WebeasyJet is a better travel experience. 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. While Ryanair was better hedged its fuel expenses raised 560% versus EasyJet is a British airline company whose headquarter is based at Londons Luton Airport. 500 In order to become a competitive low fare airline, it is important that costs be economized or minimized. Customers have appreciated this strategy by increasing ticket sales (Kew & Stredwick 2005). For example, Easyjet has maximised its productivity by operating in airports where it enjoys market leadership (CAPA 2014). 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. 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. 1%, 7. 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 Although revenues have picked up, profits continue to lag behind as a result of elevated fuel and labour costs. Automobiles, bus services and railways can act as substitutes but where time saving is important, there can be no substitute to airlines. is an Irish airline company. Both airlines have perfected this strategy by introducing new price reduction measures, such as paperless booking. 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. 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. Ryanair has always branded itself as an airline company that regards punctuality and efficiency as key segments of its service model (OConnell & Williams 2012). 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. 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 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. 97-102). Easyjet is Ryanairs main rival. 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. Ryanair does not take the services of primary airports to avoid high airport charges and opts for regional airports. WebRyanair in comparison to Easyjet has increased its turnover to 2,171 million (2008) 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. Copyright 2023 service.graduateway.com. Low fare airlines primarily focus on keeping the costs down by cutting down on costs of customer service and airport facilities. Its strategy was to steal customers from dominant players in the airline industry by offering lower ticket prices compared to its rivals. This article aims to compare the two largest Low-cost carrier (LCCs) in EasyJet is also affected by other environmental issues like inflation, per capita income, gross domestic product and government taxes. It was established in the year 1984 by the Ryan family with 25 employees. 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. Need a custom essay sample written specially to meet your This is most common in aviation industry since only few companies manufacture aircrafts. According to Dobruszkes (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. 3. EasyJets Net Current Assets to Sales i. e. , Working Capital to Sales ratio suggests that the company manages its debtors and creditors very efficiently. It chose to lower its costs by eliminating these expenses. In this case, both EasyJet and Ryanair have a witnessed a declining trend in the ratio from 2010 to 2012. In line with this strategy, the company also introduced value-added services to its core strategy. Ryanair has a higher gross margin than EasyJet. Increased incomes make people quality, customer service and comfort conscious during flights. 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. 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. Every effort has to be paid in order to keep the costs of operations at the bare minimum albeit without compromising on safety and security of passengers. 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. While all airlines have similar characteristics and make similar responses to situations, yet each airline has some distinctive features and characteristics in order to maintain competitiveness in the aviation industry. A business enterprise before its establishment needs to study the forces that will impact its profitability, and a tool for such assessment is Porters 5 forces analysis, which includes bargaining power of customers, bargaining power of suppliers, threat of new entrants, threat of substitutes and competitive rivalry. Ryanair and EasyJet are targeting markets These destinations spread across 29 different countries in the region. must. Choose skilled expert on your subject and get original paper with free plagiarism The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. 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. Threat of substitutes This force is not much applicable to aviation industry especially if the airline is a low fare one like EasyJet. In this case, Ryanair does better than EasyJet. 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. Liquidity and Current ratio Under this ratio, we measure the companys ability to meet it short term expenses. Need a custom Compare & Contrast Essay sample written from scratch by 59% for years 2010, 2011 and 2012. Ryanair also severely lacks in customer service since one cannot contact the airline through phone or e-mail except for booking purposes. Dowling, T. 2010, Ryanair v easyJet. EasyJet being a British airline company is performing within the political framework of Europe. Mayer, S. 2008, Ryanair and Its Low Cost Flights in Europe, Books on Demand, New York. 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. The following table shows this fact. 3 millions. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. 12 in 2010 to 0. Evidence of this fact emerges in Paris as a common destination for both airlines. WebAdditional ESG information - Financial Year 2021; Investors. Dobruszkes, F. 2006, An analysis of European low-cost airlines and their networks, Journal of Transport Geography, vol. The highest 12-month target stood at 900p while the lowest was 460p per share. Both airlines create value for the shareholders in the following ways. 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 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. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." 16 over the same period. The target price is lowered from GBX 370 to GBX 350. All rights reserved. These strategic factors made the airline more profitable than other flag carriers did. Thirdly, there is a growing threat of terrorist attacks across Europe. 24 from 2010 to 2012. This shows that Ryanair can make reasonable profits from its sales. 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). Web1759 Words. Profit reinvestment is a common way that the airlines create value for their shareholders (Mennen 2005). By managing and controlling competition in the sector, both Ryanair and Easyjet have generated superior values for their investors. Social Airline profits are highly dependent on the behavioral and demand patterns of customers. 91% and 7. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." 2006). 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. Since its low-cost strategy started increasing sales, Ryanair has always branded itself as a low-cost airline. The increased seating leaves very little leg room for a relaxed travel. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). The purpose is to build a low-carbon European economy (Mayer, 2007, pp. 81%, 7. This paper analyses the corporate and competitive strategies of Ryanair and Easyjet. Half of its seating capacity is in such facilities. Your privacy is extremely important to us. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. WebFor Easyjet Group, it is worth a lot more than Ryanair, both in terms of assets owned In Europe, major airline companies, such as Flybe, Wizz Air and Aer Lingus, dominate this space (Dobruszkes 2006). Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. In this measure, EasyJet is less geared as compared to Ryanair. Irish ultra low-cost carrier founded in 1984. April 1, 2022. The recent availability of price comparison websites have increased the bargaining power of buyers especially between two low fare airlines like EasyJet and Ryanair. 2005, Business Environment: Managing in a Strategic Context Chartered Institute of Personnel and Development, CIPD Publishing, New York. Just talk to our smart assistant Amy and she'll connect you with the best An incident like air accident can lead the customers to rethink about the compromises adopted in aircraft maintenance. In the year 2010 EasyJet faced a number of major problems that posed a threat to its efficient service. easyJet CEO Johan Lundgren concerned about reliability . More than 20 airlines have collapsed after adopting the low-cost strategy (Air France 2011). If this happens then demand will fall which will add to the cost. Contact us: [emailprotected]. In March 1998, EasyJet acquired 40% of Swiss charter operation, TEA Basel AG after which EasyJet was renamed as EasyJet Switzerland. However, the airlines employ the smallest number of people to meet the least regulatory requirement stipulated in the aviation sector (Malighetti et al. This way, shareholders in both airlines get value for their investments through structured competition and increased productivity. Gearing ratio which reflects a companys financial position in the long run shows that EasyJet is in a better financial position than Ryanair in the fiscal year 2011-2012. professional specifically for you? After the terrorist attacks in America people have become anxious regarding traveling by air, and such threats of terrorist attacks can further influence flight demands of European airlines including EasyJet. External factors like increasing oil price can severely impact fare structure since the fare is already low. 77% respectively. The first operating aircraft was a 15-seater Bandeirante that carried 5000 passengers in its first year of operations. Moreover, these are cheaper modes of travel than air travel. 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.
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