Ryanair vs. Easyjet Price Comparison

To gain a competitive advantage, most companies tend to implement a brand strategy. What makes easyJet stand out amongst its competitors is their image of a low-budget airline and no-frills services; this brand strategy is simple but strong. EasyJets’ whole company is recognised by their unique orange logo, this color also forms part of the uniform worn by their staff, which in turn is a strong recognised tool by the consumers.

70% of seats are sold at the lowest two fares.30% of seats are charged at higher fares. The last 6% are sold at the highest fare

Countries protected their National carriers by refusing other airlines landing slots in their countries. However, even with this deregulation in 1992, only 3-5% of passengers in Europe flew on low cost carriers, compared to 24% in the US. This was believed to be due to the direct competition with high speed rail services on some European routes.

Although there was a deregulation of the airline industry, the one significant component that did not change was the infrastructure of the airline industry. Constrained by the limitations of the airports and the air traffic control system, airlines did not see significant increases in profits despite the large growth and operations. As the airlines increased the number of flights and structure, the air traffic control system did not experience the same increase. Because the ATC system was still controlled and owned by the government, growth was, and continues to be slow.

Since Ryanair is looming their highest return-on-capital route, it was expected that, not to lose the passengers volumes, both airlines will start to offer lower fares and greater frequency of flights. It is not likely that BA and AL will try to match the exact prices of Ryanair because they have other factors that would influence their customer base to remain loyal. Also, the majority of their costs are fixed, making it difficult for them to quickly reduce their operating expenses without significant financial losses. Not only will BA and AL have to figure out ways to lower their costs, they will also need to reassess the limitations they have on their tickets. Ryanair is offering tickets without any restrictions, so even if BA and AL came close to their price, the customer may still choose Ryanair if the others do not make policy changes. They offer a variety of classes of service, from first to economy, while Ryanair has less complicated offer - one class on one type of plane. BA and AL were assuming that the deregulation of the airline industry, particularly in the United Kingdom, will allow them to expand their routes and cover more of their significant overhead. Some expected

With the passing of the airline deregulation act of 1978, airline carriers were now provided with new options to help expand their route systems and to help the flexibility of innovative pricing structures. This flexibility allowed the carrier to now grow into new markets. Also, deregulation now brought many unwanted and very hostile takeovers and mergers. Many airlines became onboard with this and became giants in the industry.

Airline deregulation is the process of removing the government-imposed regulations on the entry of new airlines as well the airline fare limiting the competition and growth of the airline industry. In the United States, airline deregulation mainly refers to the Airline Deregulation Act of 1978 signed by President Carter. President Carter signed the Act, but the act was proposed initially during Nixon’s presidency, and was carried out by the Ford Administration. The airline industry was growing dramatically during the 1960s and mid-1970s. Due to the steady increase in the demand, airlines were facing three major difficulties- lack of free and stable market, high ticket prices leading to poor productivity, and rising

The events that led the path to deregulation were the Middle Eastern oil embargo of 1973, Inflation, and economic downturn, wide body aircraft, CAB. Because of the Airline Deregulation Act of 1978, many of the regulatory controls were removed such as air passenger eliminated restriction and air cargo domestic route operation, what remained were an antitrust exemption, safety and essential air service, which changed the face of Civil Aviation as we knew it (Greenberg, 2013). The deregulation now allowed airlines to set their own routes and not long after in 1982 the airlines could set their own fares. CAB was abolished in 1984 and airline safety was regulated by the Federal Aviation Administration (FAA). Passengers numbers increased due to

A drop in fares has been the best result of the Airline Deregulation Act of 1978. It has been the impetus for the increase in the number of flights, which in turn has spurred a drive for greater safety in airlines. But with the current airline market, this development has given us one negative. Since ticket prices have dropped to new lows, the realities of an industry which operates on such economies of scale dictates that only a few competitors have the capacity to operate within the market. This is not the desired effect of either political side on this issue, but it is an economic necessity with the environment that has been created, very similar to that of public utilities and phone companies.

Airlines use a formula of combining their yield and inventory costs to determine ticket prices. While it is imperative to focus on the idea of being profitable, the focus is to maximize the cost of the flight revenue. One huge factor that encourages an increase in the cost of tickets relates to a customer ordering a ticket close to the departing date, define this as a risk factor because they need to make up for all unsold seats. A high percentage of the revenue is dedicated to overhead costs such as fuel and labor. When a ticket price is higher with one airline than the other, the customer interprets this as being an excessive cost. The demand is greatly affected by the external market

“No frills strategy” combines a low price with a lower perceived product and/or service and focus on the price-sensitive market segment. For EasyJet this means that in order to reduce the price, the consumer receives less services like a drink and meal on the aircraft during flight.

Make the price of the ticket more affordable to the customer. This research is a descriptive one as data needs to be described and interpreted in order to solve problems,

II.3 Competitive Advantages Their main competitors are carriers including easyJet, BMI baby, FlyBe and ThomsonFly all of who try to attract potential customers by emphasising their low cost tickets. This makes the competition in this market segment fierce as in order to offer the lowest fares, costs must also be kept to a minimum.

According to the Profit & Loss accounts of Ryanair, the operating revenues are splitted into two categories: the scheduled revenues and the ancillary revenues. The scheduled revenues are generated through direct sales of flight tickets while the ancillary revenues1 are generated from other non-ticket sales. Figure 1 depicted the growth of the scheduled and the ancillary revenues from 2004 to 2011. While the scheduled revenues increases from € 924,5 mio to € 2.827,9 mio with an increasing return factor equals to 206%, the ancillary revenues increases from € 149,6 mio to € 801,6 mio with an increasing return factor equals to 436% during the period 2004 to 2011.

During 2002, Ryanair would charge its one-way fares at about 50 Euros. The Pricing approach adopted by Ryanair more commonly termed the ‘Ryanair effect’ had become a popular marketing strategy worldwide. Part of the Ryanair’s strategy for increasing market demand is the distributing of free tickets. In the first few months of 2003, Ryanair had distributed 100,000 free seats as a way to celebrate its opening of its new outlet at Bergamo. As a result, Ryanair received 90million passengers in 2004 and consequently offered 900,000 seats at 90 pence. Researchers have accumulated that within 5 years time, Ryanair would plan on giving away 50% of its flight tickets for free. Accordingly passengers’ perception of LCCs will thus expect lower fares from Low-Cost Carriers, especially from Ryanair. Research was drawn to asses the cross-price elasticity of demand between Low-Cost Carriers and full-Service Carriers. The aim was to figure out the behavioural patterns of passengers if they are willing to switch from Low-Cost Carriers to traditional airlines if fare levels reduced significantly. Results show that If Full-Service airlines reduced their fares by 30%, then 45% of Ryanair’s passengers and 39% of Air Asia’s passengers would be willing to switch airlines. Even if Low-Cost Carriers in Asia was just relatively a new phenomenon, they have already adopted strong low fare