For example, it has focused on improving its performance in many routes where Easyjet does not service (Easyjet operates in 702 routes, while Ryanair operates in 1,600 routes) (CAPA 2014). Easyjet flies to Charles de Gaulle Airport and Orly Airport (two main airports in the city) (Thompson 2005). Bargaining power of suppliers Bargaining power of suppliers can be strong if they are concentrated i. e. there are few suppliers and many buyers. Similar to other low-cost carriers, the airline also had no in-flight meals and a rapid turnaround. As it is using point-to-point the, time to go to destination is reduced. Financial Analysis Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. Thus EasyJet cannot achieve low cost in all activities and so has ended up being the second best low fare airline in Europe after Ryanair (Sorenson, 2005, pp. Ryanair Corporate Strategy Vs. easyJet: Competitive 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. 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. 15% and 41. 2005, Strategic Management: Awareness and Change, Cengage Learning EMEA, London. Ever since, these two airlines have survived all odds and thrived to grow, changing the way people travelled. 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. All rights reserved. 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). Higher the ratio means higher the perceived value of the company and vice versa. This indicates that EasyJet has overall managed its assets and liabilities efficiently without compromising in profitability; the net profit during the same period has grown by 57%. Here too, Ryanair marginally outperforms EasyJet over the three years of study. An incident like air accident can lead the customers to rethink about the compromises adopted in aircraft maintenance. 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. To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). High tax rates on aviation industry affect these airlines since they strive to keep their fare low. Both the airlines use frequent-flyer program which is an added advantage over any new entrants. The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). 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. Ryanair in particular has had a major role in the development of secondary and regional airports in continental Europe. 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. Management Accounting Practices of the easyJet plc. 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. 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). 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. Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. This calls for constantly reinventing processes and upgrading and adopting the latest in the technology to keep ahead of the race. 2 Ryanair non-current assets 2022 Fig. For example, in 2014, both organisations reported increased passenger numbers (Wallach 2015). 45% and 15. report, Comparative Financial Analysis of Easyjet & Ryanair. For example, in the quest to increase the seating density, the count of washrooms are kept at bare minimum. Very typically, these companies also tend to suffer when economies are in a high employment phase. -PDF- 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. 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. WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. 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. Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. 126 the perceived close relationship between total - Course Hero We use cookies to give you the best experience possible. 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. 3.10 Peer (Muller, 2011, p. 38) Any tax reforms or rule modifications related to flight insurance of passengers, airport activities and market competition can affect Ryanair. Competitive rivalry Because of increased competition in the European aviation industry, rivalry between airlines has increased. 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. Another key aspect of its strategic competence was high aircraft use (Thompson 2005). 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. The aviation industry also gets influenced by volatilities in international currency markets. In this measure, EasyJet is less geared as compared to Ryanair. This fact shows that this market has limitations that would ordinarily curtail the growth of companies that do not adopt an elaborate strategy. WebThis report 'Two Major Airlines EasyJet and Ryanair' aims at providing a complete overview of the two major airlines of Europe, EasyJet, and Ryanair. While Easyjet flies to Leonardo da VinciFiumicino Airport, which is close to the city, Ryanair flies to CiampinoG. 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. Revenue Although these strategies do help in keeping the costs down, they also deter those customers who prefer being served while flying. The pervasive risk of terrorism means airlines like EasyJet have to emphasize on strict security measures which will warrant higher costs. Most of its income stems from selling flight tickets and the add-ons associated with them. cite it correctly. Comparatively, Ryanair commands 40% of the market (Air France 2011). 32% and 12. The total assets have increased by 19% (non-current assets 14% and current assets 27%) over the two year period between 2010 and 2012. Natural calamities and also human events like flight accidents and terrorist attacks can drastically reduce flight demand as mode of travel. While this brings in new people who can afford to fly, the low fare airlines tends to lose travelers to full fare airlines whose preferences shift to experience greater comfort while flying. Low fare can be an advantage for EasyJet but airline customers often emphasize more on comfort and services to cost factors both of which are strong elements in high fare airlines. Which European low-cost carrier is best for you: Ryanair, However, EasyJet has a policy of serving free refreshments to customers for long haul flights but this service is not available in Ryanair. Employees are not engaged in any one particular activity, they do various jobs thus reducing the need of multiple personnel. 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. . Technology Airline industry is one sector that is highly dependent on technologies. 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. 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. We utilize security vendors that protect and Profit reinvestment is a common way that the airlines create value for their shareholders (Mennen 2005). WebBCP Business & Management EMFRM 2022 Volume 38 (2023) 2360 Fig. 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 Also the regions being slightly rural can act as deterrent for some customers. In line with this strategy, the company also introduced value-added services to its core strategy. Headquarter of the company is situated at Dublin Airport. 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 strength lies in reducing cost of activities on board. British multinational low-cost airline group headquartered at London Luton Airport. Web. easyJet PLC has a consensus rating of Hold with an average target price of 12.42. In EasyJet air travel there is no arrangement for free meal services in flights that are not longer than 2 hours (EasyJet Airline Company Limited, n. d. ). Comparative Financial Analysis of Easyjet & Ryanair - GraduateWay 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. This paper has already demonstrated that Ryanair and Easyjet use the same business model low-cost strategy. 