Submitted by: Submitted by yaraajlouni
Views: 175
Words: 453
Pages: 2
Category: Business and Industry
Date Submitted: 11/27/2012 03:11 PM
This article examines the market entry of Ryanair,
a startup airline based in Ireland and the Þrst new en-
trant airline in the EU likely to exceed the passenger
numbers carried by its national airline. The implications
for contestability policy are examined.
In 1985 Ryanair commenced service from Waterford in
the southeast of Ireland to Gatwick, using a 15 seat
Bandeirante. In May 1986, the company commenced
service between Dublin and Luton using HS 748 aircraft
and charging £94.99 return compared to £208 charged by
Aer Lingus and British Airways on the Dublin-Heathrow
route. Table 1 shows the passenger numbers carried by
Ryanair and Aer Lingus since 1985. In 1998, Ryanair will
carry an estimated 86% of the passengers carried by Aer
Lingus. Table 2 shows that this relative performance is
about Þve times as successful as the typical second airline
in Europe compared to its national carrier.
Ireland had one of the most stagnant markets in avi-
ation from Britain between 1978 and 1985. It was per-
ceived an unattractive market for new entrants. Many
foreign airlines did not take up their entitlements under
bilateral aviation agreements so that in 1979/80 Aer
Lingus accounted for 72% of passengers at Irish airports.
Irish air routes also showed a high rate of growth of fares.
The charter market between Ireland and Britain was
minimal. The emphasis in policy in Ireland was to protect
the national airline. Airline costs in Ireland were high
because of low productivity and high wage costs. The
deregulation of Irish aviation policies in 1986 occurred
because of hostile reaction to legislation to Þne, imprison
and remove travel agent licences from those discounting
airline tickets (Barrett, 1997). The evidence of the
cascade studies was that basic charter-type air services
could be provided for about a third of the European
scheduled fares. Many economists in Ireland believed
that competition would reduce fares and that in turn
this...