A Comparison of EasyJet and Ryanair Operational Strategies Easyjet flies to Charles de Gaulle Airport and Orly Airport (two main airports in the city) (Thompson 2005). It is a key matter for EasyJet. 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). Although revenues have picked up, profits continue to lag behind as a result of elevated fuel and labour costs. IvyPanda. Headquarter of the company is situated at Dublin Airport. WebThe advantages of a spend analysis is that it contains detailed files on what a company buys, how much they spend, and who they buy from. 8 Pages. Ryanairs inaugural flight had its daily route from Waterford in Ireland to London Gatwick. easyJet It measures the proportion of expenses-without-interest in relation to total revenue earned. Dowling, T. 2010, Ryanair v 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. Because of its brand name, Ryanair also acts as barrier for new entrants in the European aviation industry. The increased seating leaves very little leg room for a relaxed travel. Revenue 12 in 2010 to 0. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. 53-54,58). Management Accounting Practices of the easyJet plc. Thus, EasyJet must design its strategy for a broader customer base. The purpose is to build a low-carbon European economy (Mayer, 2007, pp. Companys headquarter was moved to Geneva which became the first base outside UK. Ryanair and Easyjet understand these limitations and adopted elaborate strategies to navigate the economic challenges of operating in the low-cost airline sector (Mayer 2008). Retrieved from https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. This kind of differentiation has created an advantage over competitors. 2006). Then there were incidents like heavy snowfall and major ATC industrial unrest. The lower the ratio, the better. For example, both airlines fly to different types of airports. EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. 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. Web1759 Words. 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). The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). In case of EasyJet, the Gross Income ratio has improved from 0. Kew, J. By continuing well Finally, EasyJet must convince people that it is the safest mode of air travel at lowest cost. This makes EasyJet the second best low fare airline in Europe, second to Ryanair. Through its no-frills strategy, Ryanair discovered that it could be profitable by working 24 hours a day and keeping its aeroplanes in the air often (Dobruszkes 2006). It has destinations in many principal cities across Europe. This is because globalization has enhanced alliance between nations for trade, technology, labor etc. EasyJet's orange-and-gray cabin is slightly less intense, but not by much. For example, in 2014, both organisations reported increased passenger numbers (Wallach 2015). These strategic factors made the airline more profitable than other flag carriers did. 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 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 allows 10kg while EasyJet only 8. Easy entry of new airlines and restriction of monopolization of airports can pose stiff competition for EasyJet and Ryanair. Gearing ratio assesses the companys financial position in the long run. EasyJet being a British airline company is performing within the political framework of Europe. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. It operates almost 1,000 short-to-medium-haul routes in and around the continent. Mayer, S. 2008, Ryanair and Its Low Cost Flights in Europe, Books on Demand, New York. Natural calamities and also human events like flight accidents and terrorist attacks can drastically reduce flight demand as mode of travel. 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. For instance, there are two major aircraft manufacturers namely Airbus and Boeing. 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. Labor Costs: Ryanair has the lowest labor costs in the industry (6 per passenger vs 9 and 17 for competitors EasyJet and AirBerlin [5]). 16 in 2012 for EasyJet and whereas 0. is an Irish airline company. Both airlines have perfected this strategy by introducing new price reduction measures, such as paperless booking. Both the airlines are known for their operational efficiency and financial stability. 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. The target price is lowered from GBX 370 to GBX 350. EasyJet has broadened its customer base by targeting both business and leisure travelers which is an advantage over Ryanair. Comparatively, Ryanair flies to Beauvais-Till Airport, which is almost one hour away from the city (Ryans 2009). In this case, Ryanair does better than EasyJet. 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). Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 13 to 0. We utilize security vendors that protect and Ryanair and easyJet Case Study The low-fare services of Ryanair are structured in the manner to entice passengers who travel for leisure or business. The primary goal of Ryanair is to achieve the status of being the biggest scheduled passenger airline in Europe. EASYJET 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. Thirdly, there is a growing threat of terrorist attacks across Europe. Based on these competencies, Ryanair has always argued that its success does not only depend on its low-cost strategy because its innovative on-time record and its value-added services also support its growth (OConnell & Williams 2012). Moreover, national airlines like Ryanair get additional benefits from governments during periods of huge losses. 2006). In line with this low-cost strategy is a simplified pricing structure. Other segments of its working model appear below. 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. Equity ratio for EasyJet has marginally increased in 2012 compared to the Bargaining power of suppliers Bargaining power of suppliers can be strong if they are concentrated i. e. there are few suppliers and many buyers. 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. 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. For example, in the quest to increase the seating density, the count of washrooms are kept at bare minimum. Economic The price of oil primarily affects any airline companys viability. On the other hand, EasyJet has been earning at a modest rate of 5. Ryanairs market strategy has focused on cost leadership because it strives to become the best company in the low-cost market segment (Mayer 2008; Thomson & Baden-Fuller 2010). According to Dobruszkes (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. Ryanair has also focused on creating value for its shareholders by focusing its strengths on markets that it enjoys dominance. 17, no. After the terrorist attacks in America people have become anxious regarding traveling by air, and such threats of terrorist attacks can further influence flight demands of European airlines including EasyJet. For example, Easyjet has managed to do so by using the companys profits to increase its fleet size and expand into new routes (Mennen 2005). 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. 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. Within this space, Ryanair and Easyjet are the two biggest low-cost airlines in the region (Elderman 2014; Dowling 2010). Although both the airlines have witnessed growth in operating expenses between year 2010 and year 2012, the operating profit margin of EasyJet has shown greater improvement over that of Ryanair. Differentiating services for airlines is not viable for many primary airports. The trend remains same in the given years for both the airlines in the Net Income ratio. Sull, D. 1999, Case Study: easyJets $500 Million Gamble, European Management Journal, vol. Such passengers prefer to choose airlines with minimum traveling expenses or may opt for not traveling at all. 8 billion in 2010 to Euro 2. Bargaining power of buyers. 3 billion in the year 2012. EasyJet and Ryanair have differences within their strategies. WebThe seats don't recline and have a width of 17 inches and a pitch of 30 inches. It also engages in the sale of holiday packages; aircraft trading and leasing; development of building projects; financing and insurance business; and tour operator activities. (Muller, 2011, p. 38) Any tax reforms or rule modifications related to flight insurance of passengers, airport activities and market competition can affect Ryanair. Financial Analysis (2023, February 18). The average easyJet stock price forecast from analysts was set at 734.5p per share resulting in a potential 34% gain from its last closing price of 546.20 (as of 1 March) if that target is hit. In March 1998, EasyJet acquired 40% of Swiss charter operation, TEA Basel AG after which EasyJet was renamed as EasyJet Switzerland. 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. Ryanair Both airlines are in a better position to make all payments. The highest 12-month target stood at 900p while the lowest was 460p per share. Both the airlines use frequent-flyer program which is an added advantage over any new entrants. EasyJets routes within the EU boundaries face stiff competition from other low fare airlines like Jet2, BMI Baby, Ryanair. The same example emerges in Rome as a popular destination for both airlines. Moreover, these are cheaper modes of travel than air travel. Easyjet Case Study Management Accounting Ryanair and EasyJet are targeting markets An incident like air accident can lead the customers to rethink about the compromises adopted in aircraft maintenance. EasyJet and Ryanair lag behind high fare airlines regarding customer comfort during flights because of their cost saving strategies. 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. Both airlines create value for the shareholders in the following ways. 45% and 15. EasyJet has an average turnaround time of 30 minutes or below which goes to prove its service efficiency and reliability. Although Ryanair has hinted at loyalty programmes, the airline doesnt 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. Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. Political. Ryanair enjoys a dominant market share in the European low-cost airline market because it was among the first companies to adopt this strategy in the region (Malighetti et al. Over the last four quarters, easyJet's revenue has decreased by 48.8%. Ryanair has also used the same strategy to meet the same goals (Mayer 2008). PESTEL Analysis of Ryanair Ltd. In case you can't find a relevant example, our professional writers are ready This paper has already demonstrated that Ryanair and Easyjet use the same business model low-cost strategy. Comparative analysis based on PESTEL Ryanair and EasyJet both being the top European low fare airlines face some common advantages and disadvantages. To do so, the company uses a simplified airline network. Low fare airlines have the problem of working with primary airports because of the expensive aerobridges and elaborate check-in-services of these airports. Competitive rivalry Air fare is the driving factor for competitive rivalry in aviation industry. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. However, the company changed this strategy after realising it needed a differentiation strategy that would set it apart from its competitors. According to Malighetti et al. As it is using point-to-point the, time to go to destination is reduced. These operational strategies have created immense benefits for the two airlines, including optimizing airline use and increasing airline turnaround frequencies. 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. Comprehensively, the two organisations share almost similar strategies. easyJet easyJet financial profile is strong, leaving capacity for taking on further debt, it has a strong working capital, and an attractive current ratio 169. In the first part, PESTEL analysis has been done along with comparisons of both the airlines. From 67 operational bases, Ryanair makes more than 1,600 flights daily. For instance, in 2004, Ryanair put aviation industrys first paperless pilot training program into practice (Muller, 2011, p. 39). Correct writing styles (it is advised to use correct citations) Not sure if you can write a paper on Managing Corporate Reputation the Case of Ryanair by yourself? This calls for constantly reinventing processes and upgrading and adopting the latest in the technology to keep ahead of the race. For example, Easyjet has maximised its productivity by operating in airports where it enjoys market leadership (CAPA 2014). 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). EASYJET PLC : Forcasts, revenue, earnings, analysts expectations, ratios for EASYJET PLC Stock | EZJ | GB00B7KR2P84 . Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). This way, it became profitable in an overcrowded industry. easyJet They create user-friendly websites which encourages people to book tickets online thereby eliminating the need of travel agents. EasyJet is a British airline company whose headquarter is based at Londons Luton Airport. Then there is also a growing interest in multiple product features, product quality and service which may cause people to try other airlines merely to get a different kind of experience (Muller, 2011, p. 39). This in turn helps them to keep the fare down and become competitive. It was established in the year 1995 by Sir Stelios Haji-loannou with the purpose of providing scheduled air services at low costs. The market differences are profound because profitable routes in Europe already have large airline companies that serve them. Based on the strategies adopted by Ryanair and Easyjet, it is important to point out that competition determines the success or failure of the strategic approaches adopted by low-cost airlines. To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). Since its low-cost strategy started increasing sales, Ryanair has always branded itself as a low-cost airline. On the 28th of last month, it said that it could realistically raise this sum money through the sale of its aircraft. EasyJet is also affected by other environmental issues like inflation, per capita income, gross domestic product and government taxes. High tax rates on aviation industry affect these airlines since they strive to keep their fare low. must. This restructuring affirmed the views of Mennen (2005) who said a corporate strategy should have more value as a holistic entity as opposed to the sum of its parts. | April 27, 2023 17 in 2012 for Ryanair. Economic The growing rate of employment increases the spending capacity of people with more money at disposal. More than 20 airlines have collapsed after adopting the low-cost strategy (Air France 2011). 79% and 8. WebeasyJet's revenue is the ranked 7th among it's top 10 competitors. April 1, 2022. easyJet Shares | Latest easyJet Stock News and Analysis 2023 Moreover, pandemics like swine flu can adversely affect flight demands. External factors like increasing oil price can severely impact fare structure since the fare is already low. Stringent laws regarding safety and air traffic rights put financial pressure on low-fare airlines like EasyJet. 