By Awesome Possum: Jihye Chun Kyungjin Lee Rick Jantz Yang Song Ryanair By Awesome Possum: Jihye Chun Kyungjin Lee Rick Jantz Yang Song

Can RyanAir be Profitable? Expense Low est. High est. Staff 12 30 Depreciation 5 8 Fuel 20 32 Engineering 6 10 Selling 4 15 Leases 3 Fees 11 Catering, etc. 16 Ground Equip. 13 19 Total 76 144

Yes, but… Our low estimations assume: All flights are full Fuel costs are not higher from fuller flights or smaller planes More passengers does not require more staff Selling expenses can be kept very low It is unlikely that all of these will be true at once. Ryanair is unlikely to make money.

Strategy PROS: BA and Aer Lingus can not compete at these prices. Margaret Thatcher is unlikely to allow further coddling of the airline industry. If the other airlines leave the market, Ryanair can raise its prices CONS: Historically, BA and Aer Lingus have dominated the London-Dublin route. The governments of the UK and Ireland have supported airlines losing money on these routes in the past. This is one of the most profitable routes for BA and Aer Lingus, and they are unlikely to cede market share easily.

What will BA and Aer Lingus do? Ignore the situation It costs much more to defend: the major airlines would have to lose a significant amount on each flight. RyanAir can only ser about 150,000 passengers a year at the current rate. That is only about a 30% market share. The major airlines make their money on last minute travelers – who would be unable to get a ticket on discount Ryanair. The new management of BA is unlikely to tolerate throwing additional resources at protecting a route against a lower cost competitor.

Was it a good idea? Yes! Ryanair has a competitive advantage to exploit. They have lower costs than their competitors. Extremely low fares can establish a client base and take market share.