Through its no-frills strategy, Ryanair discovered that it could be profitable by working 24 hours a day and keeping its aeroplanes in the air often (Dobruszkes 2006). However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. 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. Efficiency ratio has increased in 2012 for both EasyJet and Ryanair which means they can make all payments because of greater profitability and higher sales volumes. If this happens then demand will fall which will add to the cost. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. (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. Ryanairs operating expenses have increased by 43% from 2010 to 2012 and EasyJets by 27%. More than 20 airlines have collapsed after adopting the low-cost strategy (Air France 2011). It chose to lower its costs by eliminating these expenses. 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. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." 0 millions to Euro 2,988. EasyJet has a wider customer base since it targets both leisure and business customers while Ryanair targets only leisure customers. It has destinations in many principal cities across Europe. 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. Web1759 Words. 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. Low fare can be an advantage for EasyJet but airline customers often emphasize more on comfort and services to cost factors both of which are strong elements in high fare airlines. After realising these strategic weaknesses, the company decided to introduce an outside perspective on its business model by creating superior value for its customers. Financial Analysis Ryanair has also focused on creating value for its shareholders by focusing its strengths on markets that it enjoys dominance. The trend remains same in the given years for both the airlines in the Net Income ratio. 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. 2006). 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. The increased seating leaves very little leg room for a relaxed travel. It also uses single type of aircraft which is Boeing to save on training costs of flyers (O Cuilleanain, et al, 2004, pp. It is a key matter for EasyJet. There are other infrequent environmental issues like volcanic eruptions from which ash can emit and disrupt airspace in Europe as witnessed recently with Eyjafjalla volcano. EasyJet vs RyanAir Whereas for Ryanair, this ratio has improved from just 5. Higher the ratio means higher the perceived value of the company and vice versa. easyJet Vs. Ryanair: The Curious Case Of WebOn the basis of financial fundamentals, Ryanair is stronger than EasyJet in terms of Both airlines have perfected this strategy by introducing new price reduction measures, such as paperless booking. Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. 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. EasyJet, Ryanair And Wizzair Provide Pointers For A Post Since Ryanair has its operational bases in several European countries, so it must take into consideration variable labor markets and government regulations. This strategy emerged after learning that many flag carriers use large airports, such as Heathrow, thereby limiting its competitiveness on this platform. In 2009, EasyJet catered to passengers with 50% having passports of countries other than that of UK. (2023, February 18). This can be an important factor for Ryanair as aircrafts cannot be substituted. submit it as your own as it will be considered plagiarism. Ryanair is projecting a strong summer; it has capacity on sale at 114% of The total liabilities have grown by 21% between 2010 and 2012 (non-current liabilities by 23% and current liabilities by 17%). The rate of unemployment in Europe is very high which means a major portion of European population cannot afford to travel by air. 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. There are many low-cost airlines in the world. easyJet 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. The growing rate of employment can have both positive and adverse effects on EasyJet and Ryanair. Stated differently, both airlines use the direct sales strategy to market their services. 97-102). easyJet For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. In this regard, both companies have gained the reputation of being the biggest low-cost airlines in Europe (Wallach 2015). Since the company has succeeded by adopting this strategy, it has proved that a differentiated market strategy is still vulnerable to competition. Figure Two: Ryanair and Easyjet market share (Source: Air France 2011). Retrieved from https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. EasyJet EasyJets strength lies in its strategically low fare air service. IvyPanda. For instance, in 2004, Ryanair put aviation industrys first paperless pilot training program into practice (Muller, 2011, p. 39). (2016, Oct 07). is an Irish airline company. Political. 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. Also, lower ratio means the two airlines have improved profitability in 2012. To attract more customers EasyJet must also concentrate on designing user-friendly websites for easy booking experience. In the year 2010 there was a reduction in the costs of fuel from Euro 1,257 million o Euro 893. Comparatively, Ryanair flies to Beauvais-Till Airport, which is almost one hour away from the city (Ryans 2009). The policy of no refunds also irks customers who miss flights for genuine reasons. Web. 79% and 8. easyJet CEO Johan Lundgren concerned about reliability . 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. Which European low-cost carrier is best for you: Ryanair, The paper will explain the summary of the company including its business activities, along with the management accounting information that helps managers of business. However, this factor plays low for EasyJet as it uses primary airports like Schiphol, Copenhagen etc. EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. 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. Based on the strategies adopted by Ryanair and Easyjet, it is important to point out that competition determines the success or failure of the strategic approaches adopted by low-cost airlines. Ryanair V.S 2014, Ryanair: Strategy Report. -PDF- 14 over the three years and where as in case of Ryanair, this ratio has improved from 0. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. Analysis: the Ryanair-Wizz showdown in depth - Aviacionline.com The highest 12-month target stood at 900p while the lowest was 460p per share. Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. to help you write a unique paper. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. Although Ryanair has hinted at loyalty programmes, the airline doesnt As such EasyJet has the advantage of providing low fare which will be difficult for new entrants to offer, and also EasyJet has a goodwill attached to its name which is something a new entrant will take years to replicate. This understanding shows where the corporate strategies of both companies converge. 58 to 6. Partly, this is why the company commands the highest market share in the European low-cost airline market segment. 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. The company conveys these advantages to its customers by operating in secondary airports where long queues and complicated security rules rarely inconvenience customers (OConnell & Williams 2012). The commitment and dedication towards work that stimulates the employees of EasyJet kept its workforce going and provide uninterrupted world class service. 3 Easyjet non-current assets 2021 Fig. 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. British multinational low-cost airline group headquartered at London Luton Airport. This has resulted in an overall increase of 7. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. To meet the demand, management focuses on maintaining enough flights every day. 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 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. ). 24 from 2010 to 2012. 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. In the last three financial years both these airlines Ryanair and EasyJet have shown good performances financially and otherwise. By doing so, it believes that its customers can get around to where they are going in good time. 4 Easyjet non-current assets 2022 According to Malighetti et al. All these along with various functional problems presented immense challenge to the performance level of EasyJet. Low fare airlines also face the problems of overbooking and cancellations which add to their compensation expenses. It was established in the year 1984 by the Ryan family with 25 employees. 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. 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. 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. 500 IvyPanda, 18 Feb. 2023, ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. EasyJets Net Current Assets to Sales i. e. , Working Capital to Sales ratio suggests that the company manages its debtors and creditors very efficiently. 2006). 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 profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. The same for EasyJet has been 37%, 38% and 42%. 2015, A World Made for Money: Economy, Geography, and the Way We Live Today, U of Nebraska Press, Lincoln. PESTEL Analysis of Ryanair Ltd. 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. Both the airlines use frequent-flyer program which is an added advantage over any new entrants. 2006). For example, it has stolen customers in the business class segment (Malighetti et al. EASYJET PLC : Forcasts, revenue, earnings, analysts expectations, ratios for EASYJET PLC Stock | EZJ | GB00B7KR2P84 . We utilize security vendors that protect and Freire, A. Easy entry of new airlines and restriction of monopolization of airports can pose stiff competition for EasyJet and Ryanair. 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. There are some infrequent environmental issues that can disrupt services of airlines like volcanic eruptions, pandemics ike swine flu and government regulations like reduction of carbon emissions. Ryanairs inaugural flight had its daily route from Waterford in Ireland to London Gatwick. (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. Ryanair being an existing airline can lower its air fare to wipe out new entrants. student. Ryanair is not much affected by buyers bargaining power since airline customers are scattered throughout Europe and no single customer makes bulk purchase of airline tickets. EASYJET This view affirms the opinions of researchers who say price leadership is pivotal to creating market dominance, compared to cost leadership advantages (Mayer 2008). 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. Ryanair vs EasyJet vs Eurowings The dominant market share enjoyed by Ryanair also mirrors its high customer traffic because, compared to Easyjet, the company carries 4.5 million passengers, annually, while its rival carries 3,000,000 passengers annually (Dowling 2010). Managing Corporate Reputation the Case EASYJET Ryanair in particular has had a major role in the development of secondary and regional airports in continental Europe. 77% respectively. Registered address: Gabriela Narutowicza Street, No. 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. 84-85). must. Finally, the government has imposed higher taxes on flights which add to the cost thereby resulting in increasing air fares. 11 in 2010 to 0. We use cookies to give you the best experience possible. (Doc) Financial Analysis for Ryanair and Easyjet easyJet financial profile is strong, leaving capacity for taking on further debt, it has a strong working capital, and an attractive current ratio 169. 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%). 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. 59% of the total revenues as operating profits for the same three years. In this measure, EasyJet is less geared as compared to Ryanair. report, Comparative Financial Analysis of Easyjet & Ryanair. easyJet vs Ryanair vs Ryanair and easyJet Case Study By conducting a spend analysis the controller can consolidate purchases in order to increase buying volume with a smaller number of preferred suppliers. 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. Ryanair and EasyJet focus on low fares thus compromising on customer services. 40, loc. 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. WebBCP Business & Management EMFRM 2022 Volume 38 (2023) 2360 Fig. Economic The growing rate of employment increases the spending capacity of people with more money at disposal.