This paper analyses the corporate and competitive strategies of Ryanair and Easyjet. Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. 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. Another program that is used by Ryanair is frequent-flyer program which means customers are given a free flight after they complete a specific number of flights in a given period with Ryanair. This kind of differentiation has created an advantage over competitors. The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. This can end up with the new entrant leaving the industry. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. EasyJet cabin staff in Portugal plan early April strike over pay : More Must read. We utilize security vendors that protect and In case of potential new entrant in the low fare segment, the strategy adopted by EasyJet and Ryanair thwarts competitions and renders entry of new companies financially unviable. In this case, both EasyJet and Ryanair have a witnessed a declining trend in the ratio from 2010 to 2012. Aviation industry is largely ruled by political, economical, environmental and technological frameworks. 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. easyJet vs Ryanair vs In doing so, a company tends to improve its earnings per share (EPS). EASYJET WebAdditional ESG information - Financial Year 2021; Investors. 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. 77% respectively. Ryanair being an existing airline can lower its air fare to wipe out new entrants. IvyPanda. This lack of personal service can induce people to opt for other low fare airlines. Experts say Southwest Airlines was among the first aviation companies to exploit the opportunities that existed in the low-cost airline market segment (Dobruszkes 2006; Kew & Stredwick 2005). Ryanair Ryanair is considered as the top low fare airline in Europe. WebEasyjet's operating profit margins declined sharply, reaching only 3.85% from 10.16% Ryanair has also used the same strategy to meet the same goals (Mayer 2008). Comprehensively, the two organisations share almost similar strategies. Mennen, M. 2005, An Analysis of Ryanair Corporate Strategy. This way, it became profitable in an overcrowded industry. We use cookies to give you the best experience possible. It was established in the year 1984 by the Ryan family with 25 employees. Financial Decision Making, Easyjet in comparison with In this measure, EasyJet is less geared as compared to Ryanair. 2015, A World Made for Money: Economy, Geography, and the Way We Live Today, U of Nebraska Press, Lincoln. Comparatively, Ryanair commands 40% of the market (Air France 2011). In line with this low-cost strategy is a simplified pricing structure. WebThe seats don't recline and have a width of 17 inches and a pitch of 30 inches. This can be an important factor for Ryanair as aircrafts cannot be substituted. Last updated: 25th April 2023. easyJet (LON:EZJ) is a British low-cost This compare & contrast essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) was written and submitted by your fellow Labor Costs: Ryanair has the lowest labor costs in the industry (6 per passenger vs 9 and 17 for competitors EasyJet and AirBerlin [5]). All rights reserved. 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. Therefore, a differentiated strategy is not exclusive. In order to become a competitive low fare airline, it is important that costs be economized or minimized. These strategic factors made the airline more profitable than other flag carriers did. EasyJet being a British airline company is performing within the political framework of Europe. Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. 17 in 2012 for Ryanair. 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. 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. This program cannot be afforded by new entrants because it has the added burden of agent incentives which means Ryanair can give huge incentives to agents to make them prefer Ryanair (Sorenson, 2005, p. 52). 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 makes EasyJet the second best low fare airline in Europe, second to Ryanair. On average, easyJet achieved a punctuality level of 91.6% from February to June 2021. Low fare airlines primarily focus on keeping the costs down by cutting down on costs of customer service and airport facilities. easyJet This fact shows that this market has limitations that would ordinarily curtail the growth of companies that do not adopt an elaborate strategy. 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. Equity ratio for EasyJet has marginally increased in 2012 compared to the The company chose this strategy because it did not believe that these services contributed to customer satisfaction (Kew & Stredwick 2005). Comparatively, customers who fly with major airlines have to contend with these inconveniences, thereby making them less efficient and punctual compared to short-haul flight carriers. This is because people tend to lose confidence over low fare airlines regarding their security system. 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. According to Dobruszkes (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. 126 the perceived close relationship between total - Course Hero 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 purpose is to build a low-carbon European economy (Mayer, 2007, pp. 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. Need a custom essay sample written specially to meet your Just talk to our smart assistant Amy and she'll connect you with the best The first ever flight of this company had its route from Luton to Edinburgh and Glasgow. Comparative analysis based on PESTEL Ryanair and EasyJet both being the top European low fare airlines face some common advantages and disadvantages. easyJet easyJet The trend remains same in the given years for both the airlines in the Net Income ratio. Ryanair has a higher gross margin than EasyJet. This shows that Ryanair can make reasonable profits from its sales. 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. 8 Pages. Ryanair mainly flies to secondary airports, while Easyjet flies to primary airports. However, EasyJet pays high fees to use the services of primary airports thus not achieving low costs in all its activities. Social Airline profits are highly dependent on the behavioral and demand patterns of customers. Thus, it is apparent EasyJet generates more value for the shareholders. EasyJet's orange-and-gray cabin is slightly less intense, but not by much. 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. resulting in high fees for airports. (2023) 'Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)'. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. 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. 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). 8 billion in 2010 to Euro 2. This strategy emerged after learning that many flag carriers use large airports, such as Heathrow, thereby limiting its competitiveness on this platform. Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). This clearly establishes that EasyJets funds management vis-a-vis trade, credit and cash cycle is far superior to Ryanairs. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. Whereas for Ryanair, this ratio has improved from just 5. Managing Corporate Reputation the Case 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. April 1, 2022. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. Over the last four quarters, easyJet's revenue has decreased by 48.8%. 