Ryan Air Case Study

Ryanair has been operating in a very competitive airline industry. Their operating profit has been fluctuating from 1985 to 1987; however, from 1987 to 1991, Ryanair has been facing major losses. The strategy of Ryanair was to be all things to all people offering the lowest fare to its passengers with the highest customer service. Ryanair operated in a very complex and initially government regulated environment. However, its strategy did not hold in front of the complex environment with the current configuration of resources and competencies that the company had, which in turn affected negatively the shareholders outcomes. In fact, the barrier to entry was high but Ryanair was able to overcome the barriers with the initial capital provided by the father, his expertise in the field (father working in the field), and a differentiator, which was the lowest fare. And they initially did well in their first route. In 1987, Ryanair started competing in the Dublin-London route with 2 established airlines the British Airways (BA) and the Aer Lingus. Ryanair saw a market that was untapped as British Airlines and Aer Lingus were only 60% full and a large number of travelers used ferry and sea instead of air due to the very high prices. Ryanair entered the Dublin-London route to gain those customers by offering the lowest fare.

British Airways was secured financially. It had become private in 1987 and has been enjoying a financial profit as it was making most of its profit from international flights, in addition to the Dublin-London route which was very profitable and a number of other routes, in addition, to their large capacity jets. On the other hand, Aer Lingus, an Irish government property who was enjoying the support of the government and who had recently renew their fleet and added new sources of revenues which were supporting the cost structure of the company.

The losses incurred by Ryanair could be explained by their strategic position in a complex environment and their strategy which was to offer the lowest fare to their customers and concentrated on offering the highest customer service. In addition, Ryanair started with very small capacity jets which meant that they could not service more passengers. Ryanair was not able to sustain the major fixed costs related to the airline industry in general and Ryanair’s higher customer service costs in particular. As Ryanair entered the market, it was faced by fierce competition and a war price started. Although, all the flights were filled to capacity, Ryanair only advantage was the lowest fare but price is not a competitive advantage as the other 2 airlines started a price war and increased their capacity that forced Ryanair to reduce its fare