easyjet vs ryanair financial analysis
WebeasyJet's revenue is the ranked 7th among it's top 10 competitors. Prices. By continuing well You may use it as a guide or sample for 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. WebAdditional ESG information - Financial Year 2021; Investors. 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. Ryanair has always branded itself as an airline company that regards punctuality and efficiency as key segments of its service model (OConnell & Williams 2012). 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. Ryanair 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. 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. WebBCP Business & Management EMFRM 2022 Volume 38 (2023) 2360 Fig. 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. Ryanair is an older airline company than Easyjet because its operations started in 1985, while Easyjets operations started in 1995 (Freire 2014). In EasyJet the ratio has shown a reduction from 2011 to 2012, while in Ryanair it increased gradually from 2010 to 2012. 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). 32% and 12. This is because globalization has enhanced alliance between nations for trade, technology, labor etc. IvyPanda. In 2009, EasyJet catered to passengers with 50% having passports of countries other than that of UK. But EasyJet does not compromise on airport facilities and uses the expensive services of primary airports. There are many low-cost airlines in the world. 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. EasyJet keeps constantly looking out for opportunities that help increase its operations, lower its cost and improve profitability in European short-haul aviation. In their 2021 fiscal year, EasyJet's revenue continued to decline, WebeasyJet is a better travel experience. Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. Customers have appreciated this strategy by increasing ticket sales (Kew & Stredwick 2005). This will reduce the fare burden on customers by avoiding travel agents. 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. In such case Ryanairs current oil price strategies may not hold good. easyJet The highest 12-month target stood at 900p while the lowest was 460p per share. is an Irish airline company. 0% increase in total assets between 2010 and 2012. 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. Stelios baby is in good hands. 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). 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. Ryanair Concisely, Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). This way, shareholders in both airlines get value for their investments through structured competition and increased productivity. 249264. Easyjet Case Study Management Accounting Easyjet Financial Ratios for Analysis 2014-2023 | EJTTF The low-cost airline sector has been a ruthless industry for aviation players. 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]. 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). 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). 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. 2006). To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). 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. Comparatively, Ryanair flies to Beauvais-Till Airport, which is almost one hour away from the city (Ryans 2009). To ensure low cost maintenance of aircrafts it is essential that EasyJet and Ryanair adopt latest technologies. On the 28th of last month, it said that it could realistically raise this sum money through the sale of its aircraft. 2006). Thompson, J. Ryanair has also focused on creating value for its shareholders by focusing its strengths on markets that it enjoys dominance. The sale of the aircraft will generate 206m ($255m) of liquidity to strengthen easyJet's financial position. This paper analyses the corporate and competitive strategies of Ryanair and Easyjet. EasyJets net profit (after tax) has been 6. Although these strategies do help in keeping the costs down, they also deter those customers who prefer being served while flying. Financial Summary Headline loss before tax of 1,136 million (2020: 835 million loss) ahead of consensus. 26 between the same period. 2005, Business Environment: Managing in a Strategic Context Chartered Institute of Personnel and Development, CIPD Publishing, New York. 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. If this happens then demand will fall which will add to the cost. EasyJet in comparison to other low fare airlines provides quality service at low price, internet booking facilities and other ancillary services. Ryanair, EasyJet Make Progress on Pandemic Recovery Expansion Ryanair is projecting a strong summer; it has capacity on sale at 114% of Thomson, N. & Baden-Fuller, C. 2010, Basic Strategy in Context: European text and cases, John Wiley & Sons, London. In summary, it shows that EasyJet has successfully kept its cash outflows at minimum and at the same time managed to pare its non-current liabilities (the expensive source of fund) in favor of an increase in current liabilities. The fuel, administrative and engine maintenance costs are declined. (2016, Oct 07). 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. Similar to other low-cost carriers, the airline also had no in-flight meals and a rapid turnaround. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/, IvyPanda. easyJet 97-102). EASYJET Whereas for Ryanair, this ratio has improved from just 5. -PDF- WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. Competitive rivalry Because of increased competition in the European aviation industry, rivalry between airlines has increased. 