This affirmation aligns with the goal of Ryanair, which is to firmly set up itself as Europes leading low-fare scheduled passenger airline through continuous improvements and expanded offerings of its low-fares service (Freire 2014, p. 4). 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. In the year 2010 there was a reduction in the costs of fuel from Euro 1,257 million o Euro 893. Therefore, a differentiated strategy is not exclusive. However, because it could not protect this strategic approach from duplication by other airline companies, it lost a significant market share to other companies, such as Easyjet. This means EasyJet is in a far better position to borrow as compared to Ryanair and its (EasyJets) ability to meet all interest expense is better than Ryanair. In EasyJet the ratio has shown a reduction from 2011 to 2012, while in Ryanair it increased gradually from 2010 to 2012. Vertical analysis measures all the items in terms of total revenue in the income statement and total assets in the financial position statement. 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. EasyJets aircrafts have distinctive features that make them distinguishable from aircrafts of rival airlines. easyJet 14 over the three years and where as in case of Ryanair, this ratio has improved from 0. In doing so, the company saves upon expensive sources of capital to finance low earning current assets. Ryanairs net income after tax has been growing at a healthy rate and is almost twice the yearly percentage growth of EasyJet. Elderman, H. 2014, EasyJet Vs. Ryanair: The Curious Case Of 2 Budget Airlines. 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. The rate of unemployment in Europe is very high which means a major portion of European population cannot afford to travel by air. 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 also strives to become a market leader in the low-cost market segment. Even with these adjustments, the company has still increased its passenger numbers and remained profitable for a long time. 1, pp. 2006). Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. These strategies although have helped them in keeping the costs low, but they certainly are a cause of inconvenience to the discerning customers. easyJet Alternative modes of transport do not form a threat to low fare airlines like EasyJet and Ryanair for distance more than 400 km. easyJet Ryanair. Mayer, S. 2008, Ryanair and Its Low Cost Flights in Europe, Books on Demand, New York. (Doc) Financial Analysis for Ryanair and Easyjet In this regard, both airlines have reported increased asset values and increased growth figures. Results centre easyJet plc 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. Not sure if you can write a paper on Managing Corporate Reputation the Case of Ryanair by yourself? By accurately assessing these forces a firm can equip itself with strategies to defend it against the forces or use the forces to its own advantage. Here too, Ryanair marginally outperforms EasyJet over the three years of study. Financial Analysis 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. Web1617 Words7 Pages. 1 millions allowed the company to make an unprecedented profit on regular functions. There are various political factors that can affect the performance of the company and are needed to be assessed before making any expansion plans. Analysis of the financial results reported by both airlines shows that Comparative analysis based on PESTEL Ryanair and EasyJet both being the top European low fare airlines face some common advantages and disadvantages. Technology Airline industry is one sector that is highly dependent on technologies. easyJet vs Ryanair vs As such, low fare airlines are regarded as inferior in the entire aviation industry. Thus, EasyJet must design its strategy for a broader customer base. Headquarter of the company is situated at Dublin Airport. EasyJet has broadened its customer base by targeting both business and leisure travelers which is an advantage over Ryanair. This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. easyJet PLC has a consensus rating of Hold with an average target price of 12.42. In such a case scheduling plays a major part to attract more customers. In their effort to standardize all activities and primarily maintenance of aircrafts, RyanAir and EasyJet like all other low fare airlines buy standard configuration identical aircrafts with a high density seating. EasyJet and Ryanair Financial Analysis | SpeedyPaper.com This paper has already demonstrated that Ryanair and Easyjet use the same business model low-cost strategy. 2014, Ryanair: Strategy Report. This can pose stiff competition for Ryanair. 2006). 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). Their endeavor to cut costs also result in doing way with personal one-to-one interface with customers. 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. Financial summary Headline loss before tax of 178 million (2021: 1,136 This essay was written by a fellow student. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." 59% for years 2010, 2011 and 2012. Thus, it is apparent EasyJet generates more value for the shareholders. Low fare airlines also face the problems of overbooking and cancellations which add to their compensation expenses. The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. 14, no. The interest cover ratio for EasyJet has improved from 13. Dowling, T. 2010, Ryanair v easyJet. 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. 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). Ryanair Ryanair is considered as the top low fare airline in Europe. 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. Since Ryanair provides services at low costs, its demand is very high. They cut down staff costs to the bare minimum necessity and as such do not provide for staffs at the reception or ticketing. This way, it became profitable in an overcrowded industry. Get original paper in 3 hours and nail the task. The low-fare services of Ryanair are structured in the manner to entice passengers who travel for leisure or business. 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. EasyJet's orange-and-gray cabin is slightly less intense, but not by much. These destinations spread across 29 different countries in the region. Ryanairs dependence on regional airports gives it a situational disadvantage while EasyJet compromises on low fare by using the facilities of primary airports. This is the biggest market share in the European low-cost airline sector. 56% respectively. Nearly three times as many of its flights were cancelled at the last minute as with Ryanair and Jet2. 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. Of importance, the company lacked a service advantage that would back up its cost advantage (Thompson 2005). A low price-earnings ratio is an attractive proposition to invest in the stocks of the two companies. 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. 