16 over the same period. IvyPanda. Analysis of the financial results reported by both airlines shows that However, the company changed this strategy after realising it needed a differentiation strategy that would set it apart from its competitors. This encourages customers to use Ryanair even if other cheaper flying options are available. Its strength lies in reducing cost of activities on board. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). Ryanair and EasyJet are targeting markets 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. Legal EU laws related to aviation industry do not allow monopolization of airports. submit it as your own as it will be considered plagiarism. Regular review is done by management to monitor demand of flights (Ryanair: Annual reports and financial statements 2010, pp. Such passengers prefer to choose airlines with minimum traveling expenses or may opt for not traveling at all. 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. Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. For example, it has stolen customers in the business class segment (Malighetti et al. The two firms have witnessed a decline in gross margin. 500 126 the perceived close relationship between total - Course Hero CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. -PDF- 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. If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. Financial Analysis For instance, flight attendants also do the work of cleaners or gate agents. IvyPanda. All these factors can severely impact Ryanair. The interest cover ratio for EasyJet has improved from 13. The report contains an introduction to the business models of the airlines, their business strategies, SWOT analysis, analysis of porters five forces, financial analysis Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. While Ryanair was better hedged its fuel expenses raised 560% versus Thats almost 10 pp better than the EMA average and 11.7 pp better than the global average. 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. 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). Introduction The main objective of the paper to explain the accounting practices of easyJet plc. Ryanair EasyJet has broadened its customer base by targeting both business and leisure travelers which is an advantage over Ryanair. The growing rate of employment can have both positive and adverse effects on EasyJet and Ryanair. Analysis. (Appendix, Graphs 1 & 2). student. 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). It chose to lower its costs by eliminating these expenses. 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. The diagram below shows the current market shares of Ryanair and Easyjet in the European low-cost market. This is most common in aviation industry since only few companies manufacture aircrafts. 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. EasyJet is also affected by other environmental issues like inflation, per capita income, gross domestic product and government taxes. However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. The net income after tax for years 2010, 2011 and 2012 as a percentage of total revenue of the respective years has been 10. 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]. Although this is a strategy for keeping fares low by cutting cost, people are denied extra service value and this may affect the demand pattern of Ryanair flights. In doing so, the company saves upon expensive sources of capital to finance low earning current assets. 9 billion during 2011 and to Euro 3. However at the end, EasyJet with low working capital and yet maintaining a growth trend in profitability, lower gearing/leverage as opposed to Ryanair, consistent positive growth in net worth and, the fact that it remains competitive in spite of utilizing full service airports and providing free refreshment for long haul flights, EasyJet emerges a better buy for long term growth and potential. Massive flight cancellations led to Euro 50 million loss for Ryanair. The top 10 competitors average 11.6B. Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. 53-54,58). easyJet CEO Johan Lundgren concerned about reliability . Comparatively, Ryanair flies to Beauvais-Till Airport, which is almost one hour away from the city (Ryans 2009). EasyJet and Ryanair Financial Analysis | SpeedyPaper.com However, the airlines employ the smallest number of people to meet the least regulatory requirement stipulated in the aviation sector (Malighetti et al. Figure One: Position of Easyjet and Ryanair in the global low-cost airline market (Source: Elderman 2014). From 67 operational bases, Ryanair makes more than 1,600 flights daily. The net worth of Ryanair has been more or less remained same as a percentage of total assets 38%, 34% and 37% for years 2010, 2011 and 2012. Web1759 Words. Porters 5 forces analysis of EasyJet Threat of new entrants The deregulation policy encourages new airlines to emerge, but since initial capital investment is too high it becomes difficult for new entrants to compete with well established airlines like EasyJet. The following table shows this fact. 1, pp. Not sure if you can write a paper on Managing Corporate Reputation the Case of Ryanair by yourself? (Muller, 2011, p. 38) Any tax reforms or rule modifications related to flight insurance of passengers, airport activities and market competition can affect Ryanair. However, in 2013 and 2014, EasyJet posted a 5.94% and 3.39% reduction These destinations spread across 29 different countries in the region. EasyJet is in a better financial position than Ryanair. Political. 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. 79% and 8. 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. 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). Web. According to Malighetti et al. The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). Ryanair vs 32% and 12. Competitive rivalry Air fare is the driving factor for competitive rivalry in aviation industry. Ryanair also emphasizes on providing the most efficient customer service compared to other rival airlines. 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). | April 27, 2023 Irish ultra low-cost carrier founded in 1984. 76%. Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. Comparative Financial Analysis of Easyjet & Ryanair - GraduateWay Stated differently, both airlines use the direct sales strategy to market their services. If this happens then demand will fall which will add to the cost. Easyjet is Ryanairs main rival. 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). Low fare airlines also face the problems of overbooking and cancellations which add to their compensation expenses. IvyPanda, 18 Feb. 2023, ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. These operational strategies have created immense benefits for the two airlines, including optimizing airline use and increasing airline turnaround frequencies. Then there were incidents like heavy snowfall and major ATC industrial unrest. 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. 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. WebRyanair in comparison charges 115 if its done online, and a whopping 160 if you only In such case Ryanairs current oil price strategies may not hold good. 2009, Beating Low Cost Competition: How Premium Brands can respond to Cut-Price Rivals, John Wiley & Sons, London. 3 Easyjet non-current assets 2021 Fig.
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