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Case Study: Easyjet and Ryanair

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Case Study: easyJet and Ryanair
Flying High with Low Prices
Toifl Edith, Maike Klement Hamiyet Karaman, Tsolmonzul Erevgiylkham
FK ABWL Marketing 040177/1 WS 06/07

Story - easyJet
Founded in March 1995 by Stelios HajiIoannou - the family remains the major shareholder The airline is based at easyLand, at Luton airport

2

Concept - easyJet
Reduction of costs through: -

reduction of distribution costs No free lunch Efficient use of airports (fast turnaround terms - 30 min))

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Operations out of secondary airports main target group: business travelers
3

Story - Ryanair
1985 founded by the Ryan Family (with a share capital of only £ 1 Million)

First route from Waterford in Ireland to London Gatwick

4

Concept - Ryanair
Cheap point-to-point flights from secondary airport Single aircraft policy Fast turnarounds Main target group: leisure customers

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1. How do easyJet and Ryanair achieve success using low-price strategies?

1. How do easyJet and Ryanair achieve success using low-price strategies? A new system allows airline seats to be priced according to supply and demand and achieve high occupancy.

-

how does it work? They start with low ticket prices, and raise it according to demand.

Stelios from easyJet calls this system

„yield management“
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1. How do easyJet and Ryanair achieve success using low-price strategies? Examples: Ryanair: Linz Stansted flight: 08.12.06 € 59.99 flight: 08.04.07 € 39.99 easyJet: Munich Stansted flight: 03.12.06 €188.89 flight: 02.04.07 € 48.99
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1. How do easyJet and Ryanair achieve success using low-price strategies?

Strict cost controll achieved through: - simplicity (using one aircraft type) - productivity (fast turnaround terms) - direct distribution (using the internet for bookings and payment)

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on board: no drinks, no meals
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1. How do easyJet and Ryanair achieve success using low-price strategies?

Secondary airports with low taxes Few destinations with higher frequency Price elastic demand: means that demand increases when costs fall.

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2. What are the advantages and risks associated with low-price strategies?

2. What are the advantages and risks associated with low-price strategies? Advantages:
A bigger market share New target market The barriers to enter are higher Predatory pricing

Risks:
Price discrimination Customer dissatisfaction Phycological factors - low price = low quality - Prestige

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3. To what extent do the conditions for charging low prices discussed in this chapter hold for easyJet and Ryanair?

3. To what extent do the conditions for charging low prices.......... ?
Conditions for charging low prices ? Only feasible alternative Market presence or domination Experience curve effect/low costs Make money later Make money elsewhere Barrier to entry Predation
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3. To what extent do the conditions for charging low prices.......... ?

Only feasible alternative: there was no need for another airline with „normal“ prices. Ryanair and easyJet wanted and still want to gain market presence - attractive for price sensitive customers
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3. To what extent do the conditions for charging low prices.......... ? Experience curve effect/low costs: - through the continual improvement of the processes you can save costs. To make money later: - with drinks and meals on board To make money elsewhere: - with other services like car hire, hotels, internet cafes and insurances
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3. To what extent do the conditions for charging low prices.......... ?

Barrier to enter: High-margin strategy would attract many companies to enter the market Predatory pricing: low prices may be charged in attempt to put other companies out of business
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4. How successful do you believe easyCinema is likely to be?

What is easyCinema?
Low cost movie entertainment Motivation: half empty cinema auditoriums Stelios proposed an infinite number of prices depending on supply and demand
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Prices of easyCinema
Adult First Run: Adult Ticket: £4.50 Monday to Friday after 5:00 p.m. and all day Saturday and Sunday Monday to Friday before 5pm £3.50 except ALL DAY Super Tuesday Discount £3.50

Child 14 & £3.20 all show times / Ticket must be Under First Run: purchased at the cinema 30 minutes prior to start time Low Prices: Check the web page for films with variable pricing every day.
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Deja Vu Classic: £2.00 starting price Sunday afternoon and Wednesday afternoon and evening

Formular to sucess
No reason to employ people to sell or tear tickets „bar code tickets“ Has become the busiest cinema listings websites in the UK 1/2 million vistitors per month
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We think that it will work, because Stelios adresses also here the price-sensitve customers. A lot of people do not want to spend € 8,- or more for a cinema-ticket.

Thank you!…...

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