IvyPanda. Given the above background, this report will attempt to analyze the two companies i. e. , Ryanair and EasyJet viz. Kew, J. IvyPanda. Half of its seating capacity is in such facilities. 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. Most of its income stems from selling flight tickets and the add-ons associated with them. This has resulted in an overall increase of 7. Automobiles, bus services and railways can act as substitutes but where time saving is important, there can be no substitute to airlines. Italy is Ryanairs leading country market with almost 15,000 flights planned in December. As far as information technology goes Ryanair operates a multi-featured website for selling flight tickets. 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. Similar to other low-cost carriers, the airline also had no in-flight meals and a rapid turnaround. 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. 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. Ryanair has a higher gross margin than EasyJet. Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). For example, both airlines fly to different types of airports. This understanding shows where the corporate strategies of both companies converge. 2009, Beating Low Cost Competition: How Premium Brands can respond to Cut-Price Rivals, John Wiley & Sons, London. Ryanair and EasyJet focus on low fares thus compromising on customer services. Management Accounting Practices of the easyJet plc. This compare & contrast essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) was written and submitted by your fellow 9 billion during 2011 and to Euro 3. On average, easyJet achieved a punctuality level of 91.6% from February to June 2021. (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. Supplemental understanding of the topic including revealing main issues described in the particular theme; By conducting a spend analysis the controller can consolidate purchases in order to increase buying volume with a smaller number of preferred suppliers. Ryanair uses no hub. easyJet PLC has a consensus rating of Hold with an average target price of 12.42. 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. 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. Gearing ratio assesses the companys financial position in the long run. 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. WebThe advantages of a spend analysis is that it contains detailed files on what a company buys, how much they spend, and who they buy from. 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. Data demonstrates 10,000 invested in EasyJet in 2000 now amounts to 62,510, which is a far larger figure than 33,742 in the case of Ryanair. (2023, February 18). EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. Its strategy was to steal customers from dominant players in the airline industry by offering lower ticket prices compared to its rivals. EasyJet 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. Registration number: 7252303643 Today EasyJet has in its service 175 aircrafts over 400 routes in 27 countries. 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). 77% respectively. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. Registered address: Gabriela Narutowicza Street, No. However in the measure of Return on Assets, EasyJet consistently outperforms Ryanair over the study period of three years (2010, 2011 and 2012). Key All these along with various functional problems presented immense challenge to the performance level of EasyJet. This paper analyses the corporate and competitive strategies of Ryanair and Easyjet. 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. The return on shareholders funds also is seen closely identical ranging between 0. 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 Irish ultra low-cost carrier founded in 1984. Pharapreising and interpretation due to major educational standards released by a particular educational institution as well as tailored to your educational institution if different; 1, 90-135 d, Poland 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 14 over the three years and where as in case of Ryanair, this ratio has improved from 0. In the last three financial years both these airlines Ryanair and EasyJet have shown good performances financially and otherwise. EasyJet has a wider customer base since it targets both leisure and business customers while Ryanair targets only leisure customers. 9 million. This fact shows that this market has limitations that would ordinarily curtail the growth of companies that do not adopt an elaborate strategy. 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. 40, loc. If this happens then demand will fall which will add to the cost. The top 10 competitors average 11.6B. Get original paper in 3 hours and nail the task. 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. 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. Differentiating services for airlines is not viable for many primary airports. 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). Ryanairs working capital needs as a percentage of total assets has been consistently around the 15% mark whereas for EasyJet it has been 5. It also engages in the sale of holiday packages; aircraft trading and leasing; development of building projects; financing and insurance business; and tour operator activities. If the oil price increases then it will be difficult for EasyJet to maintain its policy of providing air services at low costs. Other segments of its working model appear below. Both the airlines are known for their operational efficiency and financial stability. The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. Focus on low-fare operations was initiated in the early 1990s by a new team of directors in the board. WebAdditional ESG information - Financial Year 2021; Investors. The primary goal of Ryanair is to achieve the status of being the biggest scheduled passenger airline in Europe. In case you can't find a relevant example, our professional writers are ready Web. Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. 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. EasyJet and Ryanair lag behind high fare airlines regarding customer comfort during flights because of their cost saving strategies. In their 2021 fiscal year, EasyJet's revenue continued to decline, 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. 1, pp. 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. 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. Natural calamities and also human events like flight accidents and terrorist attacks can drastically reduce flight demand as mode of travel. EasyJet has done it exceptionally well in comparison to Ryanair. The first operating aircraft was a 15-seater Bandeirante that carried 5000 passengers in its first year of operations. Whereas for Ryanair, this ratio has improved from just 5. 2006). The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. 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. PESTEL Analysis of Ryanair Ltd. (2023, February 18). Correct writing styles (it is advised to use correct citations) This clearly establishes that EasyJets funds management vis-a-vis trade, credit and cash cycle is far superior to Ryanairs. 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. 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). These strategic factors made the airline more profitable than other flag carriers did. Copyright 2023 service.graduateway.com. 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 unstable political scenario in the Middle East is in a perpetual war like condition. Comparative analysis based on PESTEL Ryanair and EasyJet both being the top European low fare airlines face some common advantages and disadvantages. The net income after tax for years 2010, 2011 and 2012 as a percentage of total revenue of the respective years has been 10. 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. By doing so, it believes that its customers can get around to where they are going in good time. ensure the integrity of our platform while keeping your private information safe. This is because globalization has enhanced alliance between nations for trade, technology, labor etc. Although these strategies do help in keeping the costs down, they also deter those customers who prefer being served while flying. 