The trend remains same in the given years for both the airlines in the Net Income ratio. The two airlines are also the most popular low-cost airlines in Europe. Thus, it is apparent EasyJet generates more value for the shareholders. Ryanair's blue-and-yellow seats. 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. Liquidity and Current ratio Under this ratio, we measure the companys ability to meet it short term expenses. 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. Thompson, J. Easyjet also strives to become a market leader in the low-cost market segment. WebOn the basis of financial fundamentals, Ryanair is stronger than EasyJet in terms of However, in absolute terms the net worth has grown from Euro 2. report, Comparative Financial Analysis of Easyjet & Ryanair. But EasyJet does not compromise on airport facilities and uses the expensive services of primary airports. The company chose this strategy because it did not believe that these services contributed to customer satisfaction (Kew & Stredwick 2005). 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. Legal EU laws related to aviation industry do not allow monopolization of airports. Regular review is done by management to monitor demand of flights (Ryanair: Annual reports and financial statements 2010, pp. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). easyJet PLC has a consensus rating of Hold with an average target price of 12.42. 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. Technology Airline industry is one sector that is highly dependent on technologies. For example, it has focused on improving its performance in many routes where Easyjet does not service (Easyjet operates in 702 routes, while Ryanair operates in 1,600 routes) (CAPA 2014). & Stredwick, J. -7). Because of its brand name, Ryanair also acts as barrier for new entrants in the European aviation industry. In case you can't find a relevant example, our professional writers are ready Of importance, experts say the European low-cost airline sector is more brutal for low-cost airline companies than the American market because both markets have different structures (CAPA 2014). The constant threat of a Middle East (Iran) war can adversely affect the oil price. Partly, this is why the company commands the highest market share in the European low-cost airline market segment. If this happens then demand will fall which will add to the cost. The same for EasyJet has been 37%, 38% and 42%. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. This paper analyses the corporate and competitive strategies of Ryanair and Easyjet. 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. In later sections of the study, this paper shows the operational areas where the organisational strategies of both organisations converge and diverge. Figure Two: Ryanair and Easyjet market share (Source: Air France 2011). Irish ultra low-cost carrier founded in 1984. Half of its seating capacity is in such facilities. Revenue 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). 32% and 12. Therefore, both airlines strive to minimise their operating costs by cutting expenses such as salaries and fuel costs. EasyJet has earned a Net Interest margin of 7% as compared to Ryanairs 6% in the financial year 2012 indicating that EasyJets utilization of assets is better than that of Ryanairs. Relative to this development, Ryanair has also adopted a red ocean strategy where it steals customers from other market segments (predominantly the customers of major airlines) (Thomson & Baden-Fuller 2010). 40, loc. Internal rivalry also exists between low fare airlines like EasyJet and Ryanair. Key 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. Ryanair. 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. Secondly, trade unions are creating problems all over Europe with their increasing demands. However, the company changed this strategy after realising it needed a differentiation strategy that would set it apart from its competitors. Focus on low-fare operations was initiated in the early 1990s by a new team of directors in the board. With rising employment, the purchasing power of people also improves. To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). Introduction The main objective of the paper to explain the accounting practices of easyJet plc. While Ryanair was better hedged its fuel expenses raised 560% versus However, EasyJet has a policy of serving free refreshments to customers for long haul flights but this service is not available in Ryanair. Ryanair has also focused on creating value for its shareholders by focusing its strengths on markets that it enjoys dominance. Selecting air routes, strategic flight scheduling are some elements that can allow EasyJet to maintain competitiveness. However, EasyJet pays high fees to use the services of primary airports thus not achieving low costs in all its activities. 15% and 41. Aviation industry is largely ruled by political, economical, environmental and technological frameworks. 4 Easyjet non-current assets 2022 WebEasyjet Financial Ratios for Analysis 2014-2023 | EJTTF. WebRyanair in comparison charges 115 if its done online, and a whopping 160 if you only 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%). 2005, Business Environment: Managing in a Strategic Context Chartered Institute of Personnel and Development, CIPD Publishing, New York. For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. WebFar more of you flew with easyJet than any other carrier. More recently, Ryanair has reduced the number of flights that travel over German routes because of the new eco tax imposed by government which can drastically reduce the level of profit. However, in 2013 and 2014, EasyJet posted a 5.94% and 3.39% reduction This is because globalization has enhanced alliance between nations for trade, technology, labor etc. Competitive rivalry Air fare is the driving factor for competitive rivalry in aviation industry. Their performance will mainly depend on their ability to sustain their operational models. The unstable political scenario in the Middle East is in a perpetual war like condition. A low price-earnings ratio is an attractive proposition to invest in the stocks of the two companies. 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. 11 in 2010 to 0. This is the biggest market share in the European low-cost airline sector. Then there were incidents like heavy snowfall and major ATC industrial unrest. Therefore, the takeoff costs, additional customer expenses, and meal costs as reduced. Ryanairs fuel expenses are 45% of its total operational expenses, and so any rise in fuel price will affect Ryanairs decision regarding no-fuel surcharge policy to earn profit (Muller, 2011, p. 38). Ryanair is projecting a strong summer; it has capacity on sale at 114% of Focusing on market strength is also another tenet of the airlines competitive strategies. 1, pp. Furthermore, like Ryanair, Easyjet also bases its corporate strategy on Southwests business model. By managing and controlling competition in the sector, both Ryanair and Easyjet have generated superior values for their investors. This makes EasyJet the second best low fare airline in Europe, second to Ryanair. Ryanair's operating profit grew by 40% to EUR1,460 million, and revenue increased by 16% to EUR6,536 million. Wallach, B. Other segments of its working model appear below. We will write a custom Case Study on Ryanair and EasyJet Firms Strategies specifically for you. They could compare with other investment opportunities by NPV method. 