Focusing on market strength is also another tenet of the airlines competitive strategies. Technology Airline industry is one sector that is highly dependent on technologies. As it is using point-to-point the, time to go to destination is reduced. While Ryanair was better hedged its fuel expenses raised 560% versus 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. 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). Social Airline profits are highly dependent on the behavioral and demand patterns of customers. 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. 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. 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. Customer satisfaction is another element that this company keeps track of by measuring it online or by passenger surveys. 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. They have earned more incomes and have flown more people than ever before. 13 to 0. (Doc) Financial Analysis for Ryanair and Easyjet 1. easyJet Vs. Ryanair: The Curious Case Of By continuing well PESTEL analysis provides different reports depending on whether the analysis is done in domestic or international arenas. 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). 2006). The recent availability of price comparison websites have increased the bargaining power of buyers especially between two low fare airlines like EasyJet and Ryanair. Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. Ryanair Ryanair is considered as the top low fare airline in Europe. 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. | April 27, 2023 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. One positive factor is globalization which can increase flight demand in the long run. Ryanair V.S. Easyjet: Strategy Analysis and Competition Moreover, these are cheaper modes of travel than air travel. In EasyJet air travel there is no arrangement for free meal services in flights that are not longer than 2 hours (EasyJet Airline Company Limited, n. d. ). The first operating aircraft was a 15-seater Bandeirante that carried 5000 passengers in its first year of operations. Analysis. Both airlines are in a better position to make all payments. 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. WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). Porters 5 forces analysis of Ryanair Threat of new entrants In the European aviation industry new entrants face the disadvantage of limited airport slots as these are mainly accessible to established airlines like Ryanair. 32% and 12. It provides a common size comparison between different organizations with regard to their respective individual performances. Dobruszkes, F. 2006, An analysis of European low-cost airlines and their networks, Journal of Transport Geography, vol. Such competitions set limitations to EasyJets pricing policies on less revenue routes. Thats almost 10 pp better than the EMA average and 11.7 pp better than the global average. 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. 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. Gearing ratio assesses the companys financial position in the long run. Retrieved from https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. Ryanair's blue-and-yellow seats. Ryanairs operating expenses have increased by 43% from 2010 to 2012 and EasyJets by 27%. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. Factors like growing terrorist threats and air accidents affect these airlines most because people tend to lose confidence over their security measures due to their low cost strategy. 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. Comparatively, Ryanair flies to Beauvais-Till Airport, which is almost one hour away from the city (Ryans 2009). Because of its brand name, Ryanair also acts as barrier for new entrants in the European aviation industry. easyJet vs Ryanair: the best budget airline for cheap plane tickets PESTEL is an acronym for Political, Economic, Social, Technological, Environmental and Legal factors of a business. (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. 8 billion in 2010 to Euro 2. easyJet CEO Johan Lundgren concerned about reliability . IvyPanda. 2009, Beating Low Cost Competition: How Premium Brands can respond to Cut-Price Rivals, John Wiley & Sons, London. Key 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]. Environment Airline services can be drastically disrupted by natural calamities, for instance the 2010 Eyjafjalla volcanic eruption in Iceland disrupted European air space for several days. This clearly establishes that EasyJets funds management vis-a-vis trade, credit and cash cycle is far superior to Ryanairs. Within this space, Ryanair and Easyjet are the two biggest low-cost airlines in the region (Elderman 2014; Dowling 2010). Ryanair has had no air accidents with casualties till date. Since Ryanair has its operational bases in several European countries, so it must take into consideration variable labor markets and government regulations. Easyjet Financial Ratios for Analysis 2014-2023 | EJTTF The sale of the aircraft will generate 206m ($255m) of liquidity to strengthen easyJet's financial position. This in turn helps them to keep the fare down and become competitive. 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. This paper attempts to financially analyze and compare the two airlines. According to Dobruszkes (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. 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. O. P. of Ryanair has increased by 70% between the same period 2010 to 2012, and N. P. has increased by 84%. Half of its seating capacity is in such facilities. Ryanair allows 10kg while EasyJet only 8. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. 1, pp. 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. easyJet financial profile is strong, leaving capacity for taking on further debt, it has a strong working capital, and an attractive current ratio 169. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). WebOn the basis of financial fundamentals, Ryanair is stronger than EasyJet in terms of In the first part, PESTEL analysis has been done along with comparisons of both the airlines. 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. The overall management of both these airlines has been good and so much so that these have emerged to be the two top low fare airlines in the European market in spite of all competitions, adverse economic conditions and environmental adversities. Revenue EasyJet being a British airline company is performing within the political framework of Europe. This has resulted in an overall increase of 7. easyJet (2016, Oct 07). Labor Costs: Ryanair has the lowest labor costs in the industry (6 per passenger vs 9 and 17 for competitors EasyJet and AirBerlin [5]). Ryanair Corporate Strategy Vs. easyJet: Competitive This makes EasyJet second best low fare airline in Europe after Ryanair in terms of cost. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. Differentiating services for airlines is not viable for many primary airports. | April 27, 2023 Figure 38 days sales uncollected development an - Course Hero Ryanair 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. 22%, 10. Moreover, national airlines like Ryanair get additional benefits from governments during periods of huge losses. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). Ryanair 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. Unlike EasyJet which has base only in Europe, Ryanair is regulated by both EU and Irish authorities. Ryanair in particular has had a major role in the development of secondary and regional airports in continental Europe. In line with this strategy, the company also introduced value-added services to its core strategy. EasyJet is also affected by other environmental issues like inflation, per capita income, gross domestic product and government taxes. An incident like air accident can lead the customers to rethink about the compromises adopted in aircraft maintenance. Elderman, H. 2014, EasyJet Vs. Ryanair: The Curious Case Of 2 Budget Airlines. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. By conducting a spend analysis the controller can consolidate purchases in order to increase buying volume with a smaller number of preferred suppliers. Comparing the 5 elements of Balance sheet of both the airlines, it can be observed that asset management has been good in both the companies. Easyjet Case Study Management Accounting Ever since, these two airlines have survived all odds and thrived to grow, changing the way people travelled. In their 2021 fiscal year, EasyJet's revenue continued to decline, We will write a custom Case Study on Ryanair and EasyJet Firms Strategies specifically for you. 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. If this happens then demand will fall which will add to the cost. This is because new airlines emerge with more market demand, and lower operational and labor costs by 30-40% as they start their business with inexpensive second-hand aircrafts (Sorenson, 2005, p. 37). 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). 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. Other segments of its working model appear below. Copyright 2023 - IvyPanda is operated by, Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay), EasyJet: more aircraft come in as more cash to shareholders goes out, Alliance Supermarket' Point-of-Sale System, Caterpillar Company Analysis Using Porters 5 Forces Model, An Investment Analysis of EasyJet on Behalf of a Pension Fund, EasyJet Company: Strategic Management and Business Policy, Operations and Process Management of EasyJet, Ryanair and easyJet Competitive Positions, Ryanair and easyJet Value for Shareholders, Macbeth & Frankenstein: Compare & Contrast, Nationalism Versus Capitalism: Compare & Contrast, Organisational Design and Performance Management. 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. 53-54,58). This makes EasyJet second best low fare airline in Europe after Ryanair. To meet the demand, management focuses on maintaining enough flights every day. 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). 9 million. This motivates the employees towards efficient contribution to EasyJets strategic objectives (EasyJet: Annual reports & accounts 2011, p. 35). Here too it is noteworthy that the base i. e. the total revenue of Ryanair has also grown by 21% during 2011 and by 47% during 2012 over 2010 base year. 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. 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. 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). 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. Increased incomes make people quality, customer service and comfort conscious during flights. At this stage it is noteworthy that the total revenues for EasyJet have consistently grown year upon year by 16% and 30% over 2010 base year. Ryanair can either lower air fare to level with that of the new entrant or else can lower further which will make the new entrant struggle to survive because of its low capital base. For instance, there are two major aircraft manufacturers namely Airbus and Boeing. Your privacy is extremely important to us. Both the airlines are known for their operational efficiency and financial stability. The growing rate of employment can have both positive and adverse effects on EasyJet and Ryanair. Here too, Ryanair marginally outperforms EasyJet over the three years of study. Web. 