easyjet vs ryanair financial analysis
However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. 500 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). The database is updated daily, so anyone can easily find a relevant essay example. 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 Although revenues have picked up, profits continue to lag behind as a result of elevated fuel and labour costs. In doing so, the company saves upon expensive sources of capital to finance low earning current assets. After realising these strategic weaknesses, the company decided to introduce an outside perspective on its business model by creating superior value for its customers. The first ever flight of this company had its route from Luton to Edinburgh and Glasgow. Ryanair being an existing airline can lower its air fare to wipe out new entrants. 249264. easyJet Ryanair Corporate Strategy Vs. easyJet: Competitive easyJet Vs. Ryanair: The Curious Case Of Mennen, M. 2005, An Analysis of Ryanair Corporate Strategy. 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). -PDF- April 1, 2022. The company has also adopted the same strategy to improve passenger comfort and expand its operational network. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." 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. Both the airlines have shown good financial performance, this means they can promptly meet all payment obligations to creditors and suppliers. In such a case scheduling plays a major part to attract more customers. In this case, Ryanair does better than EasyJet. Ryanair vs 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 vs EasyJet vs Eurowings easyJet vs Ryan air 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. Supplemental understanding of the topic including revealing main issues described in the particular theme; 3.10 Peer professional specifically for you? 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. This restructuring affirmed the views of Mennen (2005) who said a corporate strategy should have more value as a holistic entity as opposed to the sum of its parts. Since it is not profitable for airports to differentiate their services, Ryanair opts for secondary and regional airports. (Appendix, Graphs 1 & 2). easyJet (1995) is a low-cost airline carrier operating only in Europe. Focus on low-fare operations was initiated in the early 1990s by a new team of directors in the board. 2006). Dont WebAdditional ESG information - Financial Year 2021; Investors. Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. 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 has a wider customer base since it targets both leisure and business customers while Ryanair targets only leisure customers. Thirdly, there is a growing threat of terrorist attacks across Europe. Environment Airline services can be drastically disrupted by natural calamities, for instance the 2010 Eyjafjalla volcanic eruption in Iceland disrupted European air space for several days. Ryanair Ryanair is considered as the top low fare airline in Europe. For instance, in 2004, Ryanair put aviation industrys first paperless pilot training program into practice (Muller, 2011, p. 39). 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. Sull, D. 1999, Case Study: easyJets $500 Million Gamble, European Management Journal, vol. WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. Copyright 2023 service.graduateway.com. 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. Equity ratio for EasyJet has marginally increased in 2012 compared to the Finally, the government has imposed higher taxes on flights which add to the cost thereby resulting in increasing air fares. Both the airlines are known for their operational efficiency and financial stability. In this regard, both companies have gained the reputation of being the biggest low-cost airlines in Europe (Wallach 2015). Similar to Ryanair, Easyjets strategic direction came from years of studying the success Southwest Airline (Sull 1999). This makes EasyJet second best low fare airline in Europe after Ryanair in terms of cost. Dobruszkes, F. 2006, An analysis of European low-cost airlines and their networks, Journal of Transport Geography, vol. Also, primary airports prefer to do business with high fare airlines since low fare airlines like EasyJet are not favorably poised to pay for many of the sophisticated landings, baggage and check-in services. Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. Since the factors cannot be influenced by a business enterprise, so it is upon the business to adapt itself to the factors. We will write a custom Essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) specifically for you for only 11.00 9.35/page. 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. Wallach, B. In doing so, a company tends to improve its earnings per share (EPS). A low price-earnings ratio is an attractive proposition to invest in the stocks of the two companies. EasyJet cabin staff in Portugal plan early April strike over pay : More Must read. By conducting a spend analysis the controller can consolidate purchases in order to increase buying volume with a smaller number of preferred suppliers. 17-18). In case of EasyJet, the Gross Income ratio has improved from 0. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. While Easyjet flies to Leonardo da VinciFiumicino Airport, which is close to the city, Ryanair flies to CiampinoG. EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. Another key aspect of its strategic competence was high aircraft use (Thompson 2005). The policy of no refunds also irks customers who miss flights for genuine reasons. 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. They cut down staff costs to the bare minimum necessity and as such do not provide for staffs at the reception or ticketing. The highest 12-month target stood at 900p while the lowest was 460p per share. Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. Ryanair mainly flies to secondary airports, while Easyjet flies to primary airports. This included legal expenses for its no compensation policy. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. External factors like increasing oil price can severely impact fare structure since the fare is already low. Higher the ratio means higher the perceived value of the company and vice versa. However, in spite of all the givings and primarily the shortcomings compared to the legacy full service/full fare airlines, the low fare airlines has transformed the way people travelled. WebeasyJet's revenue is the ranked 7th among it's top 10 competitors. Low fare airlines primarily focus on keeping the costs down by cutting down on costs of customer service and airport facilities. 8 billion in 2010 to Euro 2. easyJet vs Ryanair vs 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. Complementing its direct sales strategy is the paperless booking model. Then there are also problems of cancellations for delayed flights, for which compensations and reimbursements can become a major expense for Ryanair. Web. 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. From where the investors sit, Lisa and Mark might reject the project. This will be a stimulating factor for the shareholders in profitable years even as the company continues to enjoy market share (EasyJet: Annual reports & accounts 2011, pp. This compare & contrast essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) was written and submitted by your fellow The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. Ryanair And Easyjet Financial Ratio Analysis | Researchomatic 2005, Business Environment: Managing in a Strategic Context Chartered Institute of Personnel and Development, CIPD Publishing, New York. 8-9). 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. Since its low-cost strategy started increasing sales, Ryanair has always branded itself as a low-cost airline. 3 millions. 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. Managing Corporate Reputation the Case (PDF) Ryanair V.S. Easyjet: Strategy Analysis and Competition This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. Low fare airlines also face the problems of overbooking and cancellations which add to their compensation expenses. Need a custom Compare & Contrast Essay sample written from scratch by 84-85). For example, both airlines fly to different types of airports. 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. In case of Ryanair, the assets and liabilities have both registered positive growth. Thompson, J. The same for EasyJet has been 37%, 38% and 42%. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). & Stredwick, J. The low fare strategy intertwines with the low-cost strategy because through lower costs, the company is able to offer low fares to its customers. 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. OConnell, J. Bargaining power of buyers. This helps a company to deal with situations during difficult times. Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. Unlike EasyJet which has base only in Europe, Ryanair is regulated by both EU and Irish authorities. Low fare airlines like Ryanair can lower their price to force bigger airlines to also reduce their price to maintain competitiveness. 58 to 6. 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. 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). The net worth as a percentage of total assets for the years 2010, 2011 and 2012 have been 37. EasyJet being a British airline company is performing within the political framework of Europe. Also, profitability of low fare airlines like Ryanair depends on the customers perception on low fare services. easyJet In this case, both EasyJet and Ryanair have a witnessed a declining trend in the ratio from 2010 to 2012. For example, it has stolen customers in the business class segment (Malighetti et al. EasyJet keeps its focus on environmental awareness programs while making any future strategies. Last updated: 25th April 2023. easyJet (LON:EZJ) is a British low-cost While easyJet was a profitable business prior to the pandemic, it hasnt been profitable since. However, this scenario has changed in recent times because of availability of price comparison websites like Orbitz, Travelocity, MrJet or Priceline which allow customers to compare air fares and customer services of different airlines (Sorenson, 2005, p. 65). The profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. By flying to primary airports, the latter has had an edge above its competition because its customers can get to their destinations faster than Ryanairs customers who have to board a taxi, or train, to get to major cities. Need a custom essay sample written specially to meet your 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. The return on shareholders funds also is seen closely identical ranging between 0. Since Ryanair provides services at low costs, its demand is very high. 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. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. 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 aviation industry also gets influenced by volatilities in international currency markets. easyJet & Ryanair: squaring up to each other as head to head Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. Ryanair, EasyJet Make Progress on Pandemic Recovery Expansion Moreover, national airlines like Ryanair get additional benefits from governments during periods of huge losses. Low fare airlines have the problem of working with primary airports because of the expensive aerobridges and elaborate check-in-services of these airports. Then there is also a growing interest in multiple product features, product quality and service which may cause people to try other airlines merely to get a different kind of experience (Muller, 2011, p. 39). Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. 