However, both companies have unique internal strategies that differentiate their services beyond the low-cost model. Since fuel prices can become very high, people often prefer air travel to automobiles for distance more than 400 km (Sorenson, 2005, pp. Managing Corporate Reputation the Case IvyPanda. -PDF- In this study it has been found that Ryanair bases its competitiveness by using secondary and regional airports in order to avoid congestion, keep airport charges at minimum and afford a fast and efficient turnaround time for its aircrafts. Also, too many airlines can create market saturation which can lead to market standardization of services which means people will have no particular preference for any one airline. | April 27, 2023 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. This strategy emerged after learning that many flag carriers use large airports, such as Heathrow, thereby limiting its competitiveness on this platform. 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. 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. EasyJet's orange-and-gray cabin is slightly less intense, but not by much. Figure One: Position of Easyjet and Ryanair in the global low-cost airline market (Source: Elderman 2014). 1 PESTEL Analysis for EasyJet Ltd. 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. While Ryanair does not provide any free refreshments irrespective of distance or duration travelled, EasyJet on the other hand provides free refreshments and meals for all flights of more than 2 hours duration. The trend remains same in the given years for both the airlines in the Net Income ratio. 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). 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. For instance, flight attendants also do the work of cleaners or gate agents. Moreover, pandemics like swine flu can adversely affect flight demands. Ryanair enjoys a dominant market share in the European low-cost airline market because it was among the first companies to adopt this strategy in the region (Malighetti et al. The top 10 competitors average 11.6B. For example, Easyjet has maximised its productivity by operating in airports where it enjoys market leadership (CAPA 2014). But it's not worth paying a load more than Ryanair for in my opinion. In this regard, it strives to offer convenience to its customers by operating in major airports around Europe. 22%, 10. 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. (Appendix, Graphs 1 & 2). 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. In case of EasyJet, the Gross Income ratio has improved from 0. EasyJet keeps its focus on environmental awareness programs while making any future strategies. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." The two firms have witnessed a decline in gross margin. The sale of the aircraft will generate 206m ($255m) of liquidity to strengthen easyJet's financial position. 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. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. 1, pp. Introduction The main objective of the paper to explain the accounting practices of easyJet plc. Ryanair has evolved from a family owned business into one of the most successful regional brands in the market. These strategies although have helped them in keeping the costs low, but they certainly are a cause of inconvenience to the discerning customers. Web1759 Words. Ryanair for only $11.00 $9.35/page. 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. Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. Ryanairs operating expenses have increased by 43% from 2010 to 2012 and EasyJets by 27%. 500 WebeasyJet is a better travel experience. In this case, both EasyJet and Ryanair have a witnessed a declining trend in the ratio from 2010 to 2012. 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. Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. 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. 59% of the total revenues as operating profits for the same three years. 91% and 7. To meet the demand, management focuses on maintaining enough flights every day. In doing so, the company saves upon expensive sources of capital to finance low earning current assets. (2023) 'Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)'. WebBCP Business & Management EMFRM 2022 Volume 38 (2023) 2360 Fig. & Stredwick, J. Natural calamities and also human events like flight accidents and terrorist attacks can drastically reduce flight demand as mode of travel. easyJet All these along with various functional problems presented immense challenge to the performance level of EasyJet. This makes EasyJet the second best low fare airline in Europe, second to Ryanair. Lastly, in Europe, too much competition in the low-cost airline sector offers minimal profit margins for existing players in the industry. 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. Ryanair And Easyjet Financial Ratio Analysis | Researchomatic 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. 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. B. Pastine International Airport, which is far away from the main business district. 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. Thus, it is apparent EasyJet generates more value for the shareholders. 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. Easyjet also strives to become a market leader in the low-cost market segment. 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. 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. 1%, 7. 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. In case you can't find a relevant example, our professional writers are ready 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. 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. 12 in 2010 to 0. 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). Higher the gearing, higher is the risk to investor. The net worth as a percentage of total assets for the years 2010, 2011 and 2012 have been 37. Ryanair has always branded itself as an airline company that regards punctuality and efficiency as key segments of its service model (OConnell & Williams 2012). requirements? 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. EasyJet is in a better financial position than Ryanair. The low-fare services of Ryanair are structured in the manner to entice passengers who travel for leisure or business. easyJet Shares | Latest easyJet Stock News and Analysis 2023 Similar to Ryanair, Easyjets strategic direction came from years of studying the success Southwest Airline (Sull 1999). Figure 38 days sales uncollected development an - Course Hero While Ryanair was better hedged its fuel expenses raised 560% versus 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. Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. 2 Ryanair non-current assets 2022 Fig. To maintain competitiveness in the market, EasyJet needs to keep an eye on the technological upgrades with regard to aircraft manufacturing. 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. British multinational low-cost airline group headquartered at London Luton Airport. The lower the ratio, the better. EASYJET 2005, Strategic Management: Awareness and Change, Cengage Learning EMEA, London. Vertical analysis measures all the items in terms of total revenue in the income statement and total assets in the financial position statement. to help you write a unique paper. 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. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. As far as information technology goes Ryanair operates a multi-featured website for selling flight tickets. Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. 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. The need is to always stay technologically up to date in regard to aircrafts so that the aircrafts are fuel efficient to deal to mitigate the risk arising out of rise in oil price in the international markets.