The increased competition between rivals in the budget airline industry may lead to price wars which will greatly benefit the customers only. "This is why Ryanair has an advantage over other airlines because their policy of bundling low frills and low prices together means that they are competing for the more price sensitive customer." (Sean Brophy and Dominic St. George, 2003)
The demand for short haul flights is ever increasing in Europe. Hence it became important that Ryanair had to take all the benefits of the first mover advantages, since there are many airlines trying to copy the services being provided by Ryanair. Davy (2003) believes that "there are only two pan-European low cost operators where first mover advantage and scale and cost efficiencies gave the two largest players, Ryanair and Easyjet, a significant advantage." The fact remains that after deregulation almost 80 airlines started operating at low cost in the similar lines of Ryanair and 60 of them have since become bankrupt.
According to Michael O'Leary, Ryanair need not bother about the competitive rivalry since according to him "at the lower end of the market Easyjet and Go don't really compete with Ryanair." Ryanair had a distinct competitive advantage in being the cheapest 'no frill' carrier in the Europe. It was possible for the airline to have the lowest costs as they drove down costs in every possible area.
In the matter of competitive rivalry Ryanair has taken away large amount of market share from the rivals Aerlingus and British Airways and to some extent from other airlines. According to Reuters (11th February 2005) "Ryanair also announced it would offer 2 million free seats, a move designed to pressure full-service airlines such as British Airways whose fuel surcharges have widened the gap on fares between budget and traditional airlines. Ryanair is fully hedged until the end of next March and has refused to impose a fuel surcharge, betting that low fares and even free tickets will draw passengers away from rivals." These strategic moves of Ryanair keep a check on the competitive rivalry.
Michael O' Leary said"The more we can put pressure on high-priced airlines, the more we can convince them there's no point competing with us (on short-haul European routes),"
Bargaining Power of Customers:
The customers for the airline industry especially in the budget airline are highly price sensitive.
Switching to another competitive airline is relatively easier and simple thanks to the presence of internet and online booking facilities. The switching also does not entail a higher cost.
The budget airline cannot