32% and 12. Ryanair also focuses on faster pre-flight preparation; this minimizes the grounded time of aircraft (Hoffman, 2007, p. 6). 49%, 38. 81%, 7. An incident like air accident can lead the customers to rethink about the compromises adopted in aircraft maintenance. Selecting air routes, strategic flight scheduling are some elements that can allow EasyJet to maintain competitiveness. It was established in the year 1995 by Sir Stelios Haji-loannou with the purpose of providing scheduled air services at low costs. Similar to other low-cost carriers, the airline also had no in-flight meals and a rapid turnaround. Furthermore, the no-frill strategy works by eliminating in-flight services to lower operating costs. Contact us: [emailprotected]. To ensure low cost maintenance of aircrafts it is essential that EasyJet and Ryanair adopt latest technologies. We use cookies to give you the best experience possible. Ryanair 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. However, EasyJet has a policy of serving free refreshments to customers for long haul flights but this service is not available in Ryanair. 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. The proceeds of this transaction will go towards the 500-650m ($616-802m) target that easyJet drafted in May. 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. 1, 90-135 d, Poland From 67 operational bases, Ryanair makes more than 1,600 flights daily. For example, in 2014, both organisations reported increased passenger numbers (Wallach 2015). Through this strategy, Ryanair became less concerned about existing competition because it was operating in a unique market segment that other airlines had not used before (Ryans 2009). 8 Pages. Ryanair is not much affected by buyers bargaining power since airline customers are scattered throughout Europe and no single customer makes bulk purchase of airline tickets. Although these strategies do help in keeping the costs down, they also deter those customers who prefer being served while flying. 16 over the same period. Therefore, a differentiated strategy is not exclusive. 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). 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). easyJet financial profile is strong, leaving capacity for taking on further debt, it has a strong working capital, and an attractive current ratio 169. The market differences are profound because profitable routes in Europe already have large airline companies that serve them. 2 Ryanair non-current assets 2022 Fig. Profitability ratio In both the cases i. e. EasyJet & Ryanair, the Gross Income ratio has increased from 2010 to 2012 and remained more or less stable. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. If this happens then demand will fall which will add to the cost. This motivates the employees towards efficient contribution to EasyJets strategic objectives (EasyJet: Annual reports & accounts 2011, p. 35). 14 over the three years and where as in case of Ryanair, this ratio has improved from 0. 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. Best and worst airlines Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). 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). The increased seating leaves very little leg room for a relaxed travel. Since the company has succeeded by adopting this strategy, it has proved that a differentiated market strategy is still vulnerable to competition. By continuing well EasyJet is a British airline company whose headquarter is based at Londons Luton Airport. (Sorenson, 2005, p. 56) Threat of substitutes Unlike other industries, this factor is less applicable in aviation industry. 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. 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 can be an important factor for Ryanair as aircrafts cannot be substituted. WebBCP Business & Management EMFRM 2022 Volume 38 (2023) 2360 Fig. (2023, February 18). This makes EasyJet second best low fare airline in Europe after Ryanair. 14, no. 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 For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. 9 billion during 2011 and to Euro 3. For example, Easyjet has maximised its productivity by operating in airports where it enjoys market leadership (CAPA 2014). Since Ryanair has its operational bases in several European countries, so it must take into consideration variable labor markets and government regulations. PESTEL analysis helps to assess the prospects of expansion and the risks involved. The success of these two airlines is primarily owing to innovative approach to business as against the age old practices and conventions of their older full fare rivals. Of importance, the company lacked a service advantage that would back up its cost advantage (Thompson 2005). In this regard, it strives to offer convenience to its customers by operating in major airports around Europe. 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. For example, in the quest to increase the seating density, the count of washrooms are kept at bare minimum. The constant threat of a Middle East (Iran) war can adversely affect the oil price. By managing and controlling competition in the sector, both Ryanair and Easyjet have generated superior values for their investors. On the 28th of last month, it said that it could realistically raise this sum money through the sale of its aircraft. 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. ). British multinational low-cost airline group headquartered at London Luton Airport. Borrowing from the Southwest low-cost model, EasyJet operated using one type of aircraft and a point-to-point short-haul travel (Kew & Stredwick 2005). Moreover, pandemics like swine flu can adversely affect flight demands. Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. For instance, flight attendants also do the work of cleaners or gate agents. 1, pp. In their 2021 fiscal year, EasyJet's revenue continued to decline,
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