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. Alternative modes of transport do not form a threat to low fare airlines like EasyJet and Ryanair for distance more than 400 km. 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. ). 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. Low fare airlines also face the problems of overbooking and cancellations which add to their compensation expenses. However, this scenario has changed in recent times because of availability of price comparison websites like Orbitz, Travelocity, MrJet or Priceline which allow customers to compare air fares and customer services of different airlines (Sorenson, 2005, p. 65). In the year 2010 EasyJet faced a number of major problems that posed a threat to its efficient service. Over the last four quarters, easyJet's revenue has decreased by 48.8%. Ryanair cabins are pretty bare-bones and the seat in front of you has a tray table but not a seat pocket. Other airline companies, such as Ryanair, also discovered similar opportunities by leveraging their competitive advantage through the adoption of a low-cost strategy. The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. WebRyanair in comparison to Easyjet has increased its turnover to 2,171 million (2008) The increased seating leaves very little leg room for a relaxed travel. Then there are strict regulations from the EU regarding reduction of carbon emissions. 2015, A World Made for Money: Economy, Geography, and the Way We Live Today, U of Nebraska Press, Lincoln. In doing so, a company tends to improve its earnings per share (EPS). 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. 59% for years 2010, 2011 and 2012. EasyJet and Ryanair lag behind high fare airlines regarding customer comfort during flights because of their cost saving strategies. 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 year 2010 there was a reduction in the costs of fuel from Euro 1,257 million o Euro 893. Evidence of this fact emerges in Paris as a common destination for both airlines. This article aims to compare the two largest Low-cost carrier (LCCs) in Based on these competencies, Ryanair has always argued that its success does not only depend on its low-cost strategy because its innovative on-time record and its value-added services also support its growth (OConnell & Williams 2012). 81%, 7. WebDiscover how Lions Financial provides expert analysis and risk management for Ryanair investments. Equity ratio for EasyJet has marginally increased in 2012 compared to the previous year and similarly for Ryanair in 2013. Ryanair uses no hub. This is because people tend to lose confidence over low fare airlines regarding their security system. 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. (2006), the relative success, or failure, of low-cost airlines lies in two factors cost leadership and differentiation. However, for distance less than 400 km bus service, railways and automobiles can act as substitutes and alternative modes of travel. Concisely, Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). Its long thrived on an unambitious reputation for being better than Ryanair, but it came close to losing even that shabby crown in the travel chaos of spring 2022. To maintain competitiveness in the market, EasyJet needs to keep an eye on the technological upgrades with regard to aircraft manufacturing. Easyjet and Ryanair have similar strategies to the extent that they both share the low-cost business model. Thats almost 10 pp better than the EMA average and 11.7 pp better than the global average. Researchers say when the airline adopted this strategy, it succeeded because it was a blue ocean strategy no other airline had adopted this strategy before (Ryans 2009). In their 2021 fiscal year, EasyJet's revenue continued to decline, 56% respectively. In line with this strategy, the company also introduced value-added services to its core strategy. 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. 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). Natural calamities and also human events like flight accidents and terrorist attacks can drastically reduce flight demand as mode of travel. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. Stated differently, both airlines use the direct sales strategy to market their services. IvyPanda. The pervasive risk of terrorism means airlines like EasyJet have to emphasize on strict security measures which will warrant higher costs. Management Accounting Practices of the easyJet plc. To attract more customers EasyJet must also concentrate on designing user-friendly websites for easy booking experience. The company operates approximately 600 routes across more than 30 countries, with its fleet of over 200 Airbus aircraft. Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). Analysis of the financial results reported by both airlines shows that 2006). Since it trails Ryanair in market strength, in some airports, the company has allocated 29% of its seats to such facilities (CAPA 2014). Ryanair Ryanair is considered as the top low fare airline in Europe. Both these airlines ever since they have come into existence in 1984 (Ryanair) and 1995 (EasyJet) have proliferated all over Europe mainly due to conducive economic conditions and environment, made possible owing to the formation of European Union which allowed airlines from member states to operate within the union without hindrance. EasyJet's orange-and-gray cabin is slightly less intense, but not by much. 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. ). 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. It is a key matter for EasyJet. 26 between the same period. 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 commitment and dedication towards work that stimulates the employees of EasyJet kept its workforce going and provide uninterrupted world class service. This target can be fulfilled with constant developments and widening of its low-fare services, without ignoring efficient operational services. February 18, 2023. https://ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 12 in 2010 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. They cut down staff costs to the bare minimum necessity and as such do not provide for staffs at the reception or ticketing. Companys headquarter was moved to Geneva which became the first base outside UK. Ryanairs net worth as a percentage of total assets for years 2010, 2011 and 2012 has been 38%, 34% and 37% respectively. 53 to 21. Ryanair has a higher gross margin than EasyJet. Complementing its direct sales strategy is the paperless booking model. Freire, A. Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay). "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." 1, pp. News & Analysis; Financial Trading Blog; 03-Oct-17; Financial Trading Blog. In doing so, the company saves upon expensive sources of capital to finance low earning current assets. 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). 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. Although this is a strategy for keeping fares low by cutting cost, people are denied extra service value and this may affect the demand pattern of Ryanair flights. This indicates that EasyJet has overall managed its assets and liabilities efficiently without compromising in profitability; the net profit during the same period has grown by 57%. The sustained current global economic recession has had an adverse impact on many airlines including Ryanair because high unemployment rates and rising fuel costs almost led to bankruptcy.

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