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. Short distance routes are also limited to low-cost airlines because European Union (EU) policies favour train services as opposed to airline services (Air France 2011). The emphasis must be on cost-cutting strategies and expansion of route network. Ryanair 34% for the years 2010, 2011 and 2012 of the respective years total revenue. Key Low fare airlines like Ryanair can lower their price to force bigger airlines to also reduce their price to maintain competitiveness. 59% for years 2010, 2011 and 2012. Since fuel prices can become very high, people often prefer air travel to automobiles for distance more than 400 km (Sorenson, 2005, pp. Introduction The main objective of the paper to explain the accounting practices of easyJet plc. Concisely, Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). Both the airlines have shown good financial performance, this means they can promptly meet all payment obligations to creditors and suppliers. In line with its low-cost strategy, the company also adopted a no-frill strategy, like Ryanair, by eliminating in-flight meals and reducing the number of aircraft attendants. Aviation industry is largely ruled by political, economical, environmental and technological frameworks. 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. 1 PESTEL Analysis for EasyJet Ltd. Ryanair Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). Low fare airlines also face the problems of overbooking and cancellations which add to their compensation expenses. EasyJet and Ryanair Financial Analysis | SpeedyPaper.com 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. Ryanair, EasyJet Make Progress on Pandemic Recovery Expansion EasyJet vs RyanAir EASYJET PLC : Forcasts, revenue, earnings, analysts expectations, ratios for EASYJET PLC Stock | EZJ | GB00B7KR2P84 . EasyJets net profit (after tax) has been 6. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). 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. 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. 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. They have earned more incomes and have flown more people than ever before. 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. Political. 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. https://www.easyjet.com. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. Kew, J. 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. 1, pp. 2006). While easyJet was a profitable business prior to the pandemic, it hasnt been profitable since. This understanding shows where the corporate strategies of both companies converge. This factor combined with a rise in revenues from Euro 2,942. EasyJet is in a better financial position than Ryanair. However, EasyJet has a policy of serving free refreshments to customers for long haul flights but this service is not available in Ryanair. This kind of differentiation has created an advantage over competitors. However, in 2013 and 2014, EasyJet posted a 5.94% and 3.39% reduction External factors like increasing oil price can severely impact fare structure since the fare is already low. 8 billion in 2010 to Euro 2. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. The recent availability of price comparison websites have increased the bargaining power of buyers especially between two low fare airlines like EasyJet and Ryanair. 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. The success of this strategy has always depended on the control and management of the four facets of cost management in the aviation sector employee management, equipment and maintenance, customer service costs, and airport handling costs (Thomson & Baden-Fuller 2010, p. 26). Easyjet Case Study Management Accounting For example, both airlines fly to different types of airports. It operates almost 1,000 short-to-medium-haul routes in and around the continent. 2014, Ryanair: Strategy Report. Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). Given the above background, this report will attempt to analyze the two companies i. e. , Ryanair and EasyJet viz. Social Airline profits are highly dependent on the behavioral and demand patterns of customers. 249264. 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. 2006). 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. 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. 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. Management Accounting Practices of the easyJet plc. 500 In their effort to standardize all activities and primarily maintenance of aircrafts, RyanAir and EasyJet like all other low fare airlines buy standard configuration identical aircrafts with a high density seating. These strategies although have helped them in keeping the costs low, but they certainly are a cause of inconvenience to the discerning customers. 9 billion during 2011 and to Euro 3. Low fare airlines have the problem of working with primary airports because of the expensive aerobridges and elaborate check-in-services of these airports. 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. 1%, 7. 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). Therefore, a key part of their strategy is meeting the minimum contractual obligations required by airlines to their customers. Financial Analysis By doing so, it believes that its customers can get around to where they are going in good time. In this case, Ryanair does better than EasyJet. WebFar more of you flew with easyJet than any other carrier. Easy entry of new airlines and restriction of monopolization of airports can pose stiff competition for EasyJet and Ryanair. 40, loc. The commitment and dedication towards work that stimulates the employees of EasyJet kept its workforce going and provide uninterrupted world class service. It also realised that its low-cost pricing strategy could not sustain its business because the margins made from such a strategy were low (Malighetti et al. The report contains an introduction to the business models of the airlines, their business strategies, SWOT analysis, analysis of porters five forces, financial analysis 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. Similar to Ryanair, Easyjets strategic direction came from years of studying the success Southwest Airline (Sull 1999). EasyJets activities comply with the regulations imposed by government regarding global warming like low carbon emissions, operating aircrafts that consume less oil and make less noise. PESTEL Analysis of Ryanair Ltd. & Williams, G. 2012, Air Transport in the 21st Century: Key Strategic Developments, Ashgate Publishing, Ltd., New York. 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). However, a closer scrutiny of the working capital level of the two airlines reveal a different a scenario as opposed to the popular belief of Ryanair being the better managed airline of the two. Irish ultra low-cost carrier founded in 1984. easyJet vs Ryan air Such passengers prefer to choose airlines with minimum traveling expenses or may opt for not traveling at all. Ryanair The first operating aircraft was a 15-seater Bandeirante that carried 5000 passengers in its first year of operations. EasyJet has an average turnaround time of 30 minutes or below which goes to prove its service efficiency and reliability. Such competitions set limitations to EasyJets pricing policies on less revenue routes. Therefore, a differentiated strategy is not exclusive. 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. 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. All rights reserved. Easyjet Case Study Management Accounting Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. The interest cover ratio for EasyJet has improved from 13. Ryanair is projecting a strong summer; it has capacity on sale at 114% of All these along with various functional problems presented immense challenge to the performance level of EasyJet. Here too, Ryanair marginally outperforms EasyJet over the three years of study. 