This kind of differentiation has created an advantage over competitors. In this regard, both airlines have reported increased asset values and increased growth figures. For instance, there are two major aircraft manufacturers namely Airbus and Boeing. To cope with these challenges, both airlines have one dominant strategy that hinges on three factors low costs of operations, low fares, and low frills. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. 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). Internal rivalry also exists between low fare airlines like EasyJet and Ryanair. This has resulted in an overall increase of 7. In doing so, a company tends to improve its earnings per share (EPS). Jet2, Ryanair, and Easyjet are other dominant airline companies in this category. 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. External factors like increasing oil price can severely impact fare structure since the fare is already low. It provides a common size comparison between different organizations with regard to their respective individual performances. Technological innovations like videoconferencing is actually another form of substitute since it enables business people to do meetings online thereby flights become unnecessary for face-to-face meetings. Ryanair is alert to any technological development and strives to embrace new processes to enhance service efficiency. 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). The company chose this strategy because it did not believe that these services contributed to customer satisfaction (Kew & Stredwick 2005). 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. EasyJet is in a better financial position than Ryanair. This way, it became profitable in an overcrowded industry. More than 20 airlines have collapsed after adopting the low-cost strategy (Air France 2011). Supplemental understanding of the topic including revealing main issues described in the particular theme; | April 27, 2023 These measurements, when combined, represent a significant reduction compared to easyJet's allowance when examining the volume, as they multiply to make a capacity of 20 liters. To do so, the company uses a simplified airline network. As such EasyJet has the advantage of providing low fare which will be difficult for new entrants to offer, and also EasyJet has a goodwill attached to its name which is something a new entrant will take years to replicate. This included legal expenses for its no compensation policy. Since the factors cannot be influenced by a business enterprise, so it is upon the business to adapt itself to the factors. Also, profitability of low fare airlines like Ryanair depends on the customers perception on low fare services. 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. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. -7). 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 inaugural flight had its daily route from Waterford in Ireland to London Gatwick. Therefore, the company decided to use secondary airports, where their customers would get efficient services. 14, no. Ryanairs working capital needs as a percentage of total assets has been consistently around the 15% mark whereas for EasyJet it has been 5. Elderman, H. 2014, EasyJet Vs. Ryanair: The Curious Case Of 2 Budget Airlines. 1%, 7. easyJet CEO Johan Lundgren concerned about reliability . 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. Thirdly, there is a growing threat of terrorist attacks across Europe. Stelios baby is in good hands. Edward Russell. 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 Higher the ratio means higher the perceived value of the company and vice versa. Comparatively, Ryanair commands 40% of the market (Air France 2011). 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. (Appendix, Table 5 and Table 9). It is a key matter for EasyJet. Open Document. 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. Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). 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]. In the year 2010 there was a reduction in the costs of fuel from Euro 1,257 million o Euro 893. April 1, 2022. WebEasyjet's operating profit margins declined sharply, reaching only 3.85% from 10.16% 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). 59% of the total revenues as operating profits for the same three years. Just talk to our smart assistant Amy and she'll connect you with the best 16 in 2012 for EasyJet and whereas 0. Comprehensively, the two organisations share almost similar strategies. Technology Airline industry is one sector that is highly dependent on technologies. Given the above background, this report will attempt to analyze the two companies i. e. , Ryanair and EasyJet viz. Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. 249264. EasyJet is also affected by other environmental issues like inflation, per capita income, gross domestic product and government taxes. Bargaining power of suppliers EasyJet being a low fare airline may have disadvantages regarding the availability of the best air routes which will be taken by larger airlines. The diagram below shows the current market shares of Ryanair and Easyjet in the European low-cost market. 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. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. 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. Its high seat density arrangements on board allow optimum use of aircrafts. On average, easyJet achieved a punctuality level of 91.6% from February to June 2021. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. Such passengers prefer to choose airlines with minimum traveling expenses or may opt for not traveling at all. Need a custom Compare & Contrast Essay sample written from scratch by 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). Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. By accurately assessing these forces a firm can equip itself with strategies to defend it against the forces or use the forces to its own advantage. EasyJet has done it exceptionally well in comparison to Ryanair. assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. 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. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). 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). 