Market status and structure before Ryanair's entry
The current market is a stabilised market, with strong players like British Airways and Aer Lingus. Both airlines established routes in the lucrative Dublin - London markets and tap on profits from this route to finance their other less profitable operations. British Airways, in particular, has been hungry for profits after emerging from losses sustained in the early 1980s due to the high fuel prices and the liberalisation and deregulation of the aviation industry in Europe, particularly in United Kingdom. Now that the aviation market is expanding, these airlines are enjoying the revenues from the market share which they have helped to stabilise over the last 10 years. Ryanair was bracing itself against these big players for a share of the lucrative market with the announcement of its entry.
Status of British Airways
- competing with strong US carriers in Europe and US in an environment that was towards free market competition
- focusing on international routes which provided nine-tenths of its revenue
- high cost of operations
? high number and wide variety of aircraft
(thus high maintenance cost)
? high employment costs with vast ground handling and representative staff
? extensive network (high IT cost) ticket sale system
Status of Aer Lingus
- partially Government owned, thus obligated to operate on certain routes (eg international routes) despite years of operating losses
- 40% owned by BA
- main revenue came from tourist passengers who were price sensitive
- involved in several more profitable side lines (as computer reservation consultants, providing maint ...