In the year 2010 EasyJet faced a number of major problems that posed a threat to its efficient service. Ryanair prefers to fly to secondary cities and pursue an outsourcing strategy to undertake its core production services, such as catering and aircraft maintenance (Mayer 2008). 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. The first operating aircraft was a 15-seater Bandeirante that carried 5000 passengers in its first year of operations. Stringent laws regarding safety and air traffic rights put financial pressure on low-fare airlines like EasyJet. Here too, Ryanair marginally outperforms EasyJet over the three years of study. All these along with various functional problems presented immense challenge to the performance level of EasyJet. 14, no. This specially affects aviation industry as people tend to spend on traveling more. 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. 2006). This has resulted in an overall increase of 7. On the 28th of last month, it said that it could realistically raise this sum money through the sale of its aircraft. 76%. Higher the gearing, higher is the risk to investor. Customer satisfaction is another element that this company keeps track of by measuring it online or by passenger surveys. 1. The purpose is to build a low-carbon European economy (Mayer, 2007, pp. Dobruszkes, F. 2006, An analysis of European low-cost airlines and their networks, Journal of Transport Geography, vol. This will be a stimulating factor for the shareholders in profitable years even as the company continues to enjoy market share (EasyJet: Annual reports & accounts 2011, pp. The recent availability of price comparison websites have increased the bargaining power of buyers especially between two low fare airlines like EasyJet and Ryanair. O. P. of EasyJet has increased by more than 90% from 2010 to 2012, and N. P. as more than doubles to 212% during the same period. WebEasyjet Financial Ratios for Analysis 2014-2023 | EJTTF. Gearing ratio assesses the companys financial position in the long run. 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. All rights reserved. They could compare with other investment opportunities by NPV method. 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. This view affirms the opinions of researchers who say price leadership is pivotal to creating market dominance, compared to cost leadership advantages (Mayer 2008). OConnell, J. 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. It was established in the year 1984 by the Ryan family with 25 employees. A low ratio is an indicator that an organization can duly pay all its dues. EasyJet has earned a Net Interest margin of 7% as compared to Ryanairs 6% in the financial year 2012 indicating that EasyJets utilization of assets is better than that of Ryanairs. 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. 3.10 Peer 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. EASYJET PLC : Forcasts, revenue, earnings, analysts expectations, ratios for EASYJET PLC Stock | EZJ | GB00B7KR2P84 . Other social factors like proportion of old age population must also be taken into consideration as old people tend towards alternate modes of travel due to airsickness or other problems. Today, the airline still reaps the benefit of being among the first airline companies, in Europe, to adopt the low-cost airline strategy. The return on shareholders funds also is seen closely identical ranging between 0. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." 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. 2006). 84-85). 2023. Employees are not engaged in any one particular activity, they do various jobs thus reducing the need of multiple personnel. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." The logic behind this strategic approach is to eliminate commissions by not using travel agents. 1, pp. Price-Earnings ratio Price-Earnings ratio is an important analysis for investors because it shows how much investors are willing to pay for each unit of profit of the company. Bargaining power of suppliers Bargaining power of suppliers can be strong if they are concentrated i. e. there are few suppliers and many buyers. 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. 15% and 41. is an Irish airline company. Alternative modes of transport do not form a threat to low fare airlines like EasyJet and Ryanair for distance more than 400 km. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. This factor combined with a rise in revenues from Euro 2,942. Furthermore, a comparison between Ryanair and other major low-cost model airlines such as easy Jet revealed better corporate reputation and perception of easy Jet, which impacts negatively on Ryanairs competitiveness. The lower the ratio, the better. WebAdditional ESG information - Financial Year 2021; Investors. WebFinancial Analysis Profitability & Shareholder Returns Ryanair, perhaps Europes best-known low-cost airline, has also consistently been among the continents most profitable. easyJet CEO Johan Lundgren concerned about reliability . Even with these adjustments, the company has still increased its passenger numbers and remained profitable for a long time. submit it as your own as it will be considered plagiarism. There are various political factors that can affect the performance of the company and are needed to be assessed before making any expansion plans. This paper attempts to financially analyze and compare the two airlines. Gearing ratio which reflects a companys financial position in the long run shows that EasyJet is in a better financial position than Ryanair in the fiscal year 2011-2012. Need a custom Compare & Contrast Essay sample written from scratch by For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. EasyJets routes within the EU boundaries face stiff competition from other low fare airlines like Jet2, BMI Baby, Ryanair. This approach was a cost-saving strategy. 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). Since it is not profitable for airports to differentiate their services, Ryanair opts for secondary and regional airports. Of importance, the company lacked a service advantage that would back up its cost advantage (Thompson 2005). I.INTRODUCTIONThis report outlines the analysis of two low-cost airlines performance in Europe, namely easyJet PLC and Ryanair Hldgs during their financial year between 2006 and 2008. Ryanair allows 10kg while EasyJet only 8. Ryanair is alert to any technological development and strives to embrace new processes to enhance service efficiency. 