14, no. Massive flight cancellations led to Euro 50 million loss for Ryanair. Financial summary Headline loss before tax of 178 million (2021: 1,136 This makes EasyJet the second best low fare airline in Europe, second to Ryanair. Ryanair uses no hub. Because of its brand name, Ryanair also acts as barrier for new entrants in the European aviation industry. Key The highest 12-month target stood at 900p while the lowest was 460p per share. These strategic factors made the airline more profitable than other flag carriers did. Competitive rivalry Air fare is the driving factor for competitive rivalry in aviation industry. Ryanair also focuses on faster pre-flight preparation; this minimizes the grounded time of aircraft (Hoffman, 2007, p. 6). WebThis report 'Two Major Airlines EasyJet and Ryanair' aims at providing a complete overview of the two major airlines of Europe, EasyJet, and Ryanair. 9 million. In tandem, the net worth of the company too has registered healthy growth from GBP 1500 million to GBP 1794 million between 2010 and 2012. Easyjet flies to Charles de Gaulle Airport and Orly Airport (two main airports in the city) (Thompson 2005). 2006). "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." This article aims to compare the two largest Low-cost carrier (LCCs) in While Easyjet flies to Leonardo da VinciFiumicino Airport, which is close to the city, Ryanair flies to CiampinoG. WebRyanair in comparison to Easyjet has increased its turnover to 2,171 million (2008) Furthermore, the no-frill strategy works by eliminating in-flight services to lower operating costs. 24 from 2010 to 2012. Ryanair plans schedules for aircrafts in the manner that they stay in air for longer periods thus avoiding loss incurred from grounded 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. 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. Since it is not profitable for airports to differentiate their services, Ryanair opts for secondary and regional airports. It was established in the year 1984 by the Ryan family with 25 employees. Concisely, Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). While easyJet was a profitable business prior to the pandemic, it hasnt been profitable since. Both airlines also have similar performance indicators in the aviation sector. It has destinations in many principal cities across Europe. Low fare airlines primarily focus on keeping the costs down by cutting down on costs of customer service and airport facilities. Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). In their 2021 fiscal year, EasyJet's revenue continued to decline, Bargaining power of buyers. If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. Thus, EasyJet must design its strategy for a broader customer base. 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. 1, pp. Then there are strict regulations from the EU regarding reduction of carbon emissions. In case of EasyJet, the Gross Income ratio has improved from 0. Since Ryanair has its operational bases in several European countries, so it must take into consideration variable labor markets and government regulations. Of importance, the company lacked a service advantage that would back up its cost advantage (Thompson 2005). Easyjet also strives to become a market leader in the low-cost market segment. This is because people tend to lose confidence over low fare airlines regarding their security system. Their endeavor to cut costs also result in doing way with personal one-to-one interface with customers. 0% increase in total assets between 2010 and 2012. 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 could compare with other investment opportunities by NPV method. 0 millions to Euro 2,988. 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. They create user-friendly websites which encourages people to book tickets online thereby eliminating the need of travel agents. 76%. Correct writing styles (it is advised to use correct citations) 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. Stated differently, both airlines use the direct sales strategy to market their services. 1, pp. In response to the new eco tax imposed by the government in Germany, Ryanair has reduced the number of flights that travel over German routes. 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). Secondly, trade unions are creating problems all over Europe with their increasing demands. requirements? Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. ensure the integrity of our platform while keeping your private information safe. Management Accounting Practices of the easyJet plc. Gearing ratio assesses the companys financial position in the long run. match. It is almost 50% bigger than the Spanish market and over 60% bigger than the third-ranked UK market. In actual numbers the costs remained constant at GBP 103 m, also due to the new policy of EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. Since the launching of single currency in Europe, the nation has become more integrated and this has increased flight demands in EasyJet (Mayer, 2007, p. 16). Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). Ryanair has always branded itself as an airline company that regards punctuality and efficiency as key segments of its service model (OConnell & Williams 2012). We will write a custom Essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) specifically for you for only 11.00 9.35/page. Legal EU laws related to aviation industry do not allow monopolization of airports. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." EasyJet in comparison to other low fare airlines provides quality service at low price, internet booking facilities and other ancillary services. 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). 2005, Strategic Management: Awareness and Change, Cengage Learning EMEA, London. In the first part, PESTEL analysis has been done along with comparisons of both the airlines. By doing so, it believes that its customers can get around to where they are going in good time. Equity ratio for EasyJet has marginally increased in 2012 compared to the previous year and similarly for Ryanair in 2013. Therefore, the risk of overcapacity in the industry is real. 2006). CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. To ensure low cost maintenance of aircrafts it is essential that EasyJet and Ryanair adopt latest technologies. report, Comparative Financial Analysis of Easyjet & Ryanair. A low working capital means, less amount of non-current liabilities are utilized to finance the current assets. This shows that Ryanair can make reasonable profits from its sales. The recent availability of price comparison websites have increased the bargaining power of buyers especially between two low fare airlines like EasyJet and Ryanair. Another key aspect of its strategic competence was high aircraft use (Thompson 2005). Then there were incidents like heavy snowfall and major ATC industrial unrest. Since the company has succeeded by adopting this strategy, it has proved that a differentiated market strategy is still vulnerable to competition. These operational strategies have created immense benefits for the two airlines, including optimizing airline use and increasing airline turnaround frequencies. professional specifically for you? Prices. 