More than 20 airlines have collapsed after adopting the low-cost strategy (Air France 2011). This is because people tend to lose confidence over low fare airlines regarding their security system. The aviation industry also gets influenced by volatilities in international currency markets. 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. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). 2009, Beating Low Cost Competition: How Premium Brands can respond to Cut-Price Rivals, John Wiley & Sons, London. Due to low fares EasyJet and Ryanair face less competition from high fare airlines, but there is internal rivalry between these two airlines. 79% and 8. Ryanair is alert to any technological development and strives to embrace new processes to enhance service efficiency. Easyjet also strives to become a market leader in the low-cost market segment. Ryanair has also focused on creating value for its shareholders by focusing its strengths on markets that it enjoys dominance. April 1, 2022. In actual numbers the costs remained constant at GBP 103 m, also due to the new policy of Secondly, there still exist problems like unwillingness to use credit cards over phone or via internet among the French and German customers which cause problems in online booking facilities. 9 billion during 2011 and to Euro 3. Both airlines have perfected this strategy by introducing new price reduction measures, such as paperless booking. Focusing on market strength is also another tenet of the airlines competitive strategies. This article aims to compare the two largest Low-cost carrier (LCCs) in One principal weakness of EasyJet is that it strives to keep fares low as well as focus on consumer satisfaction, and keeping balance between the two becomes difficult. The report contains an introduction to the business models of the airlines, their business strategies, SWOT analysis, analysis of porters five forces, financial analysis This paper has already demonstrated that Ryanair and Easyjet use the same business model low-cost strategy. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. The commitment and dedication towards work that stimulates the employees of EasyJet kept its workforce going and provide uninterrupted world class service. Other than government laws like low carbon emission, sound reduction, passenger safety and security measures, there are competition legislations that restrict the activities of low cost airlines like Ryanair and EasyJet. 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. easyJet A business enterprise before its establishment needs to study the forces that will impact its profitability, and a tool for such assessment is Porters 5 forces analysis, which includes bargaining power of customers, bargaining power of suppliers, threat of new entrants, threat of substitutes and competitive rivalry. It measures the proportion of expenses-without-interest in relation to total revenue earned. Through this strategy, Ryanair became less concerned about existing competition because it was operating in a unique market segment that other airlines had not used before (Ryans 2009). However, EasyJet does not compete with high fare airlines whose customers are mostly business or elite passengers who prefer added comforts and services during flight. 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. 12 in 2010 to 0. Introduction The main objective of the paper to explain the accounting practices of easyJet plc. 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. Stringent laws regarding safety and air traffic rights put financial pressure on low-fare airlines like EasyJet. IvyPanda. 14, no. 8 Pages. Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). 2015, A World Made for Money: Economy, Geography, and the Way We Live Today, U of Nebraska Press, Lincoln. Similar to Ryanair, Easyjets strategic direction came from years of studying the success Southwest Airline (Sull 1999). Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. 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. Borrowing from the Southwest low-cost model, EasyJet operated using one type of aircraft and a point-to-point short-haul travel (Kew & Stredwick 2005). 3 Easyjet non-current assets 2021 Fig. 2006). 3 millions. Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. 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%). 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. (Sorenson, 2005, p. 56) Threat of substitutes Unlike other industries, this factor is less applicable in aviation industry. -PDF- 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). Ryanairs dependence on regional airports gives it a situational disadvantage while EasyJet compromises on low fare by using the facilities of primary airports. Observers have also said that its fleet of new aircrafts is another strategic competency that boosts the airlines efficiency in the airline industry (Dobruszkes 2006; Kew & Stredwick 2005). Ryanairs fuel expenses are 45% of its total operational expenses, and so any rise in fuel price will affect Ryanairs decision regarding no-fuel surcharge policy to earn profit (Muller, 2011, p. 38). Since fuel prices can become very high, people often prefer air travel to automobiles for distance more than 400 km (Sorenson, 2005, pp. To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). They have caught the fancy of those people (in the low-to-middle income bracket) who