Executive Summary
A compact analysis to assess whether Ryanair can operate profitably at a ticket price of £98. Positioned between traditional airlines and low-speed alternatives, Ryanair must rely on operational efficiency and cost leadership. Breakeven calculations, market insights, and strategic recommendations are presented below.
Objective
Evaluate Ryanair's ability to generate profit at £98 while competing with higher-priced airlines (BA/AL) and cheaper transport modes (train/ferry).
Market Landscape
BA/AL Avg Fare: £166.5
Train/Ferry: £55
Ryanair Fare Target: £98
Opportunity: 1.25M roundtrips/year market (750k from train/ferry, 500k from BA/AL). Ryanair offers a faster, more affordable alternative.
Context: The route between Dublin and London was dominated by full-service airlines using large aircraft and major airports. Ryanair saw an opportunity to disrupt with a simplified model targeting cost-conscious travelers.
Cost Structure Breakdown (Per Passenger)
Operational Strategy:
Use of smaller, fuel-efficient aircraft such as 44-seat turboprops allowed Ryanair to lower fuel consumption and maintenance expenses compared to competitors flying larger jets.
Focused on short-haul efficiency with high-frequency rotations.
Operated from secondary airports, reducing landing fees and congestion delays.
Breakeven & Load Factor Analysis
Aircraft Capacity: 44 seats
Break-even Load Factor: ~88%
At full capacity, Ryanair earns a small profit per passenger (£8.9). But even a slight dip in occupancy leads to losses due to high fixed costs spread over fewer passengers.
Game Theory Perspective
Sequential Decision Game:
Ryanair enters
BA/AL can fight (cut prices) or accommodate
Risks:
Price Wars: Incumbents could match Ryanair's low prices.
Retaliation: Established players may use loyalty programs, capacity dumping, or alliances.
Leverage Points:
Ryanair’s cost advantage creates flexibility.
Simpler, more transparent pricing appeals to a different segment.
Strategic Insights
Ryanair's model works only at high efficiency (>88%)
Execution focus:
Minimize fixed overhead
Maximize aircraft turnaround & load factor
Generate ancillary revenue (baggage, food, seating)
Industry Timing:
Deregulation and privatization trends favored new entrants.
Ryanair capitalized on a window of regulatory and market flexibility.
Recommendations
Target only high-demand routes where 88%+ occupancy is likely
Avoid hub-to-hub battles unless uniquely positioned
Continue leveraging low-cost structure and simplified operations
Develop brand around speed, simplicity, and savings