easyjet vs ryanair financial analysis

The recent availability of price comparison websites have increased the bargaining power of buyers especially between two low fare airlines like EasyJet and Ryanair. (PDF) Ryanair V.S. Easyjet: Strategy Analysis and Competition A low ratio is an indicator that an organization can duly pay all its dues. Financials. The trend remains same in the given years for both the airlines in the Net Income ratio. Your privacy is extremely important to us. Vertical analysis measures all the items in terms of total revenue in the income statement and total assets in the financial position statement. IvyPanda. 17, no. professional specifically for you? Although revenues have picked up, profits continue to lag behind as a result of elevated fuel and labour costs. To do so, both airlines use the single fleet type of operation and optimize flight crew productivity (Air France 2011). In doing so, the company saves upon expensive sources of capital to finance low earning current assets. EasyJet is in a better financial position than Ryanair. Ryanair and Easyjet have always strived to support their market dominance by increasing passenger traffic through cost containment (Mayer 2008). They have caught the fancy of those people (in the low-to-middle income bracket) who have found air travel through these low fare airlines as an alternative to other modes of travel road and railways. 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. Based at Londons Luton Airport, the company travels to more than 700 destinations and has a market presence in more than 30 countries (Mayer 2008). This can end up with the new entrant leaving the industry. Ryanair V.S. Easyjet: Strategy Analysis and Competition Ryanair Comparatively, Ryanair commands 40% of the market (Air France 2011). However, in 2013 and 2014, EasyJet posted a 5.94% and 3.39% reduction 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. Technological innovations like videoconferencing is actually another form of substitute since it enables business people to do meetings online thereby flights become unnecessary for face-to-face meetings. 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). IvyPanda. Ryanairs inaugural flight had its daily route from Waterford in Ireland to London Gatwick. easyJet vs Ryan air 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. Ryanair focuses on updating aircrafts since modernized fleets require less maintenance cost. EasyJet uses reward policies to motivate its employees by giving an annual performance-driven bonus and grants of performance shares to eligible employees. 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 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. In such case Ryanairs current oil price strategies may not hold good. Then there are also problems of cancellations for delayed flights, for which compensations and reimbursements can become a major expense for Ryanair. This paper attempts to financially analyze and compare the two airlines. 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. 59% of the total revenues as operating profits for the same three years. Meanwhile, easyJet's aforementioned free bag dimensions yield a volume of 32.4 liters, representing over 60% more capacity. Figure One: Position of Easyjet and Ryanair in the global low-cost airline market (Source: Elderman 2014). Therefore, a key part of their strategy is meeting the minimum contractual obligations required by airlines to their customers. easyJet 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. "Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay)." 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. WebThe seats don't recline and have a width of 17 inches and a pitch of 30 inches. Ryanair Kew, J. 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. For more visit Lions Lions Financial Neil Sorahan Directeur financier de Ryanair 2014.10 - aujourd'hui Wizz Air et EasyJet, RyanAir dessert prs de 4 fois le nombre de passagers que chacun de ces concurrents. However, easyJet, in a financial report, says that 99.8% of flights are operated regardless. All these along with various functional problems presented immense challenge to the performance level of EasyJet. 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. Ryanair enjoys a dominant market share in the European low-cost airline market because it was among the first companies to adopt this strategy in the region (Malighetti et al. Furthermore, since the airline uses paperless booking, customers can easily buy their tickets and walk to the security gate without enduring any other sign-in rules. 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. to help you write a unique paper. 76%. IvyPanda. Differentiating services for airlines is not viable for many primary airports. -7). 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. WebThe advantages of a spend analysis is that it contains detailed files on what a company buys, how much they spend, and who they buy from. 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. This in turn helps them to keep the fare down and become competitive. 12 to 0. Ryanair Correct writing styles (it is advised to use correct citations) OConnell, J. This factor combined with a rise in revenues from Euro 2,942. 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. 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. Ryanair also severely lacks in customer service since one cannot contact the airline through phone or e-mail except for booking purposes. The interest cover ratio for EasyJet has improved from 13. In later sections of the study, this paper shows the operational areas where the organisational strategies of both organisations converge and diverge. The commitment and dedication towards work that stimulates the employees of EasyJet kept its workforce going and provide uninterrupted world class service. The overall management of both these airlines has been good and so much so that these have emerged to be the two top low fare airlines in the European market in spite of all competitions, adverse economic conditions and environmental adversities. | April 27, 2023 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. 