The case study “Dogfight over Europe: Ryanair (A)” focuses on how Ryanair launched its airline service in 1986, flying between Dublin and London. This move directly challenged Aer Lingus and British Airways (BA), the powerful national carriers on this very profitable route. At the time, the European airline industry was highly controlled by governments and dominated by their state-owned "flag carriers."
These airlines operated under international agreements that protected their positions. The International Air Traffic Association (IATA) worked like a cartel, setting high fares, and special agreements between airlines prevented real competition. Airlines could only fly routes that started or ended in their own country, which further limited new entrants.
However, by the 1980s, this rigid system was being challenged. Customers were unhappy with expensive tickets, and charter airlines, offering cheaper vacation flights, were growing fast—carrying 60% of passengers by the mid-80s. The U.S. deregulated its airline industry in 1978, causing fares to drop and inspiring similar changes in Europe. The Single European Act of 1986 aimed to create a fully open European market by 1992.
The UK had already started liberalizing its air travel market under Prime Minister Margaret Thatcher and planned to privatize British Airways in 1987. BA cut costs and improved service, especially for business travellers. Meanwhile, Aer Lingus struggled with losses on long-haul routes and relied on non-airline businesses like IT and hotels for most of its profits.
Both BA and Aer Lingus operated on the busy and profitable Dublin-London route, with ticket prices as high as I£208 for unrestricted round trips. Discount fares were available but came with conditions. Because of the high prices, many people—about 750,000 annually—chose a much longer (9-hour) ferry and rail journey instead of flying.
Ryanair, started by Cathal and Declan Ryan, with help from their father Tony Ryan, entered the market with four daily round trips using a 44-seat aircraft. They promised strong customer service but, more importantly, offered a single, simple fare of I£98 with no restrictions. This undercut competitors and aimed to attract both price-sensitive fliers and those who previously chose slower, cheaper travel. Ryanair's bold strategy set up a direct fight with much larger, established airlines.
