In April 1986, the Ryan brothers make public their nurtured Irish airline Ryanair, which would shortly inaugurate service between Dublin and London. Ryanair will face serious competition such as Aer Lingus and British Airways on a primary route for the first time. Students are required to evaluate Ryanair's entrance and speculate the reaction of current carriers.
1. Can the Ryan brothers make money at the I₤98 fare they propose? Please prepare a breakeven analysis to prove your point.
NOTE: Landing fees are fees that airports charge to airlines as part of the airport’s revenue base. A specified landing fee such as X dollars or X Irish pounds is charged to the airline for every passenger that lands or takes off on a given flight.
2. How do you expect Aer Lingus and British Airways to respond to the Ryanair entry into the Dublin/London market? Why? If you were Aer Lingus, what would you do in response to Ryanair’s proposed new route? Would you retaliate by lowering fares? To what level?
3. How costly would it be for Aer Lingus and British Airways to retaliate against Ryanair's launch rather than allow it? You need to have a cost to the combination of British Airways and Aer Lingus in Irish pounds of accommodating the Ryanair entry (not cutting their fares) and a cost of retaliating against that entry with some sort of price change.
4. What is your overall assessment of Ryanair's launch strategy? Is it going to work?