Threat of new entrants relates to the extent of ease associated with entering into an industry and competing with current market players (Hitt et al, 2010). The threat of new entrants is low for Ryanair due to the significant entry barriers associated with entering airline sector that include economies of scale, capital requirements, access to distribution channels etc.
Economies of scale, known as the cost advantage associated with business expansion (Azar and Brocks, 2010) is considered to be the biggest entry barrier into airline industry. Specifically, according to economies of scale, for established market players in airline industry such as Ryanair “as the quantity of a product produced during a given period increases, the cost of manufacturing each unit declines” (Hoskisson et al, 2008, p.80).
Moreover, significant capital requirements associated with entering airline industry include, but not limited to obtaining physical facilities, dealing with inventories, engaging in marketing activities and attracting qualified workforce represent another significant barrier.
Difficulties associated with gaining access to distribution channels is another considerable barrier faced by new entrants in airline industry. Namely, local and international airports may not be able to create additional slots in their platforms in order to serve new entrants into the market.