Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. Freire, A. Easyjet Case Study Management Accounting JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). External factors like increasing oil price can severely impact fare structure since the fare is already low. At first cite it correctly. The target price is lowered from GBX 370 to GBX 350. Since Ryanair provides services at low costs, its demand is very high. easyJet Moreover, pandemics like swine flu can adversely affect flight demands. Last updated: 25th April 2023. easyJet (LON:EZJ) is a British low-cost EasyJet has done it exceptionally well in comparison to Ryanair. Its long thrived on an unambitious reputation for being better than Ryanair, but it came close to losing even that shabby crown in the travel chaos of spring 2022. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." A low working capital means, less amount of non-current liabilities are utilized to finance the current assets. easyJet Here too it is noteworthy that the base i. e. the total revenue of Ryanair has also grown by 21% during 2011 and by 47% during 2012 over 2010 base year. The two firms have witnessed a decline in gross margin. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). EasyJet has broadened its customer base by targeting both business and leisure travelers which is an advantage over Ryanair. EasyJet is in a better financial position than Ryanair. & Stredwick, J. Bargaining power of suppliers EasyJet being a low fare airline may have disadvantages regarding the availability of the best air routes which will be taken by larger airlines. Ryanair also focuses on faster pre-flight preparation; this minimizes the grounded time of aircraft (Hoffman, 2007, p. 6). 1 phyneas 2 yr. ago Haven't flown Easyjet, but Ryanair is fine as long as you read the rules and know what you're getting and what you aren't. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. Concisely, Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). WebThis case study "The Strengths and Weaknesses of ryanair" is about the analysis and external factors that include economic, social, cultural, technological and political, and industry analysis, recommendations are made on how Ryanair can maintain its strengths and improve on of weaknesses. usiness modelTraditionally airlines based their Compared to other leading airlines in the short-haul market segment, the two airlines are among the top ten aviation companies with the highest passenger numbers in Europe. Hence Ryanair needs to consider labor markets and government regulations of both countries. By managing and controlling competition in the sector, both Ryanair and Easyjet have generated superior values for their investors. 76%. However, this factor plays low for EasyJet as it uses primary airports like Schiphol, Copenhagen etc. Also, there are speculations that oil supply all over the world will decline as oil production will reach optimum level and there will be need for new sources of oil. 22%, 10. This is IvyPanda's free database of academic paper samples. There was the eruption of Eyjafjalla volcano that produced ash which induced problems in European airspace. In the instance of EasyJet, while the non-current assets have registered a net increase of 19% in two years (2012) over 2010 levels as base, the current assets have seen at net fall of 12% during the same period. This is because new airlines emerge with more market demand, and lower operational and labor costs by 30-40% as they start their business with inexpensive second-hand aircrafts (Sorenson, 2005, p. 37). In this regard, it strives to offer convenience to its customers by operating in major airports around Europe. is an Irish airline company. 9 million. Economic The price of oil primarily affects any airline companys viability. It chose to lower its costs by eliminating these expenses. They cut down staff costs to the bare minimum necessity and as such do not provide for staffs at the reception or ticketing. With the help of this analysis companies design strategies to reduce risks attached to development and expansions beyond the borders of the country of origin. Also, primary airports prefer to do business with high fare airlines since low fare airlines like EasyJet are not favorably poised to pay for many of the sophisticated landings, baggage and check-in services. Also, profitability of low fare airlines like Ryanair depends on the customers perception on low fare services. However, the airlines employ the smallest number of people to meet the least regulatory requirement stipulated in the aviation sector (Malighetti et al. It was established in the year 1984 by the Ryan family with 25 employees. easyJet is slightly smaller than Ryanair but also packs a punch in the low-cost market. Catering to a slightly different market, the carrier was founded in March 1995. This makes the airline 24 years old. easyJet operates aircraft from the A320 family, with an average fleet age of around seven years. Managing Corporate Reputation the Case For example, both airlines fly to different types of airports. The policy of no refunds also irks customers who miss flights for genuine reasons. This essay was written by a fellow student. Financial Analysis According to the NPV analysis, if the predicted cash flow is correct, opening the sixth restaurant could bring limited profit to the company. 