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. If the oil price increases then it will be difficult for EasyJet to maintain its policy of providing air services at low costs. In this measure, EasyJet is less geared as compared to Ryanair. 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). Financial Analysis Malighetti, P., Paleari, S. & Redondi, R. 2006, Pricing strategies of low-cost airlines: The Ryanair case study, Journal of Transport Geography, vol. Internal rivalry also exists between low fare airlines like EasyJet and Ryanair. WebEasyjet Financial Ratios for Analysis 2014-2023 | EJTTF. In tandem, the net worth of the company too has registered healthy growth from GBP 1500 million to GBP 1794 million between 2010 and 2012. EasyJet promotes itself as no-frills airline (Sorenson, 2005, p. 84). In such a case scheduling plays a major part to attract more customers. Ryanair: The lowest cost airline Need a custom essay sample written specially to meet your Ryanairs market strategy has focused on cost leadership because it strives to become the best company in the low-cost market segment (Mayer 2008; Thomson & Baden-Fuller 2010). These strategic factors made the airline more profitable than other flag carriers did. In 2009, EasyJet catered to passengers with 50% having passports of countries other than that of UK. The target price is lowered from GBX 370 to GBX 350. 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). In doing so, a company tends to improve its earnings per share (EPS). Ryanairs dependence on regional airports gives it a situational disadvantage while EasyJet compromises on low fare by using the facilities of primary airports. EasyJet and Ryanair Financial Analysis | SpeedyPaper.com 8 Pages. Although both the airlines have witnessed growth in operating expenses between year 2010 and year 2012, the operating profit margin of EasyJet has shown greater improvement over that of Ryanair. The return on shareholders funds also is seen closely identical ranging between 0. The passenger revenue as a percentage of total revenue for Ryanair is approximately 80%, whereas for EasyJet it is in excess of 95%. For example, in 2014, both organisations reported increased passenger numbers (Wallach 2015). Stelios baby is in good hands. Web. Easyjet flies to Charles de Gaulle Airport and Orly Airport (two main airports in the city) (Thompson 2005). IvyPanda, 18 Feb. 2023, ivypanda.com/essays/ryanair-vs-easyjet-corporate-and-competitive-strategy-analysis/. 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. This clearly establishes that EasyJets funds management vis-a-vis trade, credit and cash cycle is far superior to Ryanairs. 8-9). For example, Easyjet has maximised its productivity by operating in airports where it enjoys market leadership (CAPA 2014). , Department of Transport, the Irish Aviation Association, the European Commission and the European Aviation Safety Agency. The total assets have increased by 19% (non-current assets 14% and current assets 27%) over the two year period between 2010 and 2012. Analysis of the financial results reported by both airlines shows that The same for EasyJet has been 37%, 38% and 42%. EasyJet, Ryanair And Wizzair Provide Pointers For A Post 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. This helps a company to deal with situations during difficult times. Horizontal analysis Comparing the sales, operating profit (O. P) and net profit (N. P) of EasyJet and Ryanair it can be seen that all the three elements have witnessed substantive growth between fiscal year 2009-2010 to fiscal year 2011-2012. Nonetheless, Ryanair commands a stronger market share than Easyjet does. JP Morgan's analyst Harry Gowers upgraded the rating on the company from Sell to Neutral. Although these strategies do help in keeping the costs down, they also deter those customers who prefer being served while flying. 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. Both the airlines use frequent-flyer program which is an added advantage over any new entrants. Focus on low-fare operations was initiated in the early 1990s by a new team of directors in the board. This paper has already demonstrated that Ryanair and Easyjet use the same business model low-cost strategy. Ryanairs working capital needs as a percentage of total assets has been consistently around the 15% mark whereas for EasyJet it has been 5. 1%, 7. Stringent laws regarding safety and air traffic rights put financial pressure on low-fare airlines like EasyJet. On the other hand, EasyJet has been earning at a modest rate of 5. This lack of personal service can induce people to opt for other low fare airlines. We will write a custom Essay on Ryanair Corporate Strategy Vs. easyJet: Competitive Strategy Analysis (Compare & Contrast Essay) specifically for you for only 11.00 9.35/page. The purpose is to build a low-carbon European economy (Mayer, 2007, pp. CAPA 2014, EasyJet: more aircraft come in as more cash to shareholders goes out. This makes EasyJet second best low fare airline in Europe after Ryanair. 