WebeasyJet's revenue is the ranked 7th among it's top 10 competitors. This motivates the employees towards efficient contribution to EasyJets strategic objectives (EasyJet: Annual reports & accounts 2011, p. 35). The company conveys these advantages to its customers by operating in secondary airports where long queues and complicated security rules rarely inconvenience customers (OConnell & Williams 2012). Albeit these factors show areas of strategic convergence, both airlines are rivals in the low-cost airline market. Their performance will mainly depend on their ability to sustain their operational models. Airfrance 2011, Low-cost carriers. Web. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. However, in spite of all the givings and primarily the shortcomings compared to the legacy full service/full fare airlines, the low fare airlines has transformed the way people travelled. Thus, EasyJet must design its strategy for a broader customer base. Such passengers prefer to choose airlines with minimum traveling expenses or may opt for not traveling at all. The company has also adopted the same strategy to improve passenger comfort and expand its operational network. 9 million. EasyJets activities comply with the regulations imposed by government regarding global warming like low carbon emissions, operating aircrafts that consume less oil and make less noise. Higher the gearing, higher is the risk to investor. PESTEL Analysis of Ryanair Ltd. There are many low-cost airlines in the world. Dont Since it is not profitable for airports to differentiate their services, Ryanair opts for secondary and regional airports. EasyJet in comparison to other low fare airlines provides quality service at low price, internet booking facilities and other ancillary services. Ryanair has also focused on creating value for its shareholders by focusing its strengths on markets that it enjoys dominance. Ryanair does not take the services of primary airports to avoid high airport charges and opts for regional airports. In line with its low-cost strategy, the company also adopted a no-frill strategy, like Ryanair, by eliminating in-flight meals and reducing the number of aircraft attendants. This can be an important factor for Ryanair as aircrafts cannot be substituted. This shows that Ryanair can make reasonable profits from its sales. Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). To do so, the company uses a simplified airline network. Economic The price of oil primarily affects any airline companys viability. In actual numbers the costs remained constant at GBP 103 m, also due to the new policy of 45% and 15. Ryanair also focuses on faster pre-flight preparation; this minimizes the grounded time of aircraft (Hoffman, 2007, p. 6). It also uses single type of aircraft which is Boeing to save on training costs of flyers (O Cuilleanain, et al, 2004, pp. , Department of Transport, the Irish Aviation Association, the European Commission and the European Aviation Safety Agency. Ryanair can either lower air fare to level with that of the new entrant or else can lower further which will make the new entrant struggle to survive because of its low capital base. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). Ryanair being an existing airline can lower its air fare to wipe out new entrants. In their 2021 fiscal year, EasyJet's revenue continued to decline, EasyJet's orange-and-gray cabin is slightly less intense, but not by much. Comparatively between the two airlines, Ryanair has outperformed EasyJet in the given period between 2010 2012 in terms of Gross Income as a percentage of Total Revenue This indicates that Ryanair is more efficient in terms of cost control and earnings margin. Italy is Ryanairs leading country market with almost 15,000 flights planned in December. Of importance, the company lacked a service advantage that would back up its cost advantage (Thompson 2005). Registration number: 7252303643 (2023) 'Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)'. EasyJets Net Current Assets to Sales i. e. , Working Capital to Sales ratio suggests that the company manages its debtors and creditors very efficiently. Competitive rivalry Air fare is the driving factor for competitive rivalry in aviation industry. Based at Londons Luton Airport, the company travels to more than 700 destinations and has a market presence in more than 30 countries (Mayer 2008). Therefore, the company decided to use secondary airports, where their customers would get efficient services. 2005, Strategic Management: Awareness and Change, Cengage Learning EMEA, London. | April 27, 2023 Differentiating services for airlines is not viable for many primary airports. (2023, February 18). February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. They create user-friendly websites which encourages people to book tickets online thereby eliminating the need of travel agents. (Muller, 2011, p. 38) Any tax reforms or rule modifications related to flight insurance of passengers, airport activities and market competition can affect Ryanair. Ryanair Ryanair is considered as the top low fare airline in Europe. 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. By managing and controlling competition in the sector, both Ryanair and Easyjet have generated superior values for their investors. This paper attempts to financially analyze and compare the two airlines. requirements? It chose to lower its costs by eliminating these expenses. 