81%, 7. Ryanair V.S 17, no. easyJet 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. These strategies although have helped them in keeping the costs low, but they certainly are a cause of inconvenience to the discerning customers. Ryans, A. 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. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. This can pose stiff competition for Ryanair. The low-fare services of Ryanair are structured in the manner to entice passengers who travel for leisure or business. Ryanair allows 10kg while EasyJet only 8. 2006). The sustained economic recession with the European Union with no signs of it abating in the near future induces business travelers to reduce their travel expenses. By conducting a spend analysis the controller can consolidate purchases in order to increase buying volume with a smaller number of preferred suppliers. Ryanair being an existing airline can lower its air fare to wipe out new entrants. This target can be fulfilled with constant developments and widening of its low-fare services, without ignoring efficient operational services. 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. Ryanairs working capital needs as a percentage of total assets has been consistently around the 15% mark whereas for EasyJet it has been 5. WebOn the basis of financial fundamentals, Ryanair is stronger than EasyJet in terms of 12 in 2010 to 0. 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. For instance, there are two major aircraft manufacturers namely Airbus and Boeing. 13 to 0. 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. Stringent laws regarding safety and air traffic rights put financial pressure on low-fare airlines like EasyJet. 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. This motivates the employees towards efficient contribution to EasyJets strategic objectives (EasyJet: Annual reports & accounts 2011, p. 35). Customer satisfaction is another element that this company keeps track of by measuring it online or by passenger surveys. In this study it has been found that Ryanair bases its competitiveness by using secondary and regional airports in order to avoid congestion, keep airport charges at minimum and afford a fast and efficient turnaround time for its aircrafts. The profit was declared after making all tax payments in 2010 financial year that amounted to Euro 305. It also flies to more than 180 destinations in Europe (Mayer 2008). In this regard, it strives to offer convenience to its customers by operating in major airports around Europe. It operates almost 1,000 short-to-medium-haul routes in and around the continent. By flying to primary airports, the latter has had an edge above its competition because its customers can get to their destinations faster than Ryanairs customers who have to board a taxi, or train, to get to major cities. WebeasyJet is currently c.55% hedged for fuel in the financial year ending on 30 September 2022 at c.US$498 per metric tonne with the spot price as at 29 November 2021 being US$658. Registration number: 7252303643 easyJet PLC has a consensus rating of Hold with an average target price of 12.42. 8-9). Ryanair and EasyJet have concentrated their corporate strategies on the cost leadership model because they both strive to become the best companies in the low-cost market segment. 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 can either lower air fare to level with that of the new entrant or else can lower further which will make the new entrant struggle to survive because of its low capital base. 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). Stated differently, both airlines use the direct sales strategy to market their services. 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. The paper will explain the summary of the company including its business activities, along with the management accounting information that helps managers of business. Easyjet is Ryanairs main rival. 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. Financial Decision Making, Easyjet in comparison with Very typically, these companies also tend to suffer when economies are in a high employment phase. Comprehensively, the two organisations share almost similar strategies. 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 Another factor comprises of business travelers whose principal purpose for traveling by air is to conduct face-to-face meetings, but these meetings often become redundant because of technology which provides videoconferencing and does away with the need to physically meet. The return on shareholders funds also is seen closely identical ranging between 0. 3. Its strength lies in reducing cost of activities on board. 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. For instance, flight attendants also do the work of cleaners or gate agents. More than 20 airlines have collapsed after adopting the low-cost strategy (Air France 2011). We utilize security vendors that protect and WebRyanair in comparison charges 115 if its done online, and a whopping 160 if you only Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. student. Not sure if you can write a paper on Managing Corporate Reputation the Case of Ryanair by yourself? Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). Ryanair Pharapreising and interpretation due to major educational standards released by a particular educational institution as well as tailored to your educational institution if different; Last updated: 25th April 2023. easyJet (LON:EZJ) is a British low-cost This is most common in aviation industry since only few companies manufacture aircrafts. Jet2, Ryanair, and Easyjet are other dominant airline companies in this category. Such passengers prefer to choose airlines with minimum traveling expenses or may opt for not traveling at all. In EasyJet air travel there is no arrangement for free meal services in flights that are not longer than 2 hours (EasyJet Airline Company Limited, n. d. ). Equity ratio for EasyJet has marginally increased in 2012 compared to the 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. , Department of Transport, the Irish Aviation Association, the European Commission and the European Aviation Safety Agency. 500 Ryanair, when they offer the cheapest option or youre afraid that EasyJet will charge you for your 10kg cabin bag. At first This understanding shows where the corporate strategies of both companies converge. 77% respectively. Its high seat density arrangements on board allow optimum use of aircrafts. 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. Which European low-cost carrier is best for you: Ryanair, easyJet (1995) is a low-cost airline carrier operating only in Europe. This is because people tend to lose confidence over low fare airlines regarding their security system. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." Its strategy was to steal customers from dominant players in the airline industry by offering lower ticket prices compared to its rivals. This puts pressure on the low cost strategies adopted by Ryanair and EasyJet. Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. To do so, the company uses a simplified airline network. To meet the demand, management focuses on maintaining enough flights every day. The following table shows this fact. Analysis: the Ryanair-Wizz showdown in depth - Aviacionline.com By managing and controlling competition in the sector, both Ryanair and Easyjet have generated superior values for their investors. Since Ryanair has its operational bases in several European countries, so it must take into consideration variable labor markets and government regulations. EasyJet, Ryanair And Wizzair Provide Pointers For A Post More employment also means economic growth which can influence low fare airlines, because with more spending power people tend to emphasize more on quality and comfort during flight than price. 15% and 41. 1, 90-135 d, Poland 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%). 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. EasyJet's orange-and-gray cabin is slightly less intense, but not by much. 249264. In line with this low-cost strategy is a simplified pricing structure. From 67 operational bases, Ryanair makes more than 1,600 flights daily. Although Ryanair has hinted at loyalty programmes, the airline doesnt Comparative Financial Analysis of Easyjet & Ryanair - GraduateWay 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. This lack of personal service can induce people to opt for other low fare airlines. 8 billion in 2010 to Euro 2. Social Airline profits are highly dependent on the behavioral and demand patterns of customers. 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. 91% and 7. 24 from 2010 to 2012. Both the airlines have shown good financial performance, this means they can promptly meet all payment obligations to creditors and suppliers. Results centre easyJet plc British multinational low-cost airline group headquartered at London Luton Airport. 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. 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. EasyJet is in a better financial position than Ryanair. Web1759 Words. Governments can also put restrictions on mergers and acquisitions. (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. PESTEL is an acronym for Political, Economic, Social, Technological, Environmental and Legal factors of a business. However, EasyJet has a policy of serving free refreshments to customers for long haul flights but this service is not available in Ryanair. The emphasis must be on cost-cutting strategies and expansion of route network. An incident like air accident can lead the customers to rethink about the compromises adopted in aircraft maintenance. Figure 38 days sales uncollected development an - Course Hero Given the above background, this report will attempt to analyze the two companies i. e. , Ryanair and EasyJet viz. Ryanairs dependence on regional airports gives it a situational disadvantage while EasyJet compromises on low fare by using the facilities of primary airports. With rising employment, the purchasing power of people also improves. Then there were incidents like heavy snowfall and major ATC industrial unrest. 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. While EasyJets net worth has consistently witnessed growth, albeit as a percentage of total assets, the net worth of Ryanair has in fact shrunk percentage wise from year 2010 to year 2012. Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. For example, both airlines fly to different types of airports. Ryanair vs However, this factor plays low for EasyJet as it uses primary airports like Schiphol, Copenhagen etc. IvyPanda, 18 Feb. 2023, ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. 59% of the total revenues as operating profits for the same three years. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. easyJet 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). Both the airlines use frequent-flyer program which is an added advantage over any new entrants. 58 to 6. EASYJET PLC : Forcasts, revenue, earnings, analysts expectations, ratios for EASYJET PLC Stock | EZJ | GB00B7KR2P84 . 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. Such competitions set limitations to EasyJets pricing policies on less revenue routes. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)."
