1, pp. (2023) 'Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)'. 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. For example, Easyjet has maximised its productivity by operating in airports where it enjoys market leadership (CAPA 2014). Edward Russell. In case of EasyJet, the Gross Income ratio has improved from 0. Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. All rights reserved. WebThis report 'Two Major Airlines EasyJet and Ryanair' aims at providing a complete overview of the two major airlines of Europe, EasyJet, and Ryanair. The same example emerges in Rome as a popular destination for both airlines. EasyJet has done it exceptionally well in comparison to Ryanair. Financials. 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. 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. 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. This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. 1, pp. (Appendix, Table 4) While the stability in the Gross Income margin does convey about the ability of both the companies to maintain a stable rate of earnings, it also showcases that the low fare air travel market is stagnating and the capacity to increase earnings in spite of increased revenues is almost negligible. 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. WebeasyJet is currently c.55% hedged for fuel in the financial year ending on 30 September 2022 at c.US$498 per metric tonne with the spot price as at 29 November 2021 being US$658. The following table shows this fact. Both the airlines have shown good financial performance, this means they can promptly meet all payment obligations to creditors and suppliers. Given the above background, this report will attempt to analyze the two companies i. e. , Ryanair and EasyJet viz. Increased incomes make people quality, customer service and comfort conscious during flights. Finally, the government has imposed higher taxes on flights which add to the cost thereby resulting in increasing air fares. 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. Both airlines also have similar performance indicators in the aviation sector. 1 PESTEL Analysis for EasyJet Ltd. Similar to Ryanair, Easyjets strategic direction came from years of studying the success Southwest Airline (Sull 1999). 2006). 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. In this regard, it transformed its value chain for the better. Contact us: [emailprotected]. match. Mayer, S. 2008, Ryanair and Its Low Cost Flights in Europe, Books on Demand, New York. This is most common in aviation industry since only few companies manufacture aircrafts. Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. Figure Two: Ryanair and Easyjet market share (Source: Air France 2011). Over the last four quarters, easyJet's revenue has decreased by 48.8%. Introduction The main objective of the paper to explain the accounting practices of easyJet plc. , Department of Transport, the Irish Aviation Association, the European Commission and the European Aviation Safety Agency. The pervasive risk of terrorism means airlines like EasyJet have to emphasize on strict security measures which will warrant higher costs. Low fare can be an advantage for EasyJet but airline customers often emphasize more on comfort and services to cost factors both of which are strong elements in high fare airlines. These strategies although have helped them in keeping the costs low, but they certainly are a cause of inconvenience to the discerning customers. 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. 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. 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. Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. Thats almost 10 pp better than the EMA average and 11.7 pp better than the global average. Ryanair's operating profit grew by 40% to EUR1,460 million, and revenue increased by 16% to EUR6,536 million. British multinational low-cost airline group headquartered at London Luton Airport. EasyJet is in a better financial position than Ryanair. The market differences are profound because profitable routes in Europe already have large airline companies that serve them. submit it as your own as it will be considered plagiarism. requirements? Elderman, H. 2014, EasyJet Vs. Ryanair: The Curious Case Of 2 Budget Airlines. Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. 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. Analysis. Here too, Ryanair marginally outperforms EasyJet over the three years of study. Employees are not engaged in any one particular activity, they do various jobs thus reducing the need of multiple personnel. The logic behind this strategic approach is to eliminate commissions by not using travel agents. Alternative modes of transport do not form a threat to low fare airlines like EasyJet and Ryanair for distance more than 400 km. Automobiles, bus services and railways can act as substitutes but where time saving is important, there can be no substitute to airlines. 11 in 2010 to 0. cite it correctly. (2016, Oct 07). WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. 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. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). Such competitions set limitations to EasyJets pricing policies on less revenue routes. Web1617 Words7 Pages. Easyjet flies to Charles de Gaulle Airport and Orly Airport (two main airports in the city) (Thompson 2005). WebEasyjet Financial Ratios for Analysis 2014-2023 | EJTTF. At first Other airline companies, such as Ryanair, also discovered similar opportunities by leveraging their competitive advantage through the adoption of a low-cost strategy. Focusing on market strength is also another tenet of the airlines competitive strategies. This kind of differentiation has created an advantage over competitors. easyJet PLC has a consensus rating of Hold with an average target price of 12.42. 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. The aviation industry also gets influenced by volatilities in international currency markets. 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. Both the airlines are known for their operational efficiency and financial stability. 14 over the three years and where as in case of Ryanair, this ratio has improved from 0. Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. writing your own paper, but remember to Complementing its direct sales strategy is the paperless booking model. (2023, February 18). Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. Ryanair in particular has had a major role in the development of secondary and regional airports in continental Europe. Ryanair has evolved from a family owned business into one of the most successful regional brands in the market. Bargaining power of buyers. Need a custom Compare & Contrast Essay sample written from scratch by From 67 operational bases, Ryanair makes more than 1,600 flights daily. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. EasyJet has an average turnaround time of 30 minutes or below which goes to prove its service efficiency and reliability. 