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. WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. 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. In Europe, major airline companies, such as Flybe, Wizz Air and Aer Lingus, dominate this space (Dobruszkes 2006). Bargaining power of buyers. It is a key matter for EasyJet. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). Figure One: Position of Easyjet and Ryanair in the global low-cost airline market (Source: Elderman 2014). In this regard, it strives to offer convenience to its customers by operating in major airports around Europe. 46%, 13. 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. 4 Easyjet non-current assets 2022 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. 17, no. 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). Most of its income stems from selling flight tickets and the add-ons associated with them. Ryanair does not take the services of primary airports to avoid high airport charges and opts for regional airports. To do so, the company uses a simplified airline network. WebFinancial Analysis Profitability & Shareholder Returns Ryanair, perhaps Europes best-known low-cost airline, has also consistently been among the continents most profitable. Choose skilled expert on your subject and get original paper with free plagiarism WebThis case study "The Strengths and Weaknesses of ryanair" is about the analysis and external factors that include economic, social, cultural, technological and political, and industry analysis, recommendations are made on how Ryanair can maintain its strengths and improve on of weaknesses. usiness modelTraditionally airlines based their Employees are not engaged in any one particular activity, they do various jobs thus reducing the need of multiple personnel. Since its low-cost strategy started increasing sales, Ryanair has always branded itself as a low-cost airline. 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). To expand its customer base, the company tried to please all their customers by trying to meet the customer needs of every type of market in the industry (Malighetti et al. The top 10 competitors average 11.6B. Relative to this development, Ryanair has also adopted a red ocean strategy where it steals customers from other market segments (predominantly the customers of major airlines) (Thomson & Baden-Fuller 2010). This calls for constantly reinventing processes and upgrading and adopting the latest in the technology to keep ahead of the race. For example, in the quest to increase the seating density, the count of washrooms are kept at bare minimum. This is because globalization has enhanced alliance between nations for trade, technology, labor etc. This kind of differentiation has created an advantage over competitors. 91% and 7. easyJet Shares | Latest easyJet Stock News and Analysis 2023 On the other hand, EasyJet has been earning at a modest rate of 5. Freire, A. The total assets have increased by 19% (non-current assets 14% and current assets 27%) over the two year period between 2010 and 2012. WebThe gross margin of EasyJet is 8.00%, and 7.80%, while that of Ryanair is 11.16%, and 11.52%, for years 2017 and 2018 respectively. This fact shows that this market has limitations that would ordinarily curtail the growth of companies that do not adopt an elaborate strategy. 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). WebRyanair in comparison charges 115 if its done online, and a whopping 160 if you only Low fare airlines also face the problems of overbooking and cancellations which add to their compensation expenses. 2014, Ryanair: Strategy Report. But EasyJet does not compromise on airport facilities and uses the expensive services of primary airports. However, the airlines employ the smallest number of people to meet the least regulatory requirement stipulated in the aviation sector (Malighetti et al. Italy is Ryanairs leading country market with almost 15,000 flights planned in December. 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. 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. Moreover, pandemics like swine flu can adversely affect flight demands. Ryans, A. The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). easyJet Governments can also put restrictions on mergers and acquisitions. This will reduce the fare burden on customers by avoiding travel agents. It measures the proportion of expenses-without-interest in relation to total revenue earned. Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. Easyjet flies to Charles de Gaulle Airport and Orly Airport (two main airports in the city) (Thompson 2005). Financial Decision Making, Easyjet in comparison with Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). 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. ensure the integrity of our platform while keeping your private information safe. If the oil price increases then it will be difficult for EasyJet to maintain its policy of providing air services at low costs. In doing so, a company tends to improve its earnings per share (EPS). 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.

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