easyjet vs ryanair financial analysis

Political. However, EasyJet does not compete with high fare airlines whose customers are mostly business or elite passengers who prefer added comforts and services during flight. Thus, it is apparent EasyJet generates more value for the shareholders. WebRyanair in comparison charges 115 if its done online, and a whopping 160 if you only It also flies to more than 180 destinations in Europe (Mayer 2008). 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. However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. 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. By managing and controlling competition in the sector, both Ryanair and Easyjet have generated superior values for their investors. On average, easyJet achieved a punctuality level of 91.6% from February to June 2021. It has destinations in many principal cities across Europe. EasyJet is in a better financial position than Ryanair. Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. 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. Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. PESTEL Analysis of Ryanair Ltd. Dont Since Ryanair provides services at low costs, its demand is very high. Any air disaster even if with other airlines can affect Ryanair since people will start believing low fare airlines compromise on safety measures in order to cut costs (Sorenson, 2005, pp. Low fare airlines like Ryanair can lower their price to force bigger airlines to also reduce their price to maintain competitiveness. EasyJet cabin staff in Portugal plan early April strike over pay : More Must read. They have caught the fancy of those people (in the low-to-middle income bracket) who have found air travel through these low fare airlines as an alternative to other modes of travel road and railways. The database is updated daily, so anyone can easily find a relevant essay example. Ryanairs operating expenses have increased by 43% from 2010 to 2012 and EasyJets by 27%. They create user-friendly websites which encourages people to book tickets online thereby eliminating the need of travel agents. 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. 84-85). In such a case scheduling plays a major part to attract more customers. Ryanair focuses on updating aircrafts since modernized fleets require less maintenance cost. 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. requirements? Increased incomes make people quality, customer service and comfort conscious during flights. To do so, the company uses a simplified airline network. For example, Easyjet has managed to do so by using the companys profits to increase its fleet size and expand into new routes (Mennen 2005). 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). must. (2023) 'Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)'. assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. The growing rate of employment can have both positive and adverse effects on EasyJet and Ryanair. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. As such, low fare airlines are regarded as inferior in the entire aviation industry. 59% of the total revenues as operating profits for the same three years. 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. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. ensure the integrity of our platform while keeping your private information safe. 1 millions allowed the company to make an unprecedented profit on regular functions. resulting in high fees for airports. EasyJets net profit (after tax) has been 6. Since the factors cannot be influenced by a business enterprise, so it is upon the business to adapt itself to the factors. (Appendix, Graphs 1 & 2). This compare & contrast essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) was written and submitted by your fellow O. P. of Ryanair has increased by 70% between the same period 2010 to 2012, and N. P. has increased by 84%. Technology Airline industry is one sector that is highly dependent on technologies. Gearing ratio which reflects a companys financial position in the long run shows that EasyJet is in a better financial position than Ryanair in the fiscal year 2011-2012. One positive factor is globalization which can increase flight demand in the long run. WebAdditional ESG information - Financial Year 2021; Investors. -7). Evidence of this fact emerges in Paris as a common destination for both airlines. The sale of the aircraft will generate 206m ($255m) of liquidity to strengthen easyJet's financial position. In later sections of the study, this paper shows the operational areas where the organisational strategies of both organisations converge and diverge. A low ratio is an indicator that an organization can duly pay all its dues. 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. For example, in 2014, both organisations reported increased passenger numbers (Wallach 2015). Comparatively, Ryanair commands 40% of the market (Air France 2011). EasyJet has an average turnaround time of 30 minutes or below which goes to prove its service efficiency and reliability. Although revenues have picked up, profits continue to lag behind as a result of elevated fuel and labour costs. 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). 0 millions to Euro 2,988. It operates almost 1,000 short-to-medium-haul routes in and around the continent. The profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. 2014, Ryanair: Strategy Report. 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. Ryanair plans schedules for aircrafts in the manner that they stay in air for longer periods thus avoiding loss incurred from grounded aircrafts. 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. WebBCP Business & Management EMFRM 2022 Volume 38 (2023) 2360 Fig. Bargaining power of buyers Usually a number of aircrafts from various airlines fly on the same air route thus increasing the bargaining power of buyers because of availability of alternatives. 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). By continuing well 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 return on shareholders funds also is seen closely identical ranging between 0. 2006). Easyjet flies to Charles de Gaulle Airport and Orly Airport (two main airports in the city) (Thompson 2005). This encourages customers to use Ryanair even if other cheaper flying options are available. The same example emerges in Rome as a popular destination for both airlines. 2 Ryanair non-current assets 2022 Fig. EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. This motivates the employees towards efficient contribution to EasyJets strategic objectives (EasyJet: Annual reports & accounts 2011, p. 35). The company operates approximately 600 routes across more than 30 countries, with its fleet of over 200 Airbus aircraft. 