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 general public responses swell towards cheap flights however it adds to their grievance if promotions in newspapers promise flights at a particular rate when in reality they cost much higher (Mayer, 2007, p. 16). WebThe seats don't recline and have a width of 17 inches and a pitch of 30 inches. Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. Ever since, these two airlines have survived all odds and thrived to grow, changing the way people travelled. Copyright 2023 service.graduateway.com. 24 from 2010 to 2012. 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. In line with this low-cost strategy is a simplified pricing structure. Both airlines also have similar marketing strategies because besides marketing themselves as low-cost airlines, both companies do not use agents to reach their customers. Today, the airline still reaps the benefit of being among the first airline companies, in Europe, to adopt the low-cost airline strategy. Massive flight cancellations led to Euro 50 million loss for Ryanair. It operates almost 1,000 short-to-medium-haul routes in and around the continent. 8 Pages. Wallach, B. Low fare airlines like Ryanair can lower their price to force bigger airlines to also reduce their price to maintain competitiveness. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. 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. 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. 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. This factor is more applicable on EasyJet since it is a low fare airline and availability of other low fare airlines on same route can be a threat to EasyJet. It has destinations in many principal cities across Europe. Technology Airline industry is one sector that is highly dependent on technologies. This will reduce the fare burden on customers by avoiding travel agents. Ryanair by virtue of its scale of operations, fleet size and leverage consistently earns operating revenues at a margin of more than 10% of total revenues while in case of EasyJet it has been always below 10% for the last three years. 12 in 2010 to 0. While easyJet was a profitable business prior to the pandemic, it hasnt been profitable since. 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. This encourages customers to use Ryanair even if other cheaper flying options are available. 56% respectively. Natural calamities and also human events like flight accidents and terrorist attacks can drastically reduce flight demand as mode of travel. Nearly three times as many of its flights were cancelled at the last minute as with Ryanair and Jet2. Also the regions being slightly rural can act as deterrent for some customers. The commitment and dedication towards work that stimulates the employees of EasyJet kept its workforce going and provide uninterrupted world class service. 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). Comprehensively, the two organisations share almost similar strategies. 59% for years 2010, 2011 and 2012. In 2009, EasyJet catered to passengers with 50% having passports of countries other than that of UK. This lack of personal service can induce people to opt for other low fare airlines. Ryanair does not take the services of primary airports to avoid high airport charges and opts for regional airports. 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. EasyJet has broadened its customer base by targeting both business and leisure travelers which is an advantage over Ryanair. EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. According to Malighetti et al. Increasing oil prices can have severe impact especially on a low fare airline like Ryanair, and to off-set this they use high density seating arrangements on board; that way fuel price per passenger is reduced. 3. The return on shareholders funds also is seen closely identical ranging between 0. By conducting a spend analysis the controller can consolidate purchases in order to increase buying volume with a smaller number of preferred suppliers. Economic The growing rate of employment increases the spending capacity of people with more money at disposal. Not sure if you can write a paper on Managing Corporate Reputation the Case of Ryanair by yourself? Then there are also problems of cancellations for delayed flights, for which compensations and reimbursements can become a major expense for Ryanair. 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. But it's not worth paying a load more than Ryanair for in my opinion. EasyJet EasyJets strength lies in its strategically low fare air service. This approach was a cost-saving strategy. 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 included legal expenses for its no compensation policy. An incident like air accident can lead the customers to rethink about the compromises adopted in aircraft maintenance. 0% increase in total assets between 2010 and 2012. The total assets have increased by 19% (non-current assets 14% and current assets 27%) over the two year period between 2010 and 2012. Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. 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. In such case Ryanairs current oil price strategies may not hold good. 26 between the same period. However, the airlines employ the smallest number of people to meet the least regulatory requirement stipulated in the aviation sector (Malighetti et al. 2006). 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). 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. While the total revenues for Ryanair has grown at a steady and faster pace than EasyJet, the passenger revenue as a percentage of EasyJet is far higher than that of Ryanair. Ryanair Ryanair is considered as the top low fare airline in Europe. We use cookies to give you the best experience possible. Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. However, to get a correct understanding of this assessment, this paper demonstrates how both companies create value for their shareholders and reveals the strategic choices pursued by both organisations. For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. All these factors can severely impact Ryanair. Ryanair is alert to any technological development and strives to embrace new processes to enhance service efficiency. WebFinancial Analysis Profitability & Shareholder Returns Ryanair, perhaps Europes best-known low-cost airline, has also consistently been among the continents most profitable. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." EasyJets net profit (after tax) has been 6. The same for EasyJet has been 37%, 38% and 42%. In such a case scheduling plays a major part to attract more customers. Evidence of this fact emerges in Paris as a common destination for both airlines. A low ratio is an indicator that an organization can duly pay all its dues. Economic The price of oil primarily affects any airline companys viability. Ryanair uses no hub. One common economic factor that affects a low fare airline like Ryanair is overbooking by customers and their compensation later on. WebOn the basis of financial fundamentals, Ryanair is stronger than EasyJet in terms of The net income after tax for years 2010, 2011 and 2012 as a percentage of total revenue of the respective years has been 10. 