WebFinancial Analysis Profitability & Shareholder Returns Ryanair, perhaps Europes best-known low-cost airline, has also consistently been among the continents most profitable. This makes EasyJet second best low fare airline in Europe after Ryanair in terms of cost. Although Ryanair has hinted at loyalty programmes, the airline doesnt It also flies to more than 180 destinations in Europe (Mayer 2008). By managing and controlling competition in the sector, both Ryanair and Easyjet have generated superior values for their investors. However, this factor plays low for EasyJet as it uses primary airports like Schiphol, Copenhagen etc. In line with this low-cost strategy is a simplified pricing structure. 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. 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. Price-Earnings ratio Price-Earnings ratio is an important analysis for investors because it shows how much investors are willing to pay for each unit of profit of the company. Moreover, national airlines like Ryanair get additional benefits from governments during periods of huge losses. It contains thousands of paper examples on a wide variety of topics, all donated by helpful students. Which European low-cost carrier is best for you: Ryanair, Profit reinvestment is a common way that the airlines create value for their shareholders (Mennen 2005). I.INTRODUCTIONThis report outlines the analysis of two low-cost airlines performance in Europe, namely easyJet PLC and Ryanair Hldgs during their financial year between 2006 and 2008. This kind of differentiation has created an advantage over competitors. The first operating aircraft was a 15-seater Bandeirante that carried 5000 passengers in its first year of operations. 249264. Legal EU laws related to aviation industry do not allow monopolization of airports. Nearly three times as many of its flights were cancelled at the last minute as with Ryanair and Jet2. 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). However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. 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. However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. High tax rates on aviation industry affect these airlines since they strive to keep their fare low. Thats almost 10 pp better than the EMA average and 11.7 pp better than the global average. EasyJets net profit (after tax) has been 6. 126 the perceived close relationship between total - Course Hero For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. But it's not worth paying a load more than Ryanair for in my opinion. For instance, there are two major aircraft manufacturers namely Airbus and Boeing. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). Ryanair allows 10kg while EasyJet only 8. PESTEL Analysis of Ryanair Ltd. 17, no. Bargaining power of buyers. WebAn Analysis and Assessment of easyJets Strategy and Options 60 despite of its efficient operations rather low EBIT and EBITDA margins, returns on equity and on invested capital as compared to its peers. This will reduce the fare burden on customers by avoiding travel agents. The purpose is to build a low-carbon European economy (Mayer, 2007, pp. (Appendix, Graphs 1 & 2). 81%, 7. Ryanair: The lowest cost airline This strategy emerged after learning that many flag carriers use large airports, such as Heathrow, thereby limiting its competitiveness on this platform. 2006). Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. 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. The company brands itself as Europes only ultra low-cost airliner because it is the regions largest low-cost airline company (Mayer 2008). In 2009, EasyJet catered to passengers with 50% having passports of countries other than that of UK. This clearly establishes that EasyJets funds management vis-a-vis trade, credit and cash cycle is far superior to Ryanairs. easyJet Shares | Latest easyJet Stock News and Analysis 2023 While Easyjet flies to Leonardo da VinciFiumicino Airport, which is close to the city, Ryanair flies to CiampinoG. O. P. of Ryanair has increased by 70% between the same period 2010 to 2012, and N. P. has increased by 84%. 18 February. To maintain competitiveness in the market, EasyJet needs to keep an eye on the technological upgrades with regard to aircraft manufacturing. 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. The paper will explain the summary of the company including its business activities, along with the management accounting information that helps managers of business. This article aims to compare the two largest Low-cost carrier (LCCs) in Ryanair V.S 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. 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. Companys headquarter was moved to Geneva which became the first base outside UK. Although Ryanair was not immune from an industry downturn following the financial crisis in 2008-2009, the company rebounded to solid profitability in fiscal 2010. 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. 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). 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. Financial Analysis According to the NPV analysis, if the predicted cash flow is correct, opening the sixth restaurant could bring limited profit to the company. EasyJet and Ryanair Financial Analysis | SpeedyPaper.com It created a huge demand for the airlines services because it attracted price-conscious customers who would have chosen alternative modes of travel, or failed to travel at all, because of the high costs of air tickets. -PDF- You may use it as a guide or sample for It is a key matter for EasyJet. Then there are strict regulations from the EU regarding reduction of carbon emissions. Therefore, the risk of overcapacity in the industry is real. 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. It operates almost 1,000 short-to-medium-haul routes in and around the continent. EasyJets aircrafts have distinctive features that make them distinguishable from aircrafts of rival airlines. Financial summary Headline loss before tax of 178 million (2021: 1,136 Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. All these factors can severely impact Ryanair. In their 2021 fiscal year, EasyJet's revenue continued to decline, EasyJet - statistics & facts | Statista 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. WebEasyjet's operating profit margins declined sharply, reaching only 3.85% from 10.16% Ryanairs inaugural flight had its daily route from Waterford in Ireland to London Gatwick. Both airlines create value for the shareholders in the following ways. In the year 2010 there was a reduction in the costs of fuel from Euro 1,257 million o Euro 893. Here too, Ryanair marginally outperforms EasyJet over the three years of study. Both airlines also have similar performance indicators in the aviation sector. Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. Ryanair in particular has had a major role in the development of secondary and regional airports in continental Europe. From 67 operational bases, Ryanair makes more than 1,600 flights daily. 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 lower the ratio, the better. EasyJets Net Current Assets to Sales i. e. , Working Capital to Sales ratio suggests that the company manages its debtors and creditors very efficiently. This is because the strategy of these airlines to keep their cost low suffers and this affects the demand patterns since they are forced to raise fares to meet rising expenses. 15% and 41. Jet2, Ryanair, and Easyjet are other dominant airline companies in this category. Another key aspect of its strategic competence was high aircraft use (Thompson 2005). In this regard, it transformed its value chain for the better. (Muller, 2011, p. 38) Any tax reforms or rule modifications related to flight insurance of passengers, airport activities and market competition can affect Ryanair. Dobruszkes, F. 2006, An analysis of European low-cost airlines and their networks, Journal of Transport Geography, vol. The policy of no refunds also irks customers who miss flights for genuine reasons. The company has also adopted the same strategy to improve passenger comfort and expand its operational network. Comprehensively, the two organisations share almost similar strategies. Bargaining power of suppliers EasyJet being a low fare airline may have disadvantages regarding the availability of the best air routes which will be taken by larger airlines. Best and worst airlines WebBCP Business & Management EMFRM 2022 Volume 38 (2023) 2360 Fig. writing your own paper, but remember to Massive flight cancellations led to Euro 50 million loss for Ryanair. 40, loc. 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). Both the airlines use frequent-flyer program which is an added advantage over any new entrants. 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. EasyJet easyJet Vs. Ryanair: The Curious Case Of 53-54,58). News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. 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. Complementing its direct sales strategy is the paperless booking model. Since the company has succeeded by adopting this strategy, it has proved that a differentiated market strategy is still vulnerable to competition. Moreover, these are cheaper modes of travel than air travel. Ryanair uses no hub. EASYJET This paper analyses the corporate and competitive strategies of Ryanair and Easyjet. 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. There was the eruption of Eyjafjalla volcano that produced ash which induced problems in European airspace. These destinations spread across 29 different countries in the region. To ensure low cost maintenance of aircrafts it is essential that EasyJet and Ryanair adopt latest technologies. We will write a custom Case Study on Ryanair and EasyJet Firms Strategies specifically for you. Political. However, EasyJet pays high fees to use the services of primary airports thus not achieving low costs in all its activities. EasyJet is also affected by other environmental issues like inflation, per capita income, gross domestic product and government taxes. Therefore, the company decided to use secondary airports, where their customers would get efficient services. Dowling, T. 2010, Ryanair v easyJet. Concisely, Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). In case you can't find a relevant example, our professional writers are ready The report contains an introduction to the business models of the airlines, their business strategies, SWOT analysis, analysis of porters five forces, financial analysis It chose to lower its costs by eliminating these expenses. https://www.easyjet.com. 59-60). Social Airline profits are highly dependent on the behavioral and demand patterns of customers. 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. WebRyanair in comparison to Easyjet has increased its turnover to 2,171 million (2008) 91% and 7. The proceeds of this transaction will go towards the 500-650m ($616-802m) target that easyJet drafted in May. easyJet Contact us: [emailprotected]. After realising these strategic weaknesses, the company decided to introduce an outside perspective on its business model by creating superior value for its customers. In the instance of EasyJet, while the non-current assets have registered a net increase of 19% in two years (2012) over 2010 levels as base, the current assets have seen at net fall of 12% during the same period. In the beginning of 2011 the Board of EasyJet decided to start the practice of dividend payments during profitable phases without ignoring the fact that the company always needs to have a strong financial base with a strong balance sheet. IvyPanda. Thus, EasyJet must design its strategy for a broader customer base. Italy is Ryanairs leading country market with almost 15,000 flights planned in December. The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). Evidence of this fact emerges in Paris as a common destination for both airlines. 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. EasyJet vs RyanAir EasyJet in comparison to other low fare airlines provides quality service at low price, internet booking facilities and other ancillary services. From where the investors sit, Lisa and Mark might reject the project. Albeit these factors show areas of strategic convergence, both airlines are rivals in the low-cost airline market. Their performance will mainly depend on their ability to sustain their operational models. Airfrance 2011, Low-cost carriers. Web. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. Figure Two: Ryanair and Easyjet market share (Source: Air France 2011). 0% increase in total assets between 2010 and 2012. Very typically, these companies also tend to suffer when economies are in a high employment phase. In response to the new eco tax imposed by the government in Germany, Ryanair has reduced the number of flights that travel over German routes. A low working capital means, less amount of non-current liabilities are utilized to finance the current assets. 14, no. One common economic factor that affects a low fare airline like Ryanair is overbooking by customers and their compensation later on. 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. 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 uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). Today, the airline still reaps the benefit of being among the first airline companies, in Europe, to adopt the low-cost airline strategy. Financials. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. easyJet student. The database is updated daily, so anyone can easily find a relevant essay example. Comparative Financial Analysis of Easyjet & Ryanair - GraduateWay However, the airlines employ the smallest number of people to meet the least regulatory requirement stipulated in the aviation sector (Malighetti et al. Bargaining power of suppliers Bargaining power of suppliers can be strong if they are concentrated i. e. there are few suppliers and many buyers. 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. This can be an important factor for Ryanair as aircrafts cannot be substituted. The general public responses swell towards cheap flights however it adds to their grievance if promotions in newspapers promise flights at a particular rate when in reality they cost much higher (Mayer, 2007, p. 16). 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. 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. easyJet This also reflected in the Interest Cover ratio. 45% and 15. 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. Figure One: Position of Easyjet and Ryanair in the global low-cost airline market (Source: Elderman 2014). Other segments of its working model appear below. In such a case scheduling plays a major part to attract more customers. EasyJet cabin staff in Portugal plan early April strike over pay : More Must read. 59% for years 2010, 2011 and 2012. This way, shareholders in both airlines get value for their investments through structured competition and increased productivity. In this regard, both companies have gained the reputation of being the biggest low-cost airlines in Europe (Wallach 2015). This specially affects aviation industry as people tend to spend on traveling more. Financial Analysis Incidents like growing terrorist threats and air accidents even if they happen to other airlines tend to affect the demand patterns of EasyJet and Ryanair because of their low cost strategies. Comparatively, Ryanair commands 40% of the market (Air France 2011). Need a custom Compare & Contrast Essay sample written from scratch by 34% for the years 2010, 2011 and 2012 of the respective years total revenue. 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. This compare & contrast essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) was written and submitted by your fellow 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). Managing Corporate Reputation the Case Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. Ryanair vs EasyJet vs Eurowings This target can be fulfilled with constant developments and widening of its low-fare services, without ignoring efficient operational services. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." Web. EasyJet's orange-and-gray cabin is slightly less intense, but not by much. B. Pastine International Airport, which is far away from the main business district. The top 10 competitors average 11.6B. EasyJet has broadened its customer base by targeting both business and leisure travelers which is an advantage over Ryanair. easyJet vs Ryanair vs Both airlines also have similar marketing strategies because besides marketing themselves as low-cost airlines, both companies do not use agents to reach their customers. Its strategy was to steal customers from dominant players in the airline industry by offering lower ticket prices compared to its rivals. By swiftly adopting and adapting to advancements in technology, EasyJet can to a great extent counter the adverse impact of rising fuel costs, e. g. , the modern state-of-the-art aircrafts are significantly more fuel efficient in comparison to the older aircrafts of yesteryears. 2005, Strategic Management: Awareness and Change, Cengage Learning EMEA, London. As it is using point-to-point the, time to go to destination is reduced. Ryanair Ryanair's blue-and-yellow seats. 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. Therefore, a differentiated strategy is not exclusive. Ryanair, EasyJet Make Progress on Pandemic Recovery Expansion 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). WebFor Easyjet Group, it is worth a lot more than Ryanair, both in terms of assets owned (2023, February 18). The fuel, administrative and engine maintenance costs are declined. Focusing on market strength is also another tenet of the airlines competitive strategies. Ryanairs fuel expenses are 45% of its total operational expenses, and so any rise in fuel price will affect Ryanairs decision regarding no-fuel surcharge policy to earn profit (Muller, 2011, p. 38). WebEasyjet Financial Ratios for Analysis 2014-2023 | EJTTF. In case of Ryanair, the assets and liabilities have both registered positive growth. Secondly, there still exist problems like unwillingness to use credit cards over phone or via internet among the French and German customers which cause problems in online booking facilities. Registration number: 7252303643 Retrieved from https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/, EasyJet emarketing strategies and its implementation Analysis, Competitive strategy that Easyjet have utilised Analysis, The Low Fares Airline Ryanair And The Five Forces Analysis Business, Ryanair Strategic Analysis And Recommendations For The Future. easyJet EASYJET Get original paper in 3 hours and nail the task. EASYJET 1, pp. Ryanair has put the increase in overall assets and liabilities to good use, it has managed to almost double the growth in net profits from Euro 305 million to Euro 560 million translating to an increase of 84% over 2010 levels. 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. OConnell, J. Also, profitability of low fare airlines like Ryanair depends on the customers perception on low fare services. The recent availability of price comparison websites have increased the bargaining power of buyers especially between two low fare airlines like EasyJet and Ryanair. Hence Ryanair needs to consider labor markets and government regulations of both countries. Ryanair has a higher gross margin than EasyJet. This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. 2009, Beating Low Cost Competition: How Premium Brands can respond to Cut-Price Rivals, John Wiley & Sons, London. 17 in 2012 for Ryanair. The profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. Because of its brand name, Ryanair also acts as barrier for new entrants in the European aviation industry. 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. 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. Thus, it is apparent EasyJet generates more value for the shareholders. The rate of unemployment in Europe is very high which means a major portion of European population cannot afford to travel by air. 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. 3. 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).
Ripple Vape Buzz,
Geordie Accent Vs Scottish Accent,
Articles E