26 between the same period. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. EasyJet and Ryanair lag behind high fare airlines regarding customer comfort during flights because of their cost saving strategies. Ryanair and EasyJet are targeting markets easyJet Technology Airline industry is one sector that is highly dependent on technologies. In their 2021 fiscal year, EasyJet's revenue continued to decline, To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. easyJet 13 to 0. 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. 1, pp. easyJet PLC has a consensus rating of Hold with an average target price of 12.42. 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. 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 (PDF) Ryanair V.S. Easyjet: Strategy Analysis and Competition There was the eruption of Eyjafjalla volcano that produced ash which induced problems in European airspace. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. Ryanair has also focused on creating value for its shareholders by focusing its strengths on markets that it enjoys dominance. Ryanair, EasyJet Make Progress on Pandemic Recovery Expansion 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. This makes EasyJet the second best low fare airline in Europe, second to Ryanair. 1 PESTEL Analysis for EasyJet Ltd. 16 over the same period. 1, pp. Which European low-cost carrier is best for you: Ryanair, 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. Employees are not engaged in any one particular activity, they do various jobs thus reducing the need of multiple personnel. Competitive rivalry Because of increased competition in the European aviation industry, rivalry between airlines has increased. Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. 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. 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. Freire, A. 0% increase in total assets between 2010 and 2012. Jet2, Ryanair, and Easyjet are other dominant airline companies in this category. Get original paper in 3 hours and nail the task. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. Since its low-cost strategy started increasing sales, Ryanair has always branded itself as a low-cost airline. This view affirms the opinions of researchers who say price leadership is pivotal to creating market dominance, compared to cost leadership advantages (Mayer 2008). Analysis. 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. Financial Decision Making, Easyjet in comparison with Since it is not profitable for airports to differentiate their services, Ryanair opts for secondary and regional airports. The net worth as a percentage of total assets for the years 2010, 2011 and 2012 have been 37. However, the company changed this strategy after realising it needed a differentiation strategy that would set it apart from its competitors. 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. Selecting air routes, strategic flight scheduling are some elements that can allow EasyJet to maintain competitiveness. WebFinancial Analysis Profitability & Shareholder Returns Ryanair, perhaps Europes best-known low-cost airline, has also consistently been among the continents most profitable. The recent availability of price comparison websites have increased the bargaining power of buyers especially between two low fare airlines like EasyJet and Ryanair. (Appendix, Table 4) While the stability in the Gross Income margin does convey about the ability of both the companies to maintain a stable rate of earnings, it also showcases that the low fare air travel market is stagnating and the capacity to increase earnings in spite of increased revenues is almost negligible. Here too it is noteworthy that the base i. e. the total revenue of Ryanair has also grown by 21% during 2011 and by 47% during 2012 over 2010 base year. Furthermore, the no-frill strategy works by eliminating in-flight services to lower operating costs. WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. WebEasyjet Financial Ratios for Analysis 2014-2023 | EJTTF. Customers have appreciated this strategy by increasing ticket sales (Kew & Stredwick 2005). 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. For instance, flight attendants also do the work of cleaners or gate agents. Ryanair's blue-and-yellow seats. Ryanair vs EasyJet vs Eurowings Equity ratio for EasyJet has marginally increased in 2012 compared to the The net income after tax for years 2010, 2011 and 2012 as a percentage of total revenue of the respective years has been 10. 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. Dobruszkes, F. 2006, An analysis of European low-cost airlines and their networks, Journal of Transport Geography, vol. This is most common in aviation industry since only few companies manufacture aircrafts. However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. 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. (Sorenson, 2005, p. 56) Threat of substitutes Unlike other industries, this factor is less applicable in aviation industry. The emphasis must be on cost-cutting strategies and expansion of route network. Such passengers prefer to choose airlines with minimum traveling expenses or may opt for not traveling at all. 14, no. easyJet The unstable political scenario in the Middle East is in a perpetual war like condition. 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. 1 phyneas 2 yr. ago Haven't flown Easyjet, but Ryanair is fine as long as you read the rules and know what you're getting and what you aren't. Similar to Ryanair, Easyjets strategic direction came from years of studying the success Southwest Airline (Sull 1999). This article aims to compare the two largest Low-cost carrier (LCCs) in Financial Analysis Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). easyJet Vs. Ryanair: The Curious Case Of easyJet Therefore, a key part of their strategy is meeting the minimum contractual obligations required by airlines to their customers. But it's not worth paying a load more than Ryanair for in my opinion. Ryanair allows 10kg while EasyJet only 8. Albeit these factors show areas of strategic convergence, both airlines are rivals in the low-cost airline market. Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. easyJet & Ryanair: squaring up to each other as head to head However, in absolute terms the net worth has grown from Euro 2. All these factors can severely impact Ryanair. Thompson, J. Complementing its direct sales strategy is the paperless booking model. 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. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). 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. Financial Analysis O. P. of Ryanair has increased by 70% between the same period 2010 to 2012, and N. P. has increased by 84%. 40, loc. PESTEL analysis, Porters 5 forces, a summary strength and weakness analysis, various key financial ratios for comparison and eventually conclude by giving a general recommendation of findings. 53 to 21. Mennen, M. 2005, An Analysis of Ryanair Corporate Strategy. EasyJet focuses on passenger comfort by offering them free refreshments in flights whose durations are more than two and a half hours thus giving the passengers a comfortable journey (EasyJet Airline Company Limited, n. d. ). Ryans, A. The two airlines are also the most popular low-cost airlines in Europe. 