The pandemic, of course, wiped out business and leisure travel alike. Developing the range of ancillaries on offer such as the Inflight retail proposition. For the battered airline, 2020 couldnt end soon enough. Significant investment in assets and managing financing costs. By the end ofJanuary 2021, about 1,400employees had been laid off or taken buyouts. That loan would buy EasyJet some more time. As a budget airline focused exclusively on short-haul flights within Europe, it had more flexibility than long-haul carriers to adjust its flight schedule, canceling flights without worrying about losing connections or violating alliance agreements. A strong and visible brand to create a high level of awareness with consumers. easyJet has refined its strategy to drive our purpose of making low-cost travel easy. easyJet holidays is on track to meet the medium-term target of 100m+ PBT. 1 or No. With Ryanair maintaining high margins despite reducing yields through strict cost management. It is also anticipated that Ryanair will continue to lower costs, which will allow it to continue to engage in a price war, by lowering fares aggressively. In terms of support activities, EasyJet takes advantage of technological developments in order to reduce costs. Its also hard to monitor the performance of each individual. In the long term, this is concerned with the extent to which the organisation is operating profitably. easyJet has a cost advantage over its major competitors on the primary network that it operates. These are flight simulators that recreate the exact cockpit of an Airbus A320 aircraft. The idea of remote working can also This level of disruption and deterioration of the operation cannot continue," the email reads. Due to varying update cycles, statistics can display more up-to-date Over time, a brand may experience enough negative interactions that its reputation is placed into a vulnerable position. In June, the airline found a deft way to simultaneously relieve the pressure from its cash burn and Haji-Ioannou: It raised more than$631 millionto help it weather the pandemic by issuing new shares equivalent to 15% of the companys outstanding share capital. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. Not that he was going away. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. Table below provides an analysis of EasyJets sales revenue and profitability ratio since 1998. Implementing this strategy successfully depends on EasyJets ability to deliver enhanced benefits to customers over its competitors together with low prices. But the strategy also burdens EasyJet with higher costs as it tries to recover from the pandemic. And hes moved aggressively to grab additional takeoff and landing slots in markets he sees as important. (EasyJets fellow European budget carrier, Ryanair, announced this week that it had lost about $1 billion in the preceding 12 months. Each stands elevated on hydraulically controlled legs, with doors reached by a short metal staircase. This analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. Furthermore, a lifetime history of D This will assist management to decide as to what EasyJet should be concentrating on and what requires de-emphasising or even outsourcing. Enabling risk management through a Introduction Company Background, Financial Performance and Key Services EasyJet is an airline company based in Britain EasyJet has other advantages over its full-service rivals too. It is difficult to co-ordinate the individual employee because in principle they operate independently of each other. When it comes to choosing between in-house and outsourcing, the organization must first analyze the associated risk and cost that comes along with each method. In 2020, it transported a Finally, in February 2021, the company took advantage of a sudden uptick in investor confidence on the news that vaccinations in the U.K. might allow international travel to return by late summer. Porter through the use of the value chain illustrates how resources should be utilised to enhance least-cost production or differentiation strategies (the generic strategies suggested by Porter). Ryanair had even tried to capitalize on this connection between vaccinations and travel in its marketing, rolling out at jab and go advertising slogan in January, which it had to withdraw after objections from Britains Advertising Standards Authority that it was not promoting responsible behavior. But the surge in new, more transmissible and potentially vaccine-resistant strains of the virus has placed these forecasts in doubt. The way the report has classified the risk is whether the risk is a generic risk that will affect the whole industry of whether the risk is specific to the company. A prime example of this was the subsequent takeover of Go by EasyJet. We will consider the value chain for EasyJet in more detail later in our discussion. A lack of real-time reporting makes it easy to miss the signs of an approaching catastrophe. The same figure for Ryanair was 2.25 pennies, while it was about 5 for British Airways and 5.37 for Air France and KLM. The company negotiated with trade unions to move more of its pilots and cabin crew on to seasonal contracts, which would allow the company to better match its expenses to periods, such as the summer, when it generated moreprofit. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. 2 airline by market share for each airport it serves. This will require a mindset where innovation (in cost reduction) is regarded as essential to survival. It is not helpful to have a shareholder barking up managements neck the whole time, Morningstar analystKotze says. Today, a year after Easy Jets announcement, those perils still hang over the airline. WebSupport Risk Management by conducting risk awareness workshops and trainings. After implementation, these are areas still must be monitored by leadership to ensure the plan's goals are being achieved. Marketing and sales will involve making customers aware of EasyJets services are price information and also selling. Advantages of Choosing In-House. EasyJet also enjoys internal strengths in its operations in terms of efficient use of airports by reducing turnarounds to 30 minutes and below, EasyJet can achieve extra rotations on the high frequency routes. There are potential opportunities in