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The first reason that put it into this situation was that it tried to position itself as a low fare airline with the first rate services. It tried to keep low and unrestricted fare, while keep focusing on the best customer service and relationship. This mixed model was proven inefficiency. The low price could lure number of passengers; however, the increase in revenue could not offset the cost of service that Ryanair promised to customers. As a result, the company faced large losses.
Another reason was due to Ryanair's expansion, and deregulations in Europe. It expanded its routes, and some of those were Aer Lingus' existed routes...
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