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). Thirdly, there is a growing threat of terrorist attacks across Europe. Nearly three times as many of its flights were cancelled at the last minute as with Ryanair and Jet2. Not sure if you can write a paper on Managing Corporate Reputation the Case of Ryanair by yourself? To meet the demand, management focuses on maintaining enough flights every day. Also the regions being slightly rural can act as deterrent for some customers. From where the investors sit, Lisa and Mark might reject the project. easyJet 2023. It provides a common size comparison between different organizations with regard to their respective individual performances. The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). Financials. This specially affects aviation industry as people tend to spend on traveling more. 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. This can pose stiff competition for Ryanair. Comprehensively, the two organisations share almost similar strategies. 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). Ryanair does not take the services of primary airports to avoid high airport charges and opts for regional airports. One principal weakness of EasyJet is that it strives to keep fares low as well as focus on consumer satisfaction, and keeping balance between the two becomes difficult. 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). Analysis: the Ryanair-Wizz showdown in depth - Aviacionline.com 59-60). 11 in 2010 to 0. Figure One: Position of Easyjet and Ryanair in the global low-cost airline market (Source: Elderman 2014). Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. 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. Ryanair also focuses on faster pre-flight preparation; this minimizes the grounded time of aircraft (Hoffman, 2007, p. 6). Stated differently, both airlines use the direct sales strategy to market their services. This shows that Ryanair can make reasonable profits from its sales. Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. Due to low fares EasyJet and Ryanair face less competition from high fare airlines, but there is internal rivalry between these two airlines. easyJet Another program that is used by Ryanair is frequent-flyer program which means customers are given a free flight after they complete a specific number of flights in a given period with Ryanair. Sull, D. 1999, Case Study: easyJets $500 Million Gamble, European Management Journal, vol. The growing rate of employment can have both positive and adverse effects on EasyJet and Ryanair. Easyjet Case Study Management Accounting B. Pastine International Airport, which is far away from the main business district. Analysis of the financial results reported by both airlines shows that 58 to 6. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." The low-fare services of Ryanair are structured in the manner to entice passengers who travel for leisure or business. Ryanair Kew, J. Partly, this is why the company commands the highest market share in the European low-cost airline market segment. Social Airline profits are highly dependent on the behavioral and demand patterns of customers. assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. Although Ryanair has hinted at loyalty programmes, the airline doesnt 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. 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. This way, shareholders in both airlines get value for their investments through structured competition and increased productivity. Contact us: [emailprotected]. 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. Researchers say when the airline adopted this strategy, it succeeded because it was a blue ocean strategy no other airline had adopted this strategy before (Ryans 2009). Experts say Southwest Airlines was among the first aviation companies to exploit the opportunities that existed in the low-cost airline market segment (Dobruszkes 2006; Kew & Stredwick 2005). 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. It also realised that its low-cost pricing strategy could not sustain its business because the margins made from such a strategy were low (Malighetti et al. 2014, Ryanair: Strategy Report. Focus on low-fare operations was initiated in the early 1990s by a new team of directors in the board. Ryanair has a higher gross margin than EasyJet. Ryanair Ryanair is considered as the top low fare airline in Europe. 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. The logic behind this strategic approach is to eliminate commissions by not using travel agents. The target price is lowered from GBX 370 to GBX 350. -7). Ryanair's operating margin gained 3.9ppts to 22.3%; again, the highest in Europe and making it the only European airline to report an operating margin in excess of 20% in 2015 (or nearest financial year). It measures the proportion of expenses-without-interest in relation to total revenue earned. In terms of on-time performance, easyJet performs in line with some of Europes top airlines, such as Ryanair (>92%), Aeroflot (>92%), or KLM (>90%). Companys headquarter was moved to Geneva which became the first base outside UK. Both EasyJet and Ryanair have shown a reducing trend from 2010 to 2012. It was established in the year 1984 by the Ryan family with 25 employees. Thus, it is apparent EasyJet generates more value for the shareholders. Figure 38 days sales uncollected development an - Course Hero EasyJet vs RyanAir Web. WebThis report 'Two Major Airlines EasyJet and Ryanair' aims at providing a complete overview of the two major airlines of Europe, EasyJet, and Ryanair. Liquidity and Current ratio Under this ratio, we measure the companys ability to meet it short term expenses. The market differences are profound because profitable routes in Europe already have large airline companies that serve them. Natural calamities and also human events like flight accidents and terrorist attacks can drastically reduce flight demand as mode of travel. The fuel, administrative and engine maintenance costs are declined. This understanding shows where the corporate strategies of both companies converge. Italy is Ryanairs leading country market with almost 15,000 flights planned in December. 3. 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. WebFor Easyjet Group, it is worth a lot more than Ryanair, both in terms of assets owned EASYJET It operates almost 1,000 short-to-medium-haul routes in and around the continent. 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. 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. 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. 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. Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. Both the airlines have shown good financial performance, this means they can promptly meet all payment obligations to creditors and suppliers. 45% and 15. According to Malighetti et al. Other segments of its working model appear below. 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. . However, both companies have unique internal strategies that differentiate their services beyond the low-cost model. EASYJET Competitive rivalry Air fare is the driving factor for competitive rivalry in aviation industry. By continuing well Both airlines create value for the shareholders in the following ways. Since EasyJet and Ryanair both are low fare airlines they focus more on cost saving strategies thereby compromising on comfort levels during flights and other customer services. Ryanair and EasyJet focus on low fares thus compromising on customer services. Comparatively, Ryanair flies to Beauvais-Till Airport, which is almost one hour away from the city (Ryans 2009).