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. Competitive rivalry Because of increased competition in the European aviation industry, rivalry between airlines has increased. 84-85). This will be a stimulating factor for the shareholders in profitable years even as the company continues to enjoy market share (EasyJet: Annual reports & accounts 2011, pp. 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). professional specifically for you? 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. assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. Finally, EasyJet must convince people that it is the safest mode of air travel at lowest cost. Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). easyJet Pharapreising and interpretation due to major educational standards released by a particular educational institution as well as tailored to your educational institution if different; This lack of personal service can induce people to opt for other low fare airlines. 97-102). Ryanair also severely lacks in customer service since one cannot contact the airline through phone or e-mail except for booking purposes. The company brands itself as Europes only ultra low-cost airliner because it is the regions largest low-cost airline company (Mayer 2008). Moreover, governments are also planning to restrict expansion of aviation industry in order to protect the environment. Correct writing styles (it is advised to use correct citations) On average, easyJet achieved a punctuality level of 91.6% from February to June 2021. Both the airlines are known for their operational efficiency and financial stability. Ryanair easyJet If the oil price increases then it will be difficult for EasyJet to maintain its policy of providing air services at low costs. However in the measure of Return on Assets, EasyJet consistently outperforms Ryanair over the study period of three years (2010, 2011 and 2012). Ryanair WebFor Easyjet Group, it is worth a lot more than Ryanair, both in terms of assets owned The two airlines are also the most popular low-cost airlines in Europe. In Europe, major airline companies, such as Flybe, Wizz Air and Aer Lingus, dominate this space (Dobruszkes 2006). Secondly, trade unions are creating problems all over Europe with their increasing demands. Complementing its direct sales strategy is the paperless booking model. Low fare airlines have the problem of working with primary airports because of the expensive aerobridges and elaborate check-in-services of these airports. This article aims to compare the two largest Low-cost carrier (LCCs) in The trend remains same in the given years for both the airlines in the Net Income ratio. 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. Italy is Ryanairs leading country market with almost 15,000 flights planned in December. This makes EasyJet the second best low fare airline in Europe, second to Ryanair. Other airline companies, such as Ryanair, also discovered similar opportunities by leveraging their competitive advantage through the adoption of a low-cost strategy. However, EasyJet pays high fees to use the services of primary airports thus not achieving low costs in all its activities. They create user-friendly websites which encourages people to book tickets online thereby eliminating the need of travel agents. According to Malighetti et al. The following table shows this fact. Today EasyJet has in its service 175 aircrafts over 400 routes in 27 countries. Irish ultra low-cost carrier founded in 1984. Also the regions being slightly rural can act as deterrent for some customers. These strategic factors made the airline more profitable than other flag carriers did. 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. 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. easyJet The database is updated daily, so anyone can easily find a relevant essay example. Stated differently, both airlines use the direct sales strategy to market their services. Then there is also a growing interest in multiple product features, product quality and service which may cause people to try other airlines merely to get a different kind of experience (Muller, 2011, p. 39). After realising these strategic weaknesses, the company decided to introduce an outside perspective on its business model by creating superior value for its customers. Because of its brand name, Ryanair also acts as barrier for new entrants in the European aviation industry. Need a custom essay sample written specially to meet your 3 millions. 91% and 7. easyJet & Ryanair: squaring up to each other as head to head To expand its customer base, the company tried to please all their customers by trying to meet the customer needs of every type of market in the industry (Malighetti et al. 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). Governments can also put restrictions on mergers and acquisitions. Thirdly, there is a growing threat of terrorist attacks across Europe. Customers have appreciated this strategy by increasing ticket sales (Kew & Stredwick 2005). Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). Focus on low-fare operations was initiated in the early 1990s by a new team of directors in the board. This can end up with the new entrant leaving the industry. cite it correctly. However, EasyJet has a policy of serving free refreshments to customers for long haul flights but this service is not available in Ryanair. (2016, Oct 07). easyJet plc operates as a low-cost airline carrier in Europe. Natural calamities and also human events like flight accidents and terrorist attacks can drastically reduce flight demand as mode of travel. The constant threat of a Middle East (Iran) war can adversely affect the oil price. Jet2, Ryanair, and Easyjet are other dominant airline companies in this category. EASYJET PLC : Forcasts, revenue, earnings, analysts expectations, ratios for EASYJET PLC Stock | EZJ | GB00B7KR2P84 . 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. must. However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. Registration number: 7252303643 They could compare with other investment opportunities by NPV method. 2009, Beating Low Cost Competition: How Premium Brands can respond to Cut-Price Rivals, John Wiley & Sons, London. 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. Very typically, these companies also tend to suffer when economies are in a high employment phase. WebeasyJet is a better travel experience. Also, profitability of low fare airlines like Ryanair depends on the customers perception on low fare services. Financial Summary Headline loss before tax of 1,136 million (2020: 835 million loss) ahead of consensus. EasyJets activities comply with the regulations imposed by government regarding global warming like low carbon emissions, operating aircrafts that consume less oil and make less noise. Revenue However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. -PDF- 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. ).