have found air travel through these low fare airlines as an alternative to other modes of travel road and railways. The first operating aircraft was a 15-seater Bandeirante that carried 5000 passengers in its first year of operations. Short distance routes are also limited to low-cost airlines because European Union (EU) policies favour train services as opposed to airline services (Air France 2011). It was established in the year 1995 by Sir Stelios Haji-loannou with the purpose of providing scheduled air services at low costs. On the other hand, EasyJet has been earning at a modest rate of 5. EasyJet and Ryanair have differences within their strategies. Since the factors cannot be influenced by a business enterprise, so it is upon the business to adapt itself to the factors. Edward Russell. All rights reserved. This also reflected in the Interest Cover ratio. Customers have appreciated this strategy by increasing ticket sales (Kew & Stredwick 2005). Similar to other low-cost carriers, the airline also had no in-flight meals and a rapid turnaround. By swiftly adopting and adapting to advancements in technology, EasyJet can to a great extent counter the adverse impact of rising fuel costs, e. g. , the modern state-of-the-art aircrafts are significantly more fuel efficient in comparison to the older aircrafts of yesteryears. It created a huge demand for the airlines services because it attracted price-conscious customers who would have chosen alternative modes of travel, or failed to travel at all, because of the high costs of air tickets. 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]. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. easyJet PLC has a consensus rating of Hold with an average target price of 12.42. 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. This understanding shows where the corporate strategies of both companies converge. 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. assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. 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. For more visit Lions Lions Financial Neil Sorahan Directeur financier de Ryanair 2014.10 - aujourd'hui Wizz Air et EasyJet, RyanAir dessert prs de 4 fois le nombre de passagers que chacun de ces concurrents. However, the company changed this strategy after realising it needed a differentiation strategy that would set it apart from its competitors. 500 easyJet PLC has a consensus rating of Hold with an average target price of 12.42. 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. Both the airlines have shown good financial performance, this means they can promptly meet all payment obligations to creditors and suppliers. 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. Ryanair: The lowest cost airline Another program that is used by Ryanair is frequent-flyer program which means customers are given a free flight after they complete a specific number of flights in a given period with Ryanair. easyJet CEO Johan Lundgren concerned about reliability . In March 1998, EasyJet acquired 40% of Swiss charter operation, TEA Basel AG after which EasyJet was renamed as EasyJet Switzerland. In later sections of the study, this paper shows the operational areas where the organisational strategies of both organisations converge and diverge. 13 to 0. External factors like increasing oil price can severely impact fare structure since the fare is already low. 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. In this study it has been found that Ryanair bases its competitiveness by using secondary and regional airports in order to avoid congestion, keep airport charges at minimum and afford a fast and efficient turnaround time for its aircrafts. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. Ryanair and easyJet Case Study Differentiating services for airlines is not viable for many primary airports. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. WebEasyJet and Ryanair have the first movers advantage in the industry over new entrants owing to their flexibility to lower their fare prices more easily compared to the full fare airlines. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). Italy is Ryanairs leading country market with almost 15,000 flights planned in December. Ryanair is projecting a strong summer; it has capacity on sale at 114% of The unstable political scenario in the Middle East is in a perpetual war like condition. For instance, flight attendants also do the work of cleaners or gate agents. Both airlines create value for the shareholders in the following ways. Its strength lies in reducing cost of activities on board. WebAn Analysis and Assessment of easyJets Strategy and Options 45 3.5.3 Leasing Costs Leasing costs are an important profitability driver for airlines 128.Over the review period, easyJet decreased its leasing costs from 3.4% of total revenues in 2010 to 2.7% in 2016. 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. This clearly establishes that EasyJets funds management vis-a-vis trade, credit and cash cycle is far superior to Ryanairs. More recently, Ryanair has reduced the number of flights that travel over German routes because of the new eco tax imposed by government which can drastically reduce the level of profit. Aviation industry is largely ruled by political, economical, environmental and technological frameworks.
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