81%, 7. To ensure low cost maintenance of aircrafts it is essential that EasyJet and Ryanair adopt latest technologies. Any air disaster even if with other airlines can affect Ryanair since people will start believing low fare airlines compromise on safety measures in order to cut costs (Sorenson, 2005, pp. The two airlines are also the most popular low-cost airlines in Europe. However, both companies have unique internal strategies that differentiate their services beyond the low-cost model. In actual numbers the costs remained constant at GBP 103 m, also due to the new policy of Gearing ratio and Interest Cover ratio This ratio indicates how efficiently (multiple) the capital of the company has been leveraged, meaning for every unit of capital employed how many units of loan is raised. Ryanair is not much affected by buyers bargaining power since airline customers are scattered throughout Europe and no single customer makes bulk purchase of airline tickets. Environmental Since UK has a saturated market for air travel and prospect of growth is limited, therefore EasyJets focus must be on the continental and Eastern European market. Today, the airline still reaps the benefit of being among the first airline companies, in Europe, to adopt the low-cost airline strategy. 2014, Ryanair: Strategy Report. While Ryanair does not provide any free refreshments irrespective of distance or duration travelled, EasyJet on the other hand provides free refreshments and meals for all flights of more than 2 hours duration. EasyJet has an average turnaround time of 30 minutes or below which goes to prove its service efficiency and reliability. Competitive rivalry Because of increased competition in the European aviation industry, rivalry between airlines has increased. 126 the perceived close relationship between total - Course Hero easyJet PLC has a consensus rating of Hold with an average target price of 12.42. In terms of on-time performance, easyJet performs in line with some of Europes top airlines, such as Ryanair (>92%), Aeroflot (>92%), or KLM (>90%). In case you can't find a relevant example, our professional writers are ready Indeed, it would not be able to match the same level of customer service that most customers of long-haul carriers would enjoy if they used the larger airports. Ryanairs net income after tax has been growing at a healthy rate and is almost twice the yearly percentage growth of EasyJet. For instance, there are two major aircraft manufacturers namely Airbus and Boeing. According to Dobruszkes (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. In case of Ryanair, the assets and liabilities have both registered positive growth. Easyjet Financial Ratios for Analysis 2014-2023 | EJTTF Specifically, in Q1 2022's revenue was $910M; in Q2 2022, it was $2.1B; in Q3 2022, it was $2.2B; in Q4 2022, easyJet's revenue was $1.8B. 1, pp. April 1, 2022. 2006). Similar to Ryanair, Easyjets strategic direction came from years of studying the success Southwest Airline (Sull 1999). The sustained current global economic recession has had an adverse impact on many airlines including Ryanair because high unemployment rates and rising fuel costs almost led to bankruptcy. Irish ultra low-cost carrier founded in 1984. Ryanair has put the increase in overall assets and liabilities to good use, it has managed to almost double the growth in net profits from Euro 305 million to Euro 560 million translating to an increase of 84% over 2010 levels. Labor Costs: Ryanair has the lowest labor costs in the industry (6 per passenger vs 9 and 17 for competitors EasyJet and AirBerlin [5]). Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. (2023, February 18). Open Document. Ryans, A. Liquidity and Current ratio Under this ratio, we measure the companys ability to meet it short term expenses. In the year 2010 there was a reduction in the costs of fuel from Euro 1,257 million o Euro 893. This makes EasyJet the second best low fare airline in Europe, second to Ryanair. easyJet Financial Analysis The target price is lowered from GBX 370 to GBX 350. Data demonstrates 10,000 invested in EasyJet in 2000 now amounts to 62,510, which is a far larger figure than 33,742 in the case of Ryanair. 8 billion in 2010 to Euro 2. By flying to primary airports, the latter has had an edge above its competition because its customers can get to their destinations faster than Ryanairs customers who have to board a taxi, or train, to get to major cities. Ryanair allows 10kg while EasyJet only 8. Mennen, M. 2005, An Analysis of Ryanair Corporate Strategy. IvyPanda. easyJet easyJet, along with Ryanair, is concerned about the impact of the French air traffic strike but has reason to believe in a high-demand future. Focus on low-fare operations was initiated in the early 1990s by a new team of directors in the board. This has resulted in an overall increase of 7. EASYJET Italy is Ryanairs leading country market with almost 15,000 flights planned in December. 2015, A World Made for Money: Economy, Geography, and the Way We Live Today, U of Nebraska Press, Lincoln. In doing so, the company saves upon expensive sources of capital to finance low earning current assets. There are some infrequent environmental issues that can disrupt services of airlines like volcanic eruptions, pandemics ike swine flu and government regulations like reduction of carbon emissions. Easyjet also strives to become a market leader in the low-cost market segment. Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. Moreover, national airlines like Ryanair get additional benefits from governments during periods of huge losses. assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. Financial summary Headline loss before tax of 178 million (2021: 1,136 However, EasyJet pays high fees to use the services of primary airports thus not achieving low costs in all its activities. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. While EasyJets net worth has consistently witnessed growth, albeit as a percentage of total assets, the net worth of Ryanair has in fact shrunk percentage wise from year 2010 to year 2012. Factors like growing terrorist threats and air accidents affect these airlines most because people tend to lose confidence over their security measures due to their low cost strategy. Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. 26 between the same period. Stock of the day 03/10/2017 easyJet PLC news of its CEO search and an idea of how the firm may benefit from Ryanairs recent troubles and the collapse of Monarch Airlines. The success of this strategy has always depended on the control and management of the four facets of cost management in the aviation sector employee management, equipment and maintenance, customer service costs, and airport handling costs (Thomson & Baden-Fuller 2010, p. 26). The websites they have need to be updated regularly so that customer experience is enhanced and need of travel agents get reduced to save costs. This compare & contrast essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) was written and submitted by your fellow This is the biggest market share in the European low-cost airline sector. EasyJet vs RyanAir 45% and 15. But EasyJet does not compromise on airport facilities and uses the expensive services of primary airports. Selecting air routes, strategic flight scheduling are some elements that can allow EasyJet to maintain competitiveness. 2006). The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. It provides a common size comparison between different organizations with regard to their respective individual performances. 53-54,58). Retrieved from https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/, EasyJet emarketing strategies and its implementation Analysis, Competitive strategy that Easyjet have utilised Analysis, The Low Fares Airline Ryanair And The Five Forces Analysis Business, Ryanair Strategic Analysis And Recommendations For The Future. At this stage it is noteworthy that the total revenues for EasyJet have consistently grown year upon year by 16% and 30% over 2010 base year. easyJet CEO Johan Lundgren concerned about reliability . easyJet plc operates as a low-cost airline carrier in Europe. A low ratio is an indicator that an organization can duly pay all its dues. In the first part, PESTEL analysis has been done along with comparisons of both the airlines. Gearing ratio assesses the companys financial position in the long run. Get original paper in 3 hours and nail the task. Porters 5 forces analysis of EasyJet Threat of new entrants The deregulation policy encourages new airlines to emerge, but since initial capital investment is too high it becomes difficult for new entrants to compete with well established airlines like EasyJet. There are various political factors that can affect the performance of the company and are needed to be assessed before making any expansion plans. After realising these strategic weaknesses, the company decided to introduce an outside perspective on its business model by creating superior value for its customers. 14, no. Aviation industry is largely ruled by political, economical, environmental and technological frameworks. However, a closer scrutiny of the working capital level of the two airlines reveal a different a scenario as opposed to the popular belief of Ryanair being the better managed airline of the two. For instance, in 2004, Ryanair put aviation industrys first paperless pilot training program into practice (Muller, 2011, p. 39). As such EasyJet has the advantage of providing low fare which will be difficult for new entrants to offer, and also EasyJet has a goodwill attached to its name which is something a new entrant will take years to replicate. 15% and 41. Comparative analysis based on Porters 5 forces analysis New entrants in the aviation industry will be less threatening for well entrenched and already established low fare airlines like EasyJet and Ryanair because the new airlines will have low capital base and limited airport slots. Because of its brand name, Ryanair also acts as barrier for new entrants in the European aviation industry. Thus EasyJet cannot achieve low cost in all activities and so has ended up being the second best low fare airline in Europe after Ryanair (Sorenson, 2005, pp. Automobiles, bus services and railways can act as substitutes but where time saving is important, there can be no substitute to airlines. The aviation industry also gets influenced by volatilities in international currency markets. Supplemental understanding of the topic including revealing main issues described in the particular theme; 46%, 13. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. This encourages customers to use Ryanair even if other cheaper flying options are available. Other than this, factors like rise in price of oil and imposition of high tax rates by different governments impact low fare airlines more than high fare airlines. This is most common in aviation industry since only few companies manufacture aircrafts. match. The one weakness of Ryanair that is quite apparent in its no-frills approach by which they do not serve any free refreshments to customers on flight. EasyJet is also affected by other environmental issues like inflation, per capita income, gross domestic product and government taxes. Technology Airline industry is one sector that is highly dependent on technologies. The company operates approximately 600 routes across more than 30 countries, with its fleet of over 200 Airbus aircraft. 17-18). Ryanair has had no air accidents with casualties till date. This will reduce the fare burden on customers by avoiding travel agents. Ryanair Ryanair is considered as the top low fare airline in Europe. Ryanair has also focused on creating value for its shareholders by focusing its strengths on markets that it enjoys dominance. Ryanair plans schedules for aircrafts in the manner that they stay in air for longer periods thus avoiding loss incurred from grounded aircrafts. 2005, Strategic Management: Awareness and Change, Cengage Learning EMEA, London. EasyJet cabin staff in Portugal plan early April strike over pay : More Must read. 16 over the same period. In order to become a competitive low fare airline, it is important that costs be economized or minimized. Finally, the government has imposed higher taxes on flights which add to the cost thereby resulting in increasing air fares. This can be an important factor for Ryanair as aircrafts cannot be substituted. Partly, this is why the company commands the highest market share in the European low-cost airline market segment. Another factor comprises of business travelers whose principal purpose for traveling by air is to conduct face-to-face meetings, but these meetings often become redundant because of technology which provides videoconferencing and does away with the need to physically meet. However, this scenario has changed in recent times because of availability of price comparison websites like Orbitz, Travelocity, MrJet or Priceline which allow customers to compare air fares and customer services of different airlines (Sorenson, 2005, p. 65). Although revenues have picked up, profits continue to lag behind as a result of elevated fuel and labour costs. The purpose is to build a low-carbon European economy (Mayer, 2007, pp. Ryanair Corporate Strategy Vs. easyJet: Competitive To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). Need a custom Compare & Contrast Essay sample written from scratch by easyJet easyJet CEO Johan Lundgren concerned about reliability . News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. Also, lower ratio means the two airlines have improved profitability in 2012. The return on shareholders funds also is seen closely identical ranging between 0. Easyjet Case Study Management Accounting The paper will explain the summary of the company including its business activities, along with the management accounting information that helps managers of business. Its strategy was to steal customers from dominant players in the airline industry by offering lower ticket prices compared to its rivals. This fact shows that this market has limitations that would ordinarily curtail the growth of companies that do not adopt an elaborate strategy. Evidence of this fact emerges in Paris as a common destination for both airlines. Within this space, Ryanair and Easyjet are the two biggest low-cost airlines in the region (Elderman 2014; Dowling 2010). | April 27, 2023 Its high seat density arrangements on board allow optimum use of aircrafts. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). It also realised that its low-cost pricing strategy could not sustain its business because the margins made from such a strategy were low (Malighetti et al. Ryanair uses no hub. Finally, EasyJet must convince people that it is the safest mode of air travel at lowest cost. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." WebThe gross margin of EasyJet is 8.00%, and 7.80%, while that of Ryanair is 11.16%, and 11.52%, for years 2017 and 2018 respectively. Your privacy is extremely important to us. It also uses single type of aircraft which is Boeing to save on training costs of flyers (O Cuilleanain, et al, 2004, pp. 18 February. This program cannot be afforded by new entrants because it has the added burden of agent incentives which means Ryanair can give huge incentives to agents to make them prefer Ryanair (Sorenson, 2005, p. 52). Ryanairs working capital needs as a percentage of total assets has been consistently around the 15% mark whereas for EasyJet it has been 5. Since Ryanair has its operational bases in several European countries, so it must take into consideration variable labor markets and government regulations. Economic The growing rate of employment increases the spending capacity of people with more money at disposal. If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. The sale of the aircraft will generate 206m ($255m) of liquidity to strengthen easyJet's financial position. Legal EU laws related to aviation industry do not allow monopolization of airports. Revenue In Europe, major airline companies, such as Flybe, Wizz Air and Aer Lingus, dominate this space (Dobruszkes 2006).
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