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. This fact shows that this market has limitations that would ordinarily curtail the growth of companies that do not adopt an elaborate strategy. 1, pp. Malighetti, P., Paleari, S. & Redondi, R. 2006, Pricing strategies of low-cost airlines: The Ryanair case study, Journal of Transport Geography, vol. The fuel, administrative and engine maintenance costs are declined. 14, no. 0 millions to Euro 2,988. Most of its income stems from selling flight tickets and the add-ons associated with them. In case you can't find a relevant example, our professional writers are ready 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. 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. 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). Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. 1%, 7. Bargaining power of suppliers Bargaining power of suppliers can be strong if they are concentrated i. e. there are few suppliers and many buyers. It was established in the year 1984 by the Ryan family with 25 employees. Stated differently, both airlines use the direct sales strategy to market their services. This makes EasyJet the second best low fare airline in Europe, second to Ryanair. As far as information technology goes Ryanair operates a multi-featured website for selling flight tickets. If this happens then demand will fall which will add to the cost. 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). 2006). This essay was written by a fellow student. 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. The top 10 competitors average 11.6B. This can end up with the new entrant leaving the industry. In this measure, EasyJet is less geared as compared to Ryanair. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). IvyPanda. In line with this strategy, the company also introduced value-added services to its core strategy. 2005, Business Environment: Managing in a Strategic Context Chartered Institute of Personnel and Development, CIPD Publishing, New York. 40, loc. This article aims to compare the two largest Low-cost carrier (LCCs) in 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 two airlines are also the most popular low-cost airlines in Europe. student. From where the investors sit, Lisa and Mark might reject the project. Companys headquarter was moved to Geneva which became the first base outside UK. 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. The low-fare services of Ryanair are structured in the manner to entice passengers who travel for leisure or business. Today EasyJet has in its service 175 aircrafts over 400 routes in 27 countries. 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]. 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. To ensure low cost maintenance of aircrafts it is essential that EasyJet and Ryanair adopt latest technologies. This factor combined with a rise in revenues from Euro 2,942. The profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. EasyJet and Ryanair lag behind high fare airlines regarding customer comfort during flights because of their cost saving strategies. However, in 2013 and 2014, EasyJet posted a 5.94% and 3.39% reduction 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. 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. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). 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. Both the airlines use frequent-flyer program which is an added advantage over any new entrants. Social Airline profits are highly dependent on the behavioral and demand patterns of customers. The purpose is to build a low-carbon European economy (Mayer, 2007, pp. Low fare airlines also face the problems of overbooking and cancellations which add to their compensation expenses. The company operates approximately 600 routes across more than 30 countries, with its fleet of over 200 Airbus aircraft. easyJet plc operates as a low-cost airline carrier in Europe. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. 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. The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. 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). One positive factor is globalization which can increase flight demand in the long run. 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. Graduateway.com is owned and operated by MAGMA EUROPA S. z O.O. A low price-earnings ratio is an attractive proposition to invest in the stocks of the two companies. 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. Gearing ratio assesses the companys financial position in the long run. to help you write a unique paper. There are various political factors that can affect the performance of the company and are needed to be assessed before making any expansion plans. Both airlines are in a better position to make all payments. 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. PESTEL analysis helps to assess the prospects of expansion and the risks involved. 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. However, in absolute terms the net worth has grown from Euro 2. 2038. Since its low-cost strategy started increasing sales, Ryanair has always branded itself as a low-cost airline. All these along with various functional problems presented immense challenge to the performance level of EasyJet. 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. 15% and 41. This helps a company to deal with situations during difficult times. Half of its seating capacity is in such facilities. On average, easyJet achieved a punctuality level of 91.6% from February to June 2021. 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. The trend remains same in the given years for both the airlines in the Net Income ratio. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. Ryanair and EasyJet are targeting markets Ryanair also severely lacks in customer service since one cannot contact the airline through phone or e-mail except for booking purposes. 3.10 Peer 1, 90-135 d, Poland WebRyanair in comparison charges 115 if its done online, and a whopping 160 if you only 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. 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). In this regard, both airlines have reported increased asset values and increased growth figures. This specially affects aviation industry as people tend to spend on traveling more. The first international flight was launched in the year 1996 with aircraft whose sole ownership belonged to this airline and the route was from Luton to Amsterdam. The primary goal of Ryanair is to achieve the status of being the biggest scheduled passenger airline in Europe. 17 in 2012 for Ryanair. | April 27, 2023 Revenue Low fare airlines primarily focus on keeping the costs down by cutting down on costs of customer service and airport facilities.