3. Also the regions being slightly rural can act as deterrent for some customers. According to Dobruszkes (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. WebFar more of you flew with easyJet than any other carrier. 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. This compare & contrast essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) was written and submitted by your fellow The sustained economic recession with the European Union with no signs of it abating in the near future induces business travelers to reduce their travel expenses. These destinations spread across 29 different countries in the region. 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. By continuing well 84-85). 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. 34% for the years 2010, 2011 and 2012 of the respective years total revenue. However, in absolute terms the net worth has grown from Euro 2. Lastly, in Europe, too much competition in the low-cost airline sector offers minimal profit margins for existing players in the industry. This lack of personal service can induce people to opt for other low fare airlines. Graduateway.com is owned and operated by MAGMA EUROPA S. z O.O. This makes EasyJet second best low fare airline in Europe after Ryanair in terms of cost. Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. 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. This means EasyJet is in a far better position to borrow as compared to Ryanair and its (EasyJets) ability to meet all interest expense is better than Ryanair. 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. 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. 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). 1, pp. EasyJets aircrafts have distinctive features that make them distinguishable from aircrafts of rival airlines. 2038. 58 to 6. The interest cover ratio for EasyJet has improved from 13. The first ever flight of this company had its route from Luton to Edinburgh and Glasgow. 8 Pages. If this happens then demand will fall which will add to the cost. Regular review is done by management to monitor demand of flights (Ryanair: Annual reports and financial statements 2010, pp. 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. It also uses single type of aircraft which is Boeing to save on training costs of flyers (O Cuilleanain, et al, 2004, pp. 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. 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. 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. From 67 operational bases, Ryanair makes more than 1,600 flights daily. There has been a tremendous growth in the European aviation industry in last few years, and the likes of Ryanair and EasyJet have emerged as dominant players in the European market. This is because the strategy of these airlines to keep their cost low suffers and this affects the demand patterns since they are forced to raise fares to meet rising expenses. 3 billion in the year 2012. The aviation industry also gets influenced by volatilities in international currency markets. 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. There are many low-cost airlines in the world. 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. Ryans, A. 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. Competitive rivalry Because of increased competition in the European aviation industry, rivalry between airlines has increased. EasyJets Net Current Assets to Sales i. e. , Working Capital to Sales ratio suggests that the company manages its debtors and creditors very efficiently. You can use them for inspiration, an insight into a particular topic, a handy source of reference, or even just as a template of a certain type of paper. Furthermore, like Ryanair, Easyjet also bases its corporate strategy on Southwests business model. Increased incomes make people quality, customer service and comfort conscious during flights. The total assets have increased by 19% (non-current assets 14% and current assets 27%) over the two year period between 2010 and 2012. 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. For more visit Lions Lions Financial Neil Sorahan Directeur financier de Ryanair 2014.10 - aujourd'hui Wizz Air et EasyJet, RyanAir dessert prs de 4 fois le nombre de passagers que chacun de ces concurrents. 12 in 2010 to 0. 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. Customers have appreciated this strategy by increasing ticket sales (Kew & Stredwick 2005). Due to low fares EasyJet and Ryanair face less competition from high fare airlines, but there is internal rivalry between these two airlines. This specially affects aviation industry as people tend to spend on traveling more. Italy is Ryanairs leading country market with almost 15,000 flights planned in December. easyJet plc operates as a low-cost airline carrier in Europe. EasyJet keeps its focus on environmental awareness programs while making any future strategies. There was the eruption of Eyjafjalla volcano that produced ash which induced problems in European airspace. Here too, Ryanair marginally outperforms EasyJet over the three years of study. Get original paper in 3 hours and nail the task. Choose skilled expert on your subject and get original paper with free plagiarism Today, the airline still reaps the benefit of being among the first airline companies, in Europe, to adopt the low-cost airline strategy. Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. Ryanair is projecting a strong summer; it has capacity on sale at 114% of In doing so, the company saves upon expensive sources of capital to finance low earning current assets. 46%, 13. Although Ryanair was not immune from an industry downturn following the financial crisis in 2008-2009, the company rebounded to solid profitability in fiscal 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. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. resulting in high fees for airports. In this measure, EasyJet is less geared as compared to Ryanair. Your privacy is extremely important to us. 91% and 7. This in turn helps them to keep the fare down and become competitive. This is most common in aviation industry since only few companies manufacture aircrafts. Wallach, B. However, the company changed this strategy after realising it needed a differentiation strategy that would set it apart from its competitors. 2006). Political Since Ryanair has its base in both European Union (EU) and Ireland, it is regulated by authorities both in the Ireland and the EU e. . WebOn the basis of financial fundamentals, Ryanair is stronger than EasyJet in terms of
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