2005, Strategic Management: Awareness and Change, Cengage Learning EMEA, London. This understanding shows where the corporate strategies of both companies converge. It was established in the year 1995 by Sir Stelios Haji-loannou with the purpose of providing scheduled air services at low costs. Porters 5 forces analysis of Ryanair Threat of new entrants In the European aviation industry new entrants face the disadvantage of limited airport slots as these are mainly accessible to established airlines like Ryanair. Whereas for Ryanair, this ratio has improved from just 5. Ryanair Comparative analysis based on PESTEL Ryanair and EasyJet both being the top European low fare airlines face some common advantages and disadvantages. Results centre easyJet plc 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. Social Unlike other low fare airlines that focus primarily on leisure travel, EasyJet has discriminated by targeting both business and leisure travelers. WebAdditional ESG information - Financial Year 2021; Investors. This way, it became profitable in an overcrowded industry. Also the regions being slightly rural can act as deterrent for some customers. This also reflected in the Interest Cover ratio. Financial Decision Making, Easyjet in comparison with WebFar more of you flew with easyJet than any other carrier. WebFor Easyjet Group, it is worth a lot more than Ryanair, both in terms of assets owned assume youre on board with our, Financial Analysis on Galaxy Entertainment Group, https://graduateway.com/comparative-financial-analysis-of-easyjet-ryanair/. In actual numbers the costs remained constant at GBP 103 m, also due to the new policy of 2023. 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. 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. 2006). Researchers such as Kim and Mauborgne (cited in Thomson & Baden-Fuller 2010) have always supported a differentiated strategy, but these developments have proved them wrong. Which European low-cost carrier is best for you: Ryanair, 22%, 10. IvyPanda. 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. 46%, 13. 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. For example, in the quest to increase the seating density, the count of washrooms are kept at bare minimum. As it is using point-to-point the, time to go to destination is reduced. Ryanair has had no air accidents with casualties till date. The constant threat of a Middle East (Iran) war can adversely affect the oil price. Analysis. Ryanair being an existing airline can lower its air fare to wipe out new entrants. The European airline industry is also distinct because charter planes play a greater role in the industry, compared to other markets (Air France 2011). With rising employment, the purchasing power of people also improves. Ryans, A. 249264. 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. The two firms have witnessed a decline in gross margin. Copyright 2023 service.graduateway.com. In the instance of EasyJet, while the non-current assets have registered a net increase of 19% in two years (2012) over 2010 levels as base, the current assets have seen at net fall of 12% during the same period. A low price-earnings ratio is an attractive proposition to invest in the stocks of the two companies. 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. ). The companies have also strived to support their leadership positions and create value for their shareholders by maintaining operation efficiencies. Elderman, H. 2014, EasyJet Vs. Ryanair: The Curious Case Of 2 Budget Airlines. 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%. Graduateway.com is owned and operated by MAGMA EUROPA S. z O.O. Prices. Gearing ratio assesses the companys financial position in the long run. easyJet & Ryanair: squaring up to each other as head to head For a long time, Easyjet has branded itself as a committed airline that strives to optimise customer experience, always. It is a key matter for EasyJet. The fuel, administrative and engine maintenance costs are declined. Ryanair and EasyJet are targeting markets Ryanair Both airlines have perfected this strategy by introducing new price reduction measures, such as paperless booking. Ryanairs net income after tax has been growing at a healthy rate and is almost twice the yearly percentage growth of EasyJet. . 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 If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. It has destinations in many principal cities across Europe. Easyjet trails Ryanair air by commanding 31% of the market in the low-cost Airline sector (Air France 2011). In their 2021 fiscal year, EasyJet's revenue continued to decline, EasyJet's orange-and-gray cabin is slightly less intense, but not by much. In this regard, it transformed its value chain for the better. PESTEL analysis helps to assess the prospects of expansion and the risks involved. Ryanair is currently looking at operating 5% more flights this December than it did in 2019, though this may still change. If this happens then demand will fall which will add to the cost. The unstable political scenario in the Middle East is in a perpetual war like condition. The average easyJet stock price forecast from analysts was set at 734.5p per share resulting in a potential 34% gain from its last closing price of 546.20 (as of 1 March) if that target is hit. Open Document. 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. Incidents like growing terrorist threats and air accidents even if they happen to other airlines tend to affect the demand patterns of EasyJet and Ryanair because of their low cost strategies. Easyjet Case Study Management Accounting Therefore, the risk of overcapacity in the industry is real. 8 billion in 2010 to Euro 2. As of September 30, 2022, it operated 320 aircrafts, 988 routes, and 153 airports. 9 billion during 2011 and to Euro 3. 2006). Ryanair by virtue of its scale of operations, fleet size and leverage consistently earns operating revenues at a margin of more than 10% of total revenues while in case of EasyJet it has been always below 10% for the last three years.

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