2006). In the year 2010 there was a reduction in the costs of fuel from Euro 1,257 million o Euro 893. However, the company changed this strategy after realising it needed a differentiation strategy that would set it apart from its competitors. 8 Pages. Threat of substitutes This force is not much applicable to aviation industry especially if the airline is a low fare one like EasyJet. Economic The price of oil primarily affects any airline companys viability. This specially affects aviation industry as people tend to spend on traveling more. Ryanair being an existing airline can lower its air fare to wipe out new entrants. Both airlines also have similar performance indicators in the aviation sector. Low fare airlines like Ryanair can lower their price to force bigger airlines to also reduce their price to maintain competitiveness. The first ever flight of this company had its route from Luton to Edinburgh and Glasgow. 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. Both airlines have perfected this strategy by introducing new price reduction measures, such as paperless booking. On the liabilities side, the non-current liabilities have fallen by 14% over 2010 levels and where as the current liabilities have registered a growth of 19% during the similar period. 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). Another key aspect of its strategic competence was high aircraft use (Thompson 2005). 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. 1%, 7. 79% and 8. WebeasyJet is a better travel experience. At this stage it is noteworthy that the total revenues for EasyJet have consistently grown year upon year by 16% and 30% over 2010 base year. Very typically, these companies also tend to suffer when economies are in a high employment phase. WebFar more of you flew with easyJet than any other carrier. 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. In this regard, both airlines have reported increased asset values and increased growth figures. Other than this, factors like rise in price of oil and imposition of high tax rates by different governments impact low fare airlines more than high fare airlines. The same for EasyJet has been 37%, 38% and 42%. Low fare airlines have the problem of working with primary airports because of the expensive aerobridges and elaborate check-in-services of these airports. 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. This also reflected in the Interest Cover ratio. 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. 2038. Thompson, J. The interest cover ratio for EasyJet has improved from 13. The sale of the aircraft will generate 206m ($255m) of liquidity to strengthen easyJet's financial position. Web1759 Words. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." Massive flight cancellations led to Euro 50 million loss for Ryanair. Mennen, M. 2005, An Analysis of Ryanair Corporate Strategy. In case of EasyJet, the Gross Income ratio has improved from 0. But it's not worth paying a load more than Ryanair for in my opinion. Equity ratio for EasyJet has marginally increased in 2012 compared to the However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. is an Irish airline company. 17 in 2012 for Ryanair. submit it as your own as it will be considered plagiarism. 249264. 59-60). requirements? EasyJet's orange-and-gray cabin is slightly less intense, but not by much. The overall management of both these airlines has been good and so much so that these have emerged to be the two top low fare airlines in the European market in spite of all competitions, adverse economic conditions and environmental adversities. To maintain competitiveness in the market, EasyJet needs to keep an eye on the technological upgrades with regard to aircraft manufacturing. Comparatively, Ryanair commands 40% of the market (Air France 2011). 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. Contact us: [emailprotected]. Other social factors like proportion of old age population must also be taken into consideration as old people tend towards alternate modes of travel due to airsickness or other problems. These operational strategies have created immense benefits for the two airlines, including optimizing airline use and increasing airline turnaround frequencies. In doing so, a company tends to improve its earnings per share (EPS). Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. 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. A low ratio is an indicator that an organization can duly pay all its dues. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. Complementing its direct sales strategy is the paperless booking model. In March 1998, EasyJet acquired 40% of Swiss charter operation, TEA Basel AG after which EasyJet was renamed as EasyJet Switzerland. This in turn helps them to keep the fare down and become competitive. 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). The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. Technology Airline industry is one sector that is highly dependent on technologies. Ryanair and EasyJet are targeting markets The one weakness of Ryanair that is quite apparent in its no-frills approach by which they do not serve any free refreshments to customers on flight. 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. 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. 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. Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. Ryanair Ryanair is considered as the top low fare airline in Europe. (2016, Oct 07). 24 from 2010 to 2012. However, EasyJet pays high fees to use the services of primary airports thus not achieving low costs in all its activities. Also, there are speculations that oil supply all over the world will decline as oil production will reach optimum level and there will be need for new sources of oil. The low-fare services of Ryanair are structured in the manner to entice passengers who travel for leisure or business. Ryanair has evolved from a family owned business into one of the most successful regional brands in the market. The company brands itself as Europes only ultra low-cost airliner because it is the regions largest low-cost airline company (Mayer 2008). Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/, IvyPanda. This factor combined with a rise in revenues from Euro 2,942. These measurements, when combined, represent a significant reduction compared to easyJet's allowance when examining the volume, as they multiply to make a capacity of 20 liters. Elderman, H. 2014, EasyJet Vs. Ryanair: The Curious Case Of 2 Budget Airlines. The websites they have need to be updated regularly so that customer experience is enhanced and need of travel agents get reduced to save costs. match. The rate of unemployment in Europe is very high which means a major portion of European population cannot afford to travel by air. 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. The commitment and dedication towards work that stimulates the employees of EasyJet kept its workforce going and provide uninterrupted world class service. Not sure if you can write a paper on Managing Corporate Reputation the Case of Ryanair by yourself? 1 PESTEL Analysis for EasyJet Ltd. To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). In line with this strategy, the company also introduced value-added services to its core strategy. Ryanair also focuses on faster pre-flight preparation; this minimizes the grounded time of aircraft (Hoffman, 2007, p. 6). The profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). -7). 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. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. Choose skilled expert on your subject and get original paper with free plagiarism 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. 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. EasyJet cabin staff in Portugal plan early April strike over pay : More Must read. Retrieved from https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. Introduction The main objective of the paper to explain the accounting practices of easyJet plc.