The pricing strategy of Ryanair

This chapter refers to two main fields of aviation literature, namely the analysis of the low-cost business model and the study of dynamic pricing techniques, with respect to the case of Ryanair: the European low cost leader has developed a strictly low fare leading strategies and price formation represents a cornerstone of its success, source of debate for both academic and practitioners. Researchers have extensively examined the cost-effective policy, which so clearly permeates the low-cost business model. Nevertheless, the success of the low-cost model is based on a fragile balance between fare levels, load factors and operating costs and the importance of the different strategic choices made by carriers suggests examining other elements of the low-cost business model. In particular, the structure of revenues and the determination of prices are nearly as important as the minimisation of costs in the equation of profits and need further investigation. Relatively few facts are known about airline price setting at the micro level and results are quite different. Differences drawn from the difficulties to take into account the micro structure of low cost pricing rather than average fare and from the limited set of available data (most of the studies limited the extension of the sample, few fixed departing data, only one departing airport, a limited set of advancing booking price offered). In this framework this chapter aims to identify the main features of Ryanair's business model, the competitive and the contextual factors that drive the choice of the average fares and their relative dynamics. © 2011 by Nova Science Publishers, Inc. All rights reserved.