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. From 67 operational bases, Ryanair makes more than 1,600 flights daily. This has resulted in an overall increase of 7. Registration number: 7252303643 Ryanair and EasyJet focus on low fares thus compromising on customer services. 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. 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. 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. 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. 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 In line with this low-cost strategy is a simplified pricing structure. 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. 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. While the total revenues for Ryanair has grown at a steady and faster pace than EasyJet, the passenger revenue as a percentage of EasyJet is far higher than that of Ryanair. 79% and 8. Its strength lies in reducing cost of activities on board. IvyPanda. 2006). 2038. In the year 2010 EasyJet faced a number of major problems that posed a threat to its efficient service. Ryanair has had no air accidents with casualties till date. 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 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). WebThe seats don't recline and have a width of 17 inches and a pitch of 30 inches. EasyJet has broadened its customer base by targeting both business and leisure travelers which is an advantage over Ryanair. Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). EasyJet gains confidence of customers with their user friendly website where they disclose the price breakdown of travel expenses of customers hence there are no hidden costs that customers have to pay. We use cookies to give you the best experience possible. In such case Ryanairs current oil price strategies may not hold good. Secondly, primary airports often choose not to work with low fare airlines as the latter do not need many services like aerobridges, elaborate check-in-service which is preferred by full fare airline companies. Automobiles, bus services and railways can act as substitutes but where time saving is important, there can be no substitute to airlines. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. 46%, 13. They cut down staff costs to the bare minimum necessity and as such do not provide for staffs at the reception or ticketing. Sull, D. 1999, Case Study: easyJets $500 Million Gamble, European Management Journal, vol. 2006). According to Dobruszkes (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. Within this space, Ryanair and Easyjet are the two biggest low-cost airlines in the region (Elderman 2014; Dowling 2010). All these factors can severely impact Ryanair. Jet2, Ryanair, and Easyjet are other dominant airline companies in this category. 2015, A World Made for Money: Economy, Geography, and the Way We Live Today, U of Nebraska Press, Lincoln. 07%, 5. Hence Ryanair needs to consider labor markets and government regulations of both countries. 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. 3. Partly, this is why the company commands the highest market share in the European low-cost airline market segment. Pharapreising and interpretation due to major educational standards released by a particular educational institution as well as tailored to your educational institution if different; Moreover, national airlines like Ryanair get additional benefits from governments during periods of huge losses. 3 millions. Analysis of the financial results reported by both airlines shows that On the other hand, EasyJet has been earning at a modest rate of 5. 12 to 0. The net income after tax for years 2010, 2011 and 2012 as a percentage of total revenue of the respective years has been 10. This makes EasyJet second best low fare airline in Europe after Ryanair in terms of cost. 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. 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. 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. 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). 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. 1, pp. This is because new airlines emerge with more market demand, and lower operational and labor costs by 30-40% as they start their business with inexpensive second-hand aircrafts (Sorenson, 2005, p. 37). WebeasyJet is a better travel experience. Financials. Ryanair being an existing airline can lower its air fare to wipe out new entrants. Retrieved from https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. The total assets have increased by 19% (non-current assets 14% and current assets 27%) over the two year period between 2010 and 2012. Albeit these factors show areas of strategic convergence, both airlines are rivals in the low-cost airline market. Financial summary Headline loss before tax of 178 million (2021: 1,136 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. High tax rates on aviation industry affect these airlines since they strive to keep their fare low. Last updated: 25th April 2023. easyJet (LON:EZJ) is a British low-cost 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. Both airlines are in a better position to make all payments. Employees are not engaged in any one particular activity, they do various jobs thus reducing the need of multiple personnel. 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. This article aims to compare the two largest Low-cost carrier (LCCs) in Ryanair Ryanair is considered as the top low fare airline in Europe. Other airline companies, such as Ryanair, also discovered similar opportunities by leveraging their competitive advantage through the adoption of a low-cost strategy. Given the above background, this report will attempt to analyze the two companies i. e. , Ryanair and EasyJet viz. Even with these adjustments, the company has still increased its passenger numbers and remained profitable for a long time. The top 10 competitors average 11.6B. Differentiating services for airlines is not viable for many primary airports. 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. 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. 14, no. If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. student. 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. Both EasyJet and Ryanair have shown a reducing trend from 2010 to 2012. 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. Ever since, these two airlines have survived all odds and thrived to grow, changing the way people travelled. 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. In tandem, the net worth of the company too has registered healthy growth from GBP 1500 million to GBP 1794 million between 2010 and 2012. 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.

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