Ryan Air Writeup

3 March 2017

To make money at that fare I would expect that they have a distinctive cost advantage over the current operators, say British Airways and Aer Lingus. Being a small operator I would expect some efficiencies and reduced costs that the other two airlines cannot realize. I would expect Ryan Air to lease its plane as opposed to buying it (as they only have one route, no scale efficiencies from owning their fleet can be realized) that would nullify their depreciation expense and other aircraft costs and their selling effort would be less (only one route).

Initially, any expense derived from the fleet size would be less as well (as the 44-seater doesn’t need as much space in the hangars nor intensive usage of the runways as it is a fast take off/take down plane). However, for this case i have decided to leave them equal if they are variable costs.

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Finally, if they manage to increase the utilization rate of its aircraft with relation of British Airways and Aer Lingus, the per-person fixed costs would be less, about a 40% less (increase in utilization from 60% to almost 100%). Some estimation about Ryan Air’s cost breakdown that would ensure a profit can be found in the table above.

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