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. 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. . Ryanair has always branded itself as an airline company that regards punctuality and efficiency as key segments of its service model (OConnell & Williams 2012). Customer satisfaction is another element that this company keeps track of by measuring it online or by passenger surveys. 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]. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). The diagram below shows the current market shares of Ryanair and Easyjet in the European low-cost market. Nonetheless, Ryanair commands a stronger market share than Easyjet does. 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. Although these strategies do help in keeping the costs down, they also deter those customers who prefer being served while flying. 2 Ryanair non-current assets 2022 Fig. Financial Analysis Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. Today, the airline still reaps the benefit of being among the first airline companies, in Europe, to adopt the low-cost airline strategy. It chose to lower its costs by eliminating these expenses. Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. 17, no. Their endeavor to cut costs also result in doing way with personal one-to-one interface with customers. Low fare airlines primarily focus on keeping the costs down by cutting down on costs of customer service and airport facilities. In order to become a competitive low fare airline, it is important that costs be economized or minimized. Figure 38 days sales uncollected development an - Course Hero WebOn the basis of financial fundamentals, Ryanair is stronger than EasyJet in terms of In such case Ryanairs current oil price strategies may not hold good. EASYJET Correct writing styles (it is advised to use correct citations) 84-85). More than 20 airlines have collapsed after adopting the low-cost strategy (Air France 2011). All these factors can severely impact Ryanair. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). If this happens then demand will fall which will add to the cost. For example, in 2014, both organisations reported increased passenger numbers (Wallach 2015). 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. This affirmation aligns with the goal of Ryanair, which is to firmly set up itself as Europes leading low-fare scheduled passenger airline through continuous improvements and expanded offerings of its low-fares service (Freire 2014, p. 4). 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. 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. Profit reinvestment is a common way that the airlines create value for their shareholders (Mennen 2005). "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." -PDF- 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. Your privacy is extremely important to us. We will write a custom Case Study on Ryanair and EasyJet Firms Strategies specifically for you. EasyJet has earned a Net Interest margin of 7% as compared to Ryanairs 6% in the financial year 2012 indicating that EasyJets utilization of assets is better than that of Ryanairs. 1, pp. With the help of this analysis companies design strategies to reduce risks attached to development and expansions beyond the borders of the country of origin. Raccomandazioni degli analisti su EASYJET PLC: 27/04: easyJet plc: JPMorgan cambia rotta e passa a un giudizio Neutral Chief Financial Officer & Director: Stephen Alan Michael Hester 4 601: SINGAPORE AIRLINES LIMITED: 5.06%: 28 092: AIR CHINA LIMITED: 0.86%: 21 445: DELTA AIR LINES, INC.-0.33%: 21 317: RYANAIR 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. Ryanair has evolved from a family owned business into one of the most successful regional brands in the market. This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. At first Ryanair has put the increase in overall assets and liabilities to good use, it has managed to almost double the growth in net profits from Euro 305 million to Euro 560 million translating to an increase of 84% over 2010 levels. Evidence of this fact emerges in Paris as a common destination for both airlines. (Appendix, Table 5 and Table 9). They create user-friendly websites which encourages people to book tickets online thereby eliminating the need of travel agents. A low ratio is an indicator that an organization can duly pay all its dues. This paper has already demonstrated that Ryanair and Easyjet use the same business model low-cost strategy. 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). This essay was written by a fellow student. As such, low fare airlines are regarded as inferior in the entire aviation industry. This makes EasyJet second best low fare airline in Europe after Ryanair in terms of cost. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. 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. Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). EasyJet's orange-and-gray cabin is slightly less intense, but not by much. This will reduce the fare burden on customers by avoiding travel agents. student. Moreover, these are cheaper modes of travel than air travel. 14, no. 56% respectively. 14 over the three years and where as in case of Ryanair, this ratio has improved from 0. The rate of unemployment in Europe is very high which means a major portion of European population cannot afford to travel by air. PESTEL analysis provides different reports depending on whether the analysis is done in domestic or international arenas. Also the regions being slightly rural can act as deterrent for some customers. Since Ryanair has its operational bases in several European countries, so it must take into consideration variable labor markets and government regulations. IvyPanda. WebThe seats don't recline and have a width of 17 inches and a pitch of 30 inches. The first ever flight of this company had its route from Luton to Edinburgh and Glasgow. 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. easyJet is slightly smaller than Ryanair but also packs a punch in the low-cost market. Catering to a slightly different market, the carrier was founded in March 1995. This makes the airline 24 years old. easyJet operates aircraft from the A320 family, with an average fleet age of around seven years. The low-cost airline sector has been a ruthless industry for aviation players. One positive factor is globalization which can increase flight demand in the long run. for only $11.00 $9.35/page. (2023) 'Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)'. This can be an important factor for Ryanair as aircrafts cannot be substituted. It also uses single type of aircraft which is Boeing to save on training costs of flyers (O Cuilleanain, et al, 2004, pp. EasyJet keeps its focus on environmental awareness programs while making any future strategies. submit it as your own as it will be considered plagiarism. 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). easyJet 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 Easyjet Financial Ratios for Analysis 2014-2023 | EJTTF Today EasyJet has in its service 175 aircrafts over 400 routes in 27 countries. Higher the gearing, higher is the risk to investor. Bargaining power of suppliers Bargaining power of suppliers can be strong if they are concentrated i. e. there are few suppliers and many buyers. Mayer, S. 2008, Ryanair and Its Low Cost Flights in Europe, Books on Demand, New York. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. The company operates approximately 600 routes across more than 30 countries, with its fleet of over 200 Airbus aircraft.
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