WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. 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. 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. 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. Ryanair cite it correctly. As such, low fare airlines are regarded as inferior in the entire aviation industry. 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. ensure the integrity of our platform while keeping your private information safe. Retrieved from https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. Half of its seating capacity is in such facilities. For example, it has stolen customers in the business class segment (Malighetti et al. To achieve these results, Ryanair has used three levers: Labor Utilization: A large majority of Ryanairs pilots are actually not salaried employees but third party contractors [5]. Through this strategy, Ryanair became less concerned about existing competition because it was operating in a unique market segment that other airlines had not used before (Ryans 2009). "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." Easyjet also strives to become a market leader in the low-cost market segment. easyJet 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. Ryanair and EasyJet are targeting markets The constant threat of a Middle East (Iran) war can adversely affect the oil price. (2023, February 18). We can help you 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. On average, easyJet achieved a punctuality level of 91.6% from February to June 2021. Ryanairs inaugural flight had its daily route from Waterford in Ireland to London Gatwick. In line with this low-cost strategy is a simplified pricing structure. 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. 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 38 days sales uncollected development an - Course Hero easyJet It has destinations in many principal cities across Europe. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. 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). There are many low-cost airlines in the world. 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. ). This understanding shows where the corporate strategies of both companies converge. 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. Irish ultra low-cost carrier founded in 1984. EASYJET 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. 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. External factors like increasing oil price can severely impact fare structure since the fare is already low. Today, the airline still reaps the benefit of being among the first airline companies, in Europe, to adopt the low-cost airline strategy. 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. The low-cost airline sector has been a ruthless industry for aviation players. Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. professional specifically for you? This can end up with the new entrant leaving the industry. This target can be fulfilled with constant developments and widening of its low-fare services, without ignoring efficient operational services. 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. Dowling, T. 2010, Ryanair v easyJet. 1 millions allowed the company to make an unprecedented profit on regular functions. 1, 90-135 d, Poland The first ever flight of this company had its route from Luton to Edinburgh and Glasgow. EasyJet keeps its focus on environmental awareness programs while making any future strategies. Dont They create user-friendly websites which encourages people to book tickets online thereby eliminating the need of travel agents. In such case Ryanairs current oil price strategies may not hold good. This encourages customers to use Ryanair even if other cheaper flying options are available. 40, loc. This is the biggest market share in the European low-cost airline sector. Internal rivalry also exists between low fare airlines like EasyJet and Ryanair. Since the launching of single currency in Europe, the nation has become more integrated and this has increased flight demands in EasyJet (Mayer, 2007, p. 16). IvyPanda, 18 Feb. 2023, ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). Easyjet Case Study Management Accounting In this case, both EasyJet and Ryanair have a witnessed a declining trend in the ratio from 2010 to 2012. 53 to 21. Since Ryanair has its operational bases in several European countries, so it must take into consideration variable labor markets and government regulations. 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. 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. Economic The price of oil primarily affects any airline companys viability. This factor combined with a rise in revenues from Euro 2,942. Ryanair V.S 3 millions. Ryanairs operating profit as percentage of total revenue for years 2010, 2011 and 2012 have been 13. The success of this strategy has always depended on the control and management of the four facets of cost management in the aviation sector employee management, equipment and maintenance, customer service costs, and airport handling costs (Thomson & Baden-Fuller 2010, p. 26). In line with its low-cost strategy, the company also adopted a no-frill strategy, like Ryanair, by eliminating in-flight meals and reducing the number of aircraft attendants. 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. The pervasive risk of terrorism means airlines like EasyJet have to emphasize on strict security measures which will warrant higher costs. WebAdditional ESG information - Financial Year 2021; Investors. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/, IvyPanda. The return on shareholders funds also is seen closely identical ranging between 0. 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. Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. An incident like air accident can lead the customers to rethink about the compromises adopted in aircraft maintenance. It was established in the year 1995 by Sir Stelios Haji-loannou with the purpose of providing scheduled air services at low costs. This clearly establishes that EasyJets funds management vis-a-vis trade, credit and cash cycle is far superior to Ryanairs. 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. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). WebeasyJet's revenue is the ranked 7th among it's top 10 competitors. Employees are not engaged in any one particular activity, they do various jobs thus reducing the need of multiple personnel. However, the company changed this strategy after realising it needed a differentiation strategy that would set it apart from its competitors. In Europe, major airline companies, such as Flybe, Wizz Air and Aer Lingus, dominate this space (Dobruszkes 2006). 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. . One common economic factor that affects a low fare airline like Ryanair is overbooking by customers and their compensation later on. 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. WebThis report 'Two Major Airlines EasyJet and Ryanair' aims at providing a complete overview of the two major airlines of Europe, EasyJet, and Ryanair. Although Ryanair has hinted at loyalty programmes, the airline doesnt British multinational low-cost airline group headquartered at London Luton Airport. . 97-102). 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. 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. assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. 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. A low ratio is an indicator that an organization can duly pay all its dues. Another key aspect of its strategic competence was high aircraft use (Thompson 2005). Ryanairs dependence on regional airports gives it a situational disadvantage while EasyJet compromises on low fare by using the facilities of primary airports. EasyJets net profit (after tax) has been 6. It was established in the year 1984 by the Ryan family with 25 employees. Furthermore, like Ryanair, Easyjet also bases its corporate strategy on Southwests business model. Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). The profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. 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. , Department of Transport, the Irish Aviation Association, the European Commission and the European Aviation Safety Agency. Since Ryanair provides services at low costs, its demand is very high. Both airlines create value for the shareholders in the following ways. 1%, 7. 84-85). Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). This essay was written by a fellow student. This can be an important factor for Ryanair as aircrafts cannot be substituted. easyJet To maintain competitiveness in the market, EasyJet needs to keep an eye on the technological upgrades with regard to aircraft manufacturing. The database is updated daily, so anyone can easily find a relevant essay example. 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 paper attempts to financially analyze and compare the two airlines. 3. 8 Pages. Of importance, the company lacked a service advantage that would back up its cost advantage (Thompson 2005). Since the factors cannot be influenced by a business enterprise, so it is upon the business to adapt itself to the factors. easyJet plc operates as a low-cost airline carrier in Europe. According to Malighetti et al. Focus on low-fare operations was initiated in the early 1990s by a new team of directors in the board. This is because people tend to lose confidence over low fare airlines regarding their security system. 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). EasyJet EasyJets strength lies in its strategically low fare air service. Also, profitability of low fare airlines like Ryanair depends on the customers perception on low fare services. 2005, Business Environment: Managing in a Strategic Context Chartered Institute of Personnel and Development, CIPD Publishing, New York. to help you write a unique paper. Ryanair Here too, Ryanair marginally outperforms EasyJet over the three years of study. 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. Technology Airline industry is one sector that is highly dependent on technologies. EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. This is most common in aviation industry since only few companies manufacture aircrafts. 59% for years 2010, 2011 and 2012. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)."
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