easyjet vs ryanair financial analysis
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. EasyJet keeps its focus on environmental awareness programs while making any future strategies. Mennen, M. 2005, An Analysis of Ryanair Corporate Strategy. Other than government laws like low carbon emission, sound reduction, passenger safety and security measures, there are competition legislations that restrict the activities of low cost airlines like Ryanair and EasyJet. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. Both the airlines use frequent-flyer program which is an added advantage over any new entrants. Regular review is done by management to monitor demand of flights (Ryanair: Annual reports and financial statements 2010, pp. 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. 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 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. Aviation industry is largely ruled by political, economical, environmental and technological frameworks. 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. Although Ryanair has hinted at loyalty programmes, the airline doesnt EasyJet is a British airline company whose headquarter is based at Londons Luton Airport. To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). The low-fare services of Ryanair are structured in the manner to entice passengers who travel for leisure or business. 49%, 38. 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. WebThe seats don't recline and have a width of 17 inches and a pitch of 30 inches. You are free to use it for research and reference purposes in order to write your own paper; however, you This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. Legal In the EU, due to deregulation policy, there are less restrictions regarding entry of new airline ventures which means governments strict control over airlines have been modified to provide new opportunities for new airlines leading to free competition. Since Ryanair provides services at low costs, its demand is very high. For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. Supplemental understanding of the topic including revealing main issues described in the particular theme; 9 billion during 2011 and to Euro 3. April 1, 2022. Labor Costs: Ryanair has the lowest labor costs in the industry (6 per passenger vs 9 and 17 for competitors EasyJet and AirBerlin [5]). writing your own paper, but remember to British multinational low-cost airline group headquartered at London Luton Airport. Bargaining power of suppliers Bargaining power of suppliers can be strong if they are concentrated i. e. there are few suppliers and many buyers. 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). Comparative Financial Analysis of Easyjet & Ryanair - GraduateWay For instance, in 2004, Ryanair put aviation industrys first paperless pilot training program into practice (Muller, 2011, p. 39). According to the diagram above, other low-cost airlines command only 29% of the market, while Ryanair and Easyjet dominate the rest of the market. To expand its customer base, the company tried to please all their customers by trying to meet the customer needs of every type of market in the industry (Malighetti et al. 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. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. A low price-earnings ratio is an attractive proposition to invest in the stocks of the two companies. 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). On the other hand, EasyJet has been earning at a modest rate of 5. Ryanairs working capital needs as a percentage of total assets has been consistently around the 15% mark whereas for EasyJet it has been 5. Ryanair: The lowest cost airline 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. Indeed, it would not be able to match the same level of customer service that most customers of long-haul carriers would enjoy if they used the larger airports. 59% for years 2010, 2011 and 2012. WebFar more of you flew with easyJet than any other carrier. This helps a company to deal with situations during difficult times. 2006). 46%, 13. The report contains an introduction to the business models of the airlines, their business strategies, SWOT analysis, analysis of porters five forces, financial analysis 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. A low working capital means, less amount of non-current liabilities are utilized to finance the current assets. Even with these adjustments, the company has still increased its passenger numbers and remained profitable for a long time. In actual numbers the costs remained constant at GBP 103 m, also due to the new policy of External factors like increasing oil price can severely impact fare structure since the fare is already low. -PDF- This paper attempts to financially analyze and compare the two airlines. Copyright 2023 service.graduateway.com. Figure One: Position of Easyjet and Ryanair in the global low-cost airline market (Source: Elderman 2014). report, Comparative Financial Analysis of Easyjet & Ryanair. The trend remains same in the given years for both the airlines in the Net Income ratio. 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. 07%, 5. In Europe, major airline companies, such as Flybe, Wizz Air and Aer Lingus, dominate this space (Dobruszkes 2006). Ryanair has a higher gross margin than EasyJet. Differentiating services for airlines is not viable for many primary airports. 16 over the same period. Financial Analysis Since the company has succeeded by adopting this strategy, it has proved that a differentiated market strategy is still vulnerable to competition. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." In such a case scheduling plays a major part to attract more customers. 59-60). EASYJET Ryanair being an existing airline can lower its air fare to wipe out new entrants. IvyPanda. This lack of personal service can induce people to opt for other low fare airlines. From where the investors sit, Lisa and Mark might reject the project. While easyJet was a profitable business prior to the pandemic, it hasnt been profitable since. EASYJET 79% and 8. Therefore, a key part of their strategy is meeting the minimum contractual obligations required by airlines to their customers. At first The same for EasyJet has been 37%, 38% and 42%. WebAdditional ESG information - Financial Year 2021; Investors. 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. In case you can't find a relevant example, our professional writers are ready 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. 3 billion in the year 2012. The constant threat of a Middle East (Iran) war can adversely affect the oil price. Both the airlines are known for their operational efficiency and financial stability. This also reflected in the Interest Cover ratio. 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). In order to abide by governments regulations of carbon emissions, Ryanair operates flights that consume less fuel and makes low noise level. Ryanair is alert to any technological development and strives to embrace new processes to enhance service efficiency. 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. This factor combined with a rise in revenues from Euro 2,942. 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. Both airlines also have similar performance indicators in the aviation sector. https://www.easyjet.com. 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. Choose skilled expert on your subject and get original paper with free plagiarism However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. IvyPanda, 18 Feb. 2023, ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. Here too, Ryanair marginally outperforms EasyJet over the three years of study. This is IvyPanda's free database of academic paper samples. easyJet 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.