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. While easyJet was a profitable business prior to the pandemic, it hasnt been profitable since. O. P. of Ryanair has increased by 70% between the same period 2010 to 2012, and N. P. has increased by 84%. 11 in 2010 to 0. The target price is lowered from GBX 370 to GBX 350. The return on shareholders funds also is seen closely identical ranging between 0. IvyPanda. Even with these adjustments, the company has still increased its passenger numbers and remained profitable for a long time. The two firms have witnessed a decline in gross margin. Liquidity and Current ratio Under this ratio, we measure the companys ability to meet it short term expenses. As far as information technology goes Ryanair operates a multi-featured website for selling flight tickets. Also, profitability of low fare airlines like Ryanair depends on the customers perception on low fare services. In this regard, both airlines have reported increased asset values and increased growth figures. Financial Analysis Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. Massive flight cancellations led to Euro 50 million loss for Ryanair. 40, loc. Easyjet relies on the low-cost strategy because it believes that it cannot successfully compete with large aircraft carriers because they would use their economies of scale to crash the competition. However, in 2013 and 2014, EasyJet posted a 5.94% and 3.39% reduction The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. | April 27, 2023 IvyPanda. In such a case scheduling plays a major part to attract more customers. 3 Easyjet non-current assets 2021 Fig. 81%, 7. This clearly establishes that EasyJets funds management vis-a-vis trade, credit and cash cycle is far superior to Ryanairs. Half of its seating capacity is in such facilities. EasyJet and Ryanair Financial Analysis | SpeedyPaper.com Threat of substitutes This force is not much applicable to aviation industry especially if the airline is a low fare one like EasyJet. Researchers such as Kim and Mauborgne (cited in Thomson & Baden-Fuller 2010) have always supported a differentiated strategy, but these developments have proved them wrong. The sale of the aircraft will generate 206m ($255m) of liquidity to strengthen easyJet's financial position. 24 from 2010 to 2012. Need a custom essay sample written specially to meet your Since the factors cannot be influenced by a business enterprise, so it is upon the business to adapt itself to the factors. Ryanair plans schedules for aircrafts in the manner that they stay in air for longer periods thus avoiding loss incurred from grounded aircrafts. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. Thats almost 10 pp better than the EMA average and 11.7 pp better than the global average. Ryanair has always branded itself as an airline company that regards punctuality and efficiency as key segments of its service model (OConnell & Williams 2012). Similarly, the company would have to pay commissions to reservation agents and pay associated operation costs to reservation computers if it used sales agents to make sales. The company operates approximately 600 routes across more than 30 countries, with its fleet of over 200 Airbus aircraft. Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. Ryanairs reliance on secondary and regional airports is a huge cost cutting strategy on their part, but it also has the added situational disadvantage since most regional airports are situated far away from passenger destinations. Ryanairs working capital needs as a percentage of total assets has been consistently around the 15% mark whereas for EasyJet it has been 5. 2006). This fact shows that this market has limitations that would ordinarily curtail the growth of companies that do not adopt an elaborate strategy. Ryanair is alert to any technological development and strives to embrace new processes to enhance service efficiency. This will reduce the fare burden on customers by avoiding travel agents. for only $11.00 $9.35/page. Comparatively, Ryanair commands 40% of the market (Air France 2011). easyJet 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. Elderman, H. 2014, EasyJet Vs. Ryanair: The Curious Case Of 2 Budget Airlines. (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. 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). Lastly, in Europe, too much competition in the low-cost airline sector offers minimal profit margins for existing players in the industry. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." In summary, it shows that EasyJet has successfully kept its cash outflows at minimum and at the same time managed to pare its non-current liabilities (the expensive source of fund) in favor of an increase in current liabilities. Also, lower ratio means the two airlines have improved profitability in 2012. 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. 9 billion during 2011 and to Euro 3.