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). The overall management of both these airlines has been good and so much so that these have emerged to be the two top low fare airlines in the European market in spite of all competitions, adverse economic conditions and environmental adversities. We utilize security vendors that protect and Both EasyJet and Ryanair have shown a reducing trend from 2010 to 2012. As it is using point-to-point the, time to go to destination is reduced. IvyPanda. In EasyJet the ratio has shown a reduction from 2011 to 2012, while in Ryanair it increased gradually from 2010 to 2012. The highest 12-month target stood at 900p while the lowest was 460p per share. This view affirms the opinions of researchers who say price leadership is pivotal to creating market dominance, compared to cost leadership advantages (Mayer 2008). & Williams, G. 2012, Air Transport in the 21st Century: Key Strategic Developments, Ashgate Publishing, Ltd., New York. (Appendix, Table 5 and Table 9). Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. Every effort has to be paid in order to keep the costs of operations at the bare minimum albeit without compromising on safety and security of passengers. Internal rivalry also exists between low fare airlines like EasyJet and Ryanair. Last updated: 25th April 2023. easyJet (LON:EZJ) is a British low-cost airline operating out of the UK, and is the second-largest budget airline behind Ryanair in Europe by number of passengers carried. WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. Ryanair also severely lacks in customer service since one cannot contact the airline through phone or e-mail except for booking purposes. assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. 8-9). Get original paper in 3 hours and nail the task. For example, in 2014, both organisations reported increased passenger numbers (Wallach 2015). This in turn helps them to keep the fare down and become competitive. 26 between the same period. Since EasyJet and Ryanair both are low fare airlines they focus more on cost saving strategies thereby compromising on comfort levels during flights and other customer services. Wallach, B. This helps a company to deal with situations during difficult times. Their endeavor to cut costs also result in doing way with personal one-to-one interface with customers. Legal In the EU, due to deregulation policy, there are less restrictions regarding entry of new airline ventures which means governments strict control over airlines have been modified to provide new opportunities for new airlines leading to free competition. Financial summary Headline loss before tax of 178 million (2021: 1,136 Such competitions set limitations to EasyJets pricing policies on less revenue routes. Registered address: Gabriela Narutowicza Street, No. By continuing well By conducting a spend analysis the controller can consolidate purchases in order to increase buying volume with a smaller number of preferred suppliers. Ryanair and EasyJet have concentrated their corporate strategies on the cost leadership model because they both strive to become the best companies in the low-cost market segment. 500 It provides a common size comparison between different organizations with regard to their respective individual performances. In response to the new eco tax imposed by the government in Germany, Ryanair has reduced the number of flights that travel over German routes. Today, the airline still reaps the benefit of being among the first airline companies, in Europe, to adopt the low-cost airline strategy. 16 over the same period. 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. More employment also means economic growth which can influence low fare airlines, because with more spending power people tend to emphasize more on quality and comfort during flight than price. 11 in 2010 to 0. Furthermore, the no-frill strategy works by eliminating in-flight services to lower operating costs. For example, in the quest to increase the seating density, the count of washrooms are kept at bare minimum. 1. Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. 16 in 2012 for EasyJet and whereas 0. The interest cover ratio for EasyJet has improved from 13. 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. By accurately assessing these forces a firm can equip itself with strategies to defend it against the forces or use the forces to its own advantage. Edward Russell. Thats almost 10 pp better than the EMA average and 11.7 pp better than the global average. Complementing its direct sales strategy is the paperless booking model. The same for EasyJet has been 37%, 38% and 42%. One positive factor is globalization which can increase flight demand in the long run. Irish ultra low-cost carrier founded in 1984. The two firms have witnessed a decline in gross margin. IvyPanda, 18 Feb. 2023, ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. While Easyjet flies to Leonardo da VinciFiumicino Airport, which is close to the city, Ryanair flies to CiampinoG. This factor combined with a rise in revenues from Euro 2,942. This essay was written by a fellow student. This makes EasyJet second best low fare airline in Europe after Ryanair. Profitability ratio In both the cases i. e. EasyJet & Ryanair, the Gross Income ratio has increased from 2010 to 2012 and remained more or less stable. Furthermore, like Ryanair, Easyjet also bases its corporate strategy on Southwests business model. Therefore, a differentiated strategy is not exclusive. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. WebeasyJet is a better travel experience. All rights reserved. 12 to 0. The same example emerges in Rome as a popular destination for both airlines. Comparatively, customers who fly with major airlines have to contend with these inconveniences, thereby making them less efficient and punctual compared to short-haul flight carriers. Very typically, these companies also tend to suffer when economies are in a high employment phase. Experts say Southwest Airlines was among the first aviation companies to exploit the opportunities that existed in the low-cost airline market segment (Dobruszkes 2006; Kew & Stredwick 2005). IvyPanda. Companys headquarter was moved to Geneva which became the first base outside UK. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. 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. Low fare airlines like Ryanair can lower their price to force bigger airlines to also reduce their price to maintain competitiveness. Incidents like growing terrorist threats and air accidents even if they happen to other airlines tend to affect the demand patterns of EasyJet and Ryanair because of their low cost strategies. EasyJet cabin staff in Portugal plan early April strike over pay : More Must read. Bargaining power of buyers Usually a number of aircrafts from various airlines fly on the same air route thus increasing the bargaining power of buyers because of availability of alternatives. The profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. The constant threat of a Middle East (Iran) war can adversely affect the oil price. Most of its income stems from selling flight tickets and the add-ons associated with them. Lastly, in Europe, too much competition in the low-cost airline sector offers minimal profit margins for existing players in the industry. 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. 07%, 5. & Stredwick, J. 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. Porters 5 forces analysis of Ryanair Threat of new entrants In the European aviation industry new entrants face the disadvantage of limited airport slots as these are mainly accessible to established airlines like Ryanair. In their effort to standardize all activities and primarily maintenance of aircrafts, RyanAir and EasyJet like all other low fare airlines buy standard configuration identical aircrafts with a high density seating. Last updated: 25th April 2023. easyJet (LON:EZJ) is a British low-cost To achieve these results, Ryanair has used three levers: Labor Utilization: A large majority of Ryanairs pilots are actually not salaried employees but third party contractors [5]. Since the factors cannot be influenced by a business enterprise, so it is upon the business to adapt itself to the factors. Revenue There are other infrequent environmental issues like volcanic eruptions from which ash can emit and disrupt airspace in Europe as witnessed recently with Eyjafjalla volcano. Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. WebAn Analysis and Assessment of easyJets Strategy and Options 60 despite of its efficient operations rather low EBIT and EBITDA margins, returns on equity and on invested capital as compared to its peers. | April 27, 2023 Increased incomes make people quality, customer service and comfort conscious during flights. Sull, D. 1999, Case Study: easyJets $500 Million Gamble, European Management Journal, vol. Your privacy is extremely important to us. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. Another key aspect of its strategic competence was high aircraft use (Thompson 2005). In Europe, major airline companies, such as Flybe, Wizz Air and Aer Lingus, dominate this space (Dobruszkes 2006). The dominant market share enjoyed by Ryanair also mirrors its high customer traffic because, compared to Easyjet, the company carries 4.5 million passengers, annually, while its rival carries 3,000,000 passengers annually (Dowling 2010). 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. 17-18). 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. 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. It operates almost 1,000 short-to-medium-haul routes in and around the continent. Headquarter of the company is situated at Dublin Airport. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. 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. The pervasive risk of terrorism means airlines like EasyJet have to emphasize on strict security measures which will warrant higher costs. Social Airline profits are highly dependent on the behavioral and demand patterns of customers. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. . In case of potential new entrant in the low fare segment, the strategy adopted by EasyJet and Ryanair thwarts competitions and renders entry of new companies financially unviable. Ryans, A. Easy entry of new airlines and restriction of monopolization of airports can pose stiff competition for EasyJet and Ryanair. 9 billion during 2011 and to Euro 3. This is IvyPanda's free database of academic paper samples. Legal EU laws related to aviation industry do not allow monopolization of airports. This makes EasyJet the second best low fare airline in Europe, second to Ryanair. We will write a custom Essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) specifically for you for only 11.00 9.35/page. For instance, flight attendants also do the work of cleaners or gate agents. These measurements, when combined, represent a significant reduction compared to easyJet's allowance when examining the volume, as they multiply to make a capacity of 20 liters. Also, too many airlines can create market saturation which can lead to market standardization of services which means people will have no particular preference for any one airline. With rising employment, the purchasing power of people also improves. Ryanairs operating expenses have increased by 43% from 2010 to 2012 and EasyJets by 27%. The low fare strategy intertwines with the low-cost strategy because through lower costs, the company is able to offer low fares to its customers. EasyJets aircrafts have distinctive features that make them distinguishable from aircrafts of rival airlines. This strategy emerged after learning that many flag carriers use large airports, such as Heathrow, thereby limiting its competitiveness on this platform. Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. You may use it as a guide or sample for In doing so, the company saves upon expensive sources of capital to finance low earning current assets. The total revenue for Ryanair has grown by 21% and 47% over 2010 levels for years 2011 and 2012, while for EasyJet the total revenues have grown by 16% and 30% over 2010 for years 2011 and 2012. A low ratio is an indicator that an organization can duly pay all its dues. The unstable political scenario in the Middle East is in a perpetual war like condition. Focusing on market strength is also another tenet of the airlines competitive strategies. 13 to 0. 77% respectively. Figure Two: Ryanair and Easyjet market share (Source: Air France 2011). 59% of the total revenues as operating profits for the same three years. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). 1 millions allowed the company to make an unprecedented profit on regular functions. The commitment and dedication towards work that stimulates the employees of EasyJet kept its workforce going and provide uninterrupted world class service. EASYJET PLC : Forcasts, revenue, earnings, analysts expectations, ratios for EASYJET PLC Stock | EZJ | GB00B7KR2P84 . The company operates approximately 600 routes across more than 30 countries, with its fleet of over 200 Airbus aircraft. To cope with these challenges, both airlines have one dominant strategy that hinges on three factors low costs of operations, low fares, and low frills. 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. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. EasyJets routes within the EU boundaries face stiff competition from other low fare airlines like Jet2, BMI Baby, Ryanair. 1, pp. PESTEL analysis, Porters 5 forces, a summary strength and weakness analysis, various key financial ratios for comparison and eventually conclude by giving a general recommendation of findings. EasyJet has an average turnaround time of 30 minutes or below which goes to prove its service efficiency and reliability. Although this is a strategy for keeping fares low by cutting cost, people are denied extra service value and this may affect the demand pattern of Ryanair flights. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. Automobiles, bus services and railways can act as substitutes but where time saving is important, there can be no substitute to airlines. 14, no. easyJet CEO Johan Lundgren concerned about reliability . Ryanair has also used the same strategy to meet the same goals (Mayer 2008). resulting in high fees for airports. Finally, EasyJet must convince people that it is the safest mode of air travel at lowest cost. Half of its seating capacity is in such facilities. Both these airlines ever since they have come into existence in 1984 (Ryanair) and 1995 (EasyJet) have proliferated all over Europe mainly due to conducive economic conditions and environment, made possible owing to the formation of European Union which allowed airlines from member states to operate within the union without hindrance. PESTEL analysis helps to assess the prospects of expansion and the risks involved. On average, easyJet achieved a punctuality level of 91.6% from February to June 2021. 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. The lower the ratio, the better. Mennen (2005) says it is important for low-cost airlines to adopt a low-cost structure if they want to create value for their shareholders. Analysis of the financial results reported by both airlines shows that Researchers say when the airline adopted this strategy, it succeeded because it was a blue ocean strategy no other airline had adopted this strategy before (Ryans 2009). easyJet (1995) is a low-cost airline carrier operating only in Europe. Therefore, a key part of their strategy is meeting the minimum contractual obligations required by airlines to their customers. Bargaining power of buyers. 58 to 6. Then there are also problems of cancellations for delayed flights, for which compensations and reimbursements can become a major expense for Ryanair. EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. The net income after tax for years 2010, 2011 and 2012 as a percentage of total revenue of the respective years has been 10. Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. EasyJet focuses on passenger comfort by offering them free refreshments in flights whose durations are more than two and a half hours thus giving the passengers a comfortable journey (EasyJet Airline Company Limited, n. d. ). Mennen, M. 2005, An Analysis of Ryanair Corporate Strategy. However, this factor plays low for EasyJet as it uses primary airports like Schiphol, Copenhagen etc. Customers have appreciated this strategy by increasing ticket sales (Kew & Stredwick 2005). Equity ratio for EasyJet has marginally increased in 2012 compared to the previous year and similarly for Ryanair in 2013. 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). 3 millions. Technology Ryanair needs to keep itself updated on the technological innovations that can lead to enhancement of airport service efficiency, security efficiency and cost efficiency. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). to help you write a unique paper. Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). However, the airlines employ the smallest number of people to meet the least regulatory requirement stipulated in the aviation sector (Malighetti et al. Due to low fares EasyJet and Ryanair face less competition from high fare airlines, but there is internal rivalry between these two airlines. Also, lower ratio means the two airlines have improved profitability in 2012. Web1617 Words7 Pages. From where the investors sit, Lisa and Mark might reject the project. In the beginning of 2011 the Board of EasyJet decided to start the practice of dividend payments during profitable phases without ignoring the fact that the company always needs to have a strong financial base with a strong balance sheet.
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