1, pp. Kew, J. 3 billion in the year 2012. This can be an important factor for Ryanair as aircrafts cannot be substituted. 2006). Therefore, a differentiated strategy is not exclusive. Analysis: the Ryanair-Wizz showdown in depth - Aviacionline.com 8 Pages. match. This can end up with the new entrant leaving the industry. These strategic factors made the airline more profitable than other flag carriers did. Low fare airlines like Ryanair can lower their price to force bigger airlines to also reduce their price to maintain competitiveness. Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. Such competitions set limitations to EasyJets pricing policies on less revenue routes. Its high seat density arrangements on board allow optimum use of aircrafts. 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. 249264. 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. Massive flight cancellations led to Euro 50 million loss for Ryanair. Ryanair has had no air accidents with casualties till date. There are many low-cost airlines in the world. IvyPanda. IvyPanda. Since the factors cannot be influenced by a business enterprise, so it is upon the business to adapt itself to the factors. Retrieved from https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. Ryanair and EasyJet are targeting markets Nonetheless, Ryanair commands a stronger market share than Easyjet does. Therefore, the risk of overcapacity in the industry is real. This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. EASYJET The emphasis must be on cost-cutting strategies and expansion of route network. 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. easyJet Ryanair Ryanair is considered as the top low fare airline in Europe. It provides a common size comparison between different organizations with regard to their respective individual performances. 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. easyJet (1995) is a low-cost airline carrier operating only in Europe. Both the airlines are known for their operational efficiency and financial stability. 34% for the years 2010, 2011 and 2012 of the respective years total revenue. Copyright 2023 - IvyPanda is operated by, Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay), EasyJet: more aircraft come in as more cash to shareholders goes out, Alliance Supermarket' Point-of-Sale System, Caterpillar Company Analysis Using Porters 5 Forces Model, An Investment Analysis of EasyJet on Behalf of a Pension Fund, EasyJet Company: Strategic Management and Business Policy, Operations and Process Management of EasyJet, Ryanair and easyJet Competitive Positions, Ryanair and easyJet Value for Shareholders, Macbeth & Frankenstein: Compare & Contrast, Nationalism Versus Capitalism: Compare & Contrast, Organisational Design and Performance Management. easyJet Vs. Ryanair: The Curious Case Of 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. student. The company conveys these advantages to its customers by operating in secondary airports where long queues and complicated security rules rarely inconvenience customers (OConnell & Williams 2012). 97-102). easyJet In their 2021 fiscal year, EasyJet's revenue continued to decline, However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. 14, no. This target can be fulfilled with constant developments and widening of its low-fare services, without ignoring efficient operational services. Social Airline profits are highly dependent on the behavioral and demand patterns of customers. https://www.easyjet.com. Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. 24 from 2010 to 2012. For example, both airlines fly to different types of airports. 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. 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. 2006). Half of its seating capacity is in such facilities. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." In the year 2010 EasyJet faced a number of major problems that posed a threat to its efficient service. Of importance, experts say the European low-cost airline sector is more brutal for low-cost airline companies than the American market because both markets have different structures (CAPA 2014). This will reduce the fare burden on customers by avoiding travel agents. Liquidity and Current ratio Under this ratio, we measure the companys ability to meet it short term expenses. WebEasyjet's operating profit margins declined sharply, reaching only 3.85% from 10.16% Edward Russell. Labor Costs: Ryanair has the lowest labor costs in the industry (6 per passenger vs 9 and 17 for competitors EasyJet and AirBerlin [5]). In this regard, both airlines have reported increased asset values and increased growth figures. A low price-earnings ratio is an attractive proposition to invest in the stocks of the two companies. 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. 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. The two airlines are also the most popular low-cost airlines in Europe. Thirdly, there is a growing threat of terrorist attacks across Europe. Secondly, primary airports often choose not to work with low fare airlines as the latter do not need many services like aerobridges, elaborate check-in-service which is preferred by full fare airline companies. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). easyJet plc operates as a low-cost airline carrier in Europe. 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. EasyJet and Ryanair have differences within their strategies. Alternative modes of transport do not form a threat to low fare airlines like EasyJet and Ryanair for distance more than 400 km. Stelios baby is in good hands. 2038. Web1759 Words. Ryanair has evolved from a family owned business into one of the most successful regional brands in the market. Observers have also said that its fleet of new aircrafts is another strategic competency that boosts the airlines efficiency in the airline industry (Dobruszkes 2006; Kew & Stredwick 2005). If this happens then demand will fall which will add to the cost. While EasyJets net worth has consistently witnessed growth, albeit as a percentage of total assets, the net worth of Ryanair has in fact shrunk percentage wise from year 2010 to year 2012. 79% and 8. To meet the demand, management focuses on maintaining enough flights every day. 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. With rising employment, the purchasing power of people also improves. Threat of substitutes This force is not much applicable to aviation industry especially if the airline is a low fare one like EasyJet. Then there were incidents like heavy snowfall and major ATC industrial unrest. 59% of the total revenues as operating profits for the same three years. The net income after tax for years 2010, 2011 and 2012 as a percentage of total revenue of the respective years has been 10. In case of Ryanair, the assets and liabilities have both registered positive growth. The total revenue for Ryanair has grown by 21% and 47% over 2010 levels for years 2011 and 2012, while for EasyJet the total revenues have grown by 16% and 30% over 2010 for years 2011 and 2012. 16 in 2012 for EasyJet and whereas 0. Then there are strict regulations from the EU regarding reduction of carbon emissions.