Case Analysis of Ryanair

Introduction

In order to gain comparative advantages over other competitors such as British Airline and to distinguish itself from flag carries, Ryanair publicized a fare of I£98, a much lower price than other competitors. This analysis include a cost structure calculation of Ryanair and a response calculation of Ryanair’s competitors (mainly Aer Lingus and British Airways).

Cost Structure Calculation of Ryanair

The following calculation of Ryanair is based on the assumption that the flights of Ryanair will be 100% full. Since Ryan brothers intended to run four round trips per day with a 44-seat turboprop, the price is I£98, then the annual revenue of Ryanair would be I£6,295,520 (I£98x4 round tripsx44 seatsx365 days).

The case does not provide possible costs of Ryanair, but the average revenues and average costs of British Airways for the same Dublin-London route is given. British Airways’ average revenue and cost per passenger are I£ 166.5 and I£ 155.1 respectively, and the profit is I£11.4. In average, US carriers have a higher staff productivity (708.2 passengers per staff) than European carriers (341.2 passengers per staff). To put Ryanair in a best case scenario, this analysis assumes that Ryanair moves toward US style efficiency, i.e., suppose the staff productivity of Ryanair is 708 passengers per staff. The staff productivity of British Airways is 308 passengers per staff member. As a result, Ryanair’s available costs where staff is included will be 43.5% (308/708) compared to that of British Airways, and fixed costs will be 56.4% (708-308/708) of British Airways since fixed costs will be spread to more passengers. The costs of Ryanair in a best case scenario is as follows:

Exhibit 4 Ryanair Average Revenue and Cost per Passenger (in Irish Pounds) |

|

| British Airways | Ryanair | Note |

Revenue | 166.5 | 98 | mutiple by |

| | | |

Operating expenses | | | |

Staff | 35.7 | 15.5 | 43.5% |

Depreciation & amortization...