0 millions to Euro 2,988. Efficiency ratio has increased in 2012 for both EasyJet and Ryanair which means they can make all payments because of greater profitability and higher sales volumes. 40, loc. The first ever flight of this company had its route from Luton to Edinburgh and Glasgow. 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). Ryanair. 18 February. 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. (2023, February 18). Political. As it is using point-to-point the, time to go to destination is reduced. resulting in high fees for airports. 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. For instance, in 2004, Ryanair put aviation industrys first paperless pilot training program into practice (Muller, 2011, p. 39). While Easyjet flies to Leonardo da VinciFiumicino Airport, which is close to the city, Ryanair flies to CiampinoG. Furthermore, since the airline uses paperless booking, customers can easily buy their tickets and walk to the security gate without enduring any other sign-in rules. & Williams, G. 2012, Air Transport in the 21st Century: Key Strategic Developments, Ashgate Publishing, Ltd., New York. The company operates approximately 600 routes across more than 30 countries, with its fleet of over 200 Airbus aircraft. From where the investors sit, Lisa and Mark might reject the project. Jet2, Ryanair, and Easyjet are other dominant airline companies in this category. 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. WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. To do so, the company uses a simplified airline network. The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). Thompson, J. 2009, Beating Low Cost Competition: How Premium Brands can respond to Cut-Price Rivals, John Wiley & Sons, London. This motivates the employees towards efficient contribution to EasyJets strategic objectives (EasyJet: Annual reports & accounts 2011, p. 35). Complementing its direct sales strategy is the paperless booking model. (Muller, 2011, p. 38) Any tax reforms or rule modifications related to flight insurance of passengers, airport activities and market competition can affect Ryanair. There was the eruption of Eyjafjalla volcano that produced ash which induced problems in European airspace. Web. Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. WebEasyjet's operating profit margins declined sharply, reaching only 3.85% from 10.16% , Department of Transport, the Irish Aviation Association, the European Commission and the European Aviation Safety Agency. Competitive rivalry Because of increased competition in the European aviation industry, rivalry between airlines has increased. Then there were incidents like heavy snowfall and major ATC industrial unrest. Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. This will reduce the fare burden on customers by avoiding travel agents. The increased seating leaves very little leg room for a relaxed travel. 49%, 38. It is almost 50% bigger than the Spanish market and over 60% bigger than the third-ranked UK market. 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. This way, it became profitable in an overcrowded industry. Your privacy is extremely important to us. Social Airline profits are highly dependent on the behavioral and demand patterns of 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. | April 27, 2023 Dont This is the biggest market share in the European low-cost airline sector. The market differences are profound because profitable routes in Europe already have large airline companies that serve them. In the year 2010 there was a reduction in the costs of fuel from Euro 1,257 million o Euro 893. The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. 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). On the other hand, EasyJet has been earning at a modest rate of 5. 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). Automobiles, bus services and railways can act as substitutes but where time saving is important, there can be no substitute to airlines. As of September 30, 2022, it operated 320 aircrafts, 988 routes, and 153 airports. EasyJet has an average turnaround time of 30 minutes or below which goes to prove its service efficiency and reliability. Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. Furthermore, like Ryanair, Easyjet also bases its corporate strategy on Southwests business model. IvyPanda. 13 to 0. Comparative analysis based on PESTEL Ryanair and EasyJet both being the top European low fare airlines face some common advantages and disadvantages. Although Easyjet borrowed its strategic focus from Southwest Airline, its market strategy differed from Southwest because instead of relying on sales agents to make sales, the Airline relies on a direct sales strategy (Sull 1999). Vertical analysis measures all the items in terms of total revenue in the income statement and total assets in the financial position statement. On the liabilities side, the non-current liabilities have fallen by 14% over 2010 levels and where as the current liabilities have registered a growth of 19% during the similar period. 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. Since fuel prices can become very high, people often prefer air travel to automobiles for distance more than 400 km (Sorenson, 2005, pp. Registered address: Gabriela Narutowicza Street, No. Stelios baby is in good hands. However, this factor plays low for EasyJet as it uses primary airports like Schiphol, Copenhagen etc. The emphasis must be on cost-cutting strategies and expansion of route network. (2023, February 18). Revenue 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. 16 in 2012 for EasyJet and whereas 0. PESTEL is an acronym for Political, Economic, Social, Technological, Environmental and Legal factors of a business. 14 over the three years and where as in case of Ryanair, this ratio has improved from 0. Low fare airlines primarily focus on keeping the costs down by cutting down on costs of customer service and airport facilities. In relation to each airline generating ancillary revenue, Easyjet activities have diversified into various market segments and achieved higher revenue returns beyond that of Ryanair, as detailed within each airlines Income Statement. 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. High tax rates on aviation industry affect these airlines since they strive to keep their fare low. Also, lower ratio means the two airlines have improved profitability in 2012. In their 2021 fiscal year, EasyJet's revenue continued to decline, Easyjet also strives to become a market leader in the low-cost market segment. Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. To attract more customers EasyJet must also concentrate on designing user-friendly websites for easy booking experience. Secondly, trade unions are creating problems all over Europe with their increasing demands. 53 to 21. However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. This is because globalization has enhanced alliance between nations for trade, technology, labor etc. Get original paper in 3 hours and nail the task. Ryanair also focuses on faster pre-flight preparation; this minimizes the grounded time of aircraft (Hoffman, 2007, p. 6). We can help you For instance, there are two major aircraft manufacturers namely Airbus and Boeing. EasyJet gains confidence of customers with their user friendly website where they disclose the price breakdown of travel expenses of customers hence there are no hidden costs that customers have to pay. 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. Ryanair has evolved from a family owned business into one of the most successful regional brands in the market. Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. Not sure if you can write a paper on Managing Corporate Reputation the Case of Ryanair by yourself? 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. 2005, Strategic Management: Awareness and Change, Cengage Learning EMEA, London. The paper will explain the summary of the company including its business activities, along with the management accounting information that helps managers of business. Horizontal analysis Comparing the sales, operating profit (O. P) and net profit (N. P) of EasyJet and Ryanair it can be seen that all the three elements have witnessed substantive growth between fiscal year 2009-2010 to fiscal year 2011-2012. (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. In doing so, a company tends to improve its earnings per share (EPS). Therefore, a differentiated strategy is not exclusive. It operates almost 1,000 short-to-medium-haul routes in and around the continent. 91% and 7. These destinations spread across 29 different countries in the region. 3. Half of its seating capacity is in such facilities. EasyJet has done it exceptionally well in comparison to Ryanair. Technology Airline industry is one sector that is highly dependent on technologies. Most of its income stems from selling flight tickets and the add-ons associated with them. The success of these two airlines is primarily owing to innovative approach to business as against the age old practices and conventions of their older full fare rivals. This makes EasyJet second best low fare airline in Europe after Ryanair. 07%, 5. Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. We will write a custom Case Study on Ryanair and EasyJet Firms Strategies specifically for you. Ryanair Ryanair is considered as the top low fare airline in Europe. With more purchasing power people will tend to travel by flight, but also people become more quality conscious and hence prefer high fare airlines for better customer service. Also the regions being slightly rural can act as deterrent for some customers. For example, in the quest to increase the seating density, the count of washrooms are kept at bare minimum. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). You are free to use it for research and reference purposes in order to write your own paper; however, you EasyJet keeps its focus on environmental awareness programs while making any future strategies. It also uses single type of aircraft which is Boeing to save on training costs of flyers (O Cuilleanain, et al, 2004, pp. 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. At first This paper analyses the corporate and competitive strategies of Ryanair and Easyjet. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). Ryanair has always branded itself as an airline company that regards punctuality and efficiency as key segments of its service model (OConnell & Williams 2012). Its high seat density arrangements on board allow optimum use of aircrafts. 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. There also exists internal rivalry between low fare airlines like Ryanair and EasyJet. 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. Since Ryanair provides services at low costs, its demand is very high. WebOn the basis of financial fundamentals, Ryanair is stronger than EasyJet in terms of The unstable political scenario in the Middle East is in a perpetual war like condition. The company chose this strategy because it did not believe that these services contributed to customer satisfaction (Kew & Stredwick 2005). Both airlines create value for the shareholders in the following ways. Web1617 Words7 Pages. Ryanair does not take the services of primary airports to avoid high airport charges and opts for regional airports. The fuel, administrative and engine maintenance costs are declined. Ryanair's operating margin gained 3.9ppts to 22.3%; again, the highest in Europe and making it the only European airline to report an operating margin in excess of 20% in 2015 (or nearest financial year). 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. The target price is lowered from GBX 370 to GBX 350. This can end up with the new entrant leaving the industry. Since EasyJets mission is to provide air services at low costs, high fuel price can adversely affect the economic viability and structure of the company. 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. 249264. However, in 2013 and 2014, EasyJet posted a 5.94% and 3.39% reduction Analysis of the financial results reported by both airlines shows that 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. 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. 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. Their no frills strategy has been a core tenet of their low-cost strategy because both airlines do not accommodate passenger meals, pre-arranged sitting arrangements, or paper-based ticketing services (Malighetti et al. After realising these strategic weaknesses, the company decided to introduce an outside perspective on its business model by creating superior value for its customers. 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. 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. Higher the ratio means higher the perceived value of the company and vice versa. This is most common in aviation industry since only few companies manufacture aircrafts. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). 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. 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.