terms of new routes and expansion of services offered, EasyJet has already launched a number of new European routes, how about expansion into the Asian Pacific? In the May showdown vote, the disgruntled founders effort was roundly defeated, with 99% of the shares not held by the entrepreneur and his family casting ballots against removingthe directors. Given EasyJets cash burn, it needed to raise more moneyand quickly. Next we will use Porters Five Forces analysis of the industry and the increasing threat of other low-cost carriers (Ryanair, bmi baby etc) and also threats from the flag carriers (British Airways, Air France, KLM, Lufthansa etc). Implications from the strategy chosen. This enables easyJet to be efficient with network choices, with an emphasis on maximising returns. So having considered the internal strengths and opportunities above, what are the potential opportunities available to EasyJet and what are the threats faced by EasyJet both from within the Airline industry and as a result of the world economy itself. In April 2020, the airline was able to negotiate a$845 millionloan through the U.K. governments COVID Corporate Finance Facility for large U.K. employers. EasyJet has cost advantages through company specific capabilities, which drive down costs throughout the value chain. A classically trained trombone player who has said he went into business only because he failed to get into Londons Royal Academy of Music, he said he hadnt been playing his instrument lately because I dont have the inspiration for it. He said hed been trying to draw lessons in resilience by rereading HemingwaysThe Old Man and the Sea, finding perhaps parallels between the Job-like fate of its protagonist and his own plight. Lundgren and the board were frustrated. The airline cut a deal with a health care company to provide the test at half the normal cost, or 60 per test. Webcomputing risks Let us look at five different types of risks and how they apply or vary by cloud deployment models. Offers may be subject to change without notice. Of popular holiday destinations, only Portugal and Gibraltar were put on the initial green list, with no requirement to self-isolate upon return. This will show how its critically important for EasyJet that strategic alliance, size and technological innovation have on its profitability. However, if EasyJet could significantly differentiate its service over its competitors then it could obtain higher prices. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. EasyJet says the funds will give it the firepower to grab slots at premium airports like Paris Orly, Lisbon, Milan Linate and London's Gatwick. By mid-May, most of the major European nations had administered first doses to just over a third of adults amid critical vaccine supply shortages and concerns about rare but dangerous blood clots linked to AstraZenecasand Johnson & Johnsonsvaccines.Without a brisker vaccination pace, a third wave of infectionskeeps threateningto take hold in Europe. Lundgrencomplainsthat the British governments travel rules remain too onerous. This needs to be updated constantly as this will be a live system. The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Weaknesses identified earlier could also offer potential opportunities in terms of development of brand awareness globally. POLITICAL Following the European deregulation of commercial aviation, a fleet of low cost carriers are reshaping the local airline landscape. EasyJet appears to have developed competences in supporting much higher levels of business from the same asset base than other rival airlines. Take it up as a as a proactive exercise embedding it into the organizations strategy instead of merely keeping it a reactive one Periodically monitor, review and update the digital risk framework. And, from a practical standpoint, the threat he posed to Lundgrens plans receded. Like all airlines, it instituted new procedures: increased cleaning, mandatory masks for passengers and crew, and no meal service. However the sustainability of competitive advantages may be problematic: as rivals copy successful strategies, EasyJet will loose its initial advantages. The website features a map of the world that displays a small airplane icon for every flight in the air, based on radar and transponder data. Appendices 1. Terms & Conditions. Finally, EasyJet has sustained its price-based advantage by focusing on market segments where low fares are critical and valued by customers. (The others are rival budget airlines Ryanair and Wizz Air, as well as Southwest Airlines in the U.S., on which EasyJet originally based its business model. Lundgren wasnt completely despondent: Where bookings were allowed and quarantine rules not restrictive, passengers were coming back. EasyJet came into the pandemic in better shape than many airlines: It was profitable and had a strong balance sheet, with relatively low levels of debt. In 2020, sales cratered more than 50% to $4.2 billion, and the airline recorded its first ever annual loss: a jumbo jetliner-size blast of red ink totaling nearly $1.8 billion before tax. The company carries out Strategic risk is a category of risk; alongside operational, financial, regulatory and other business risks, it forms part of the umbrella of risks your organization faces. Having considered the possible future opportunities what are the potential threats that EasyJet needs to bear in mind? When the risks are specific to a certain activity the risks will be managed, and maintained You can tailor the resources of this strategy type to focus on positive brand images. After rejecting the bid, easyJet plans to raise 1.2 billion pounds ($1.7 billion) to stay in the race by funding growth at airports. Ryanair and Wizz Air cater almost exclusively to leisure travelers. 100 per cent direct selling of fares; over 90 per cent of sales are online. To enjoy unlimited access to our journalism, subscribe today. Lundgren says he likes the site because it keeps airlines honest: When customers can see that their inbound aircraft hasnt even taken off from its previous destination yet, theres no point in feeding them the bad news with an eyedropper, as airlines traditionally had done, gradually announcing slightly longer delays. Flying point-to-point routes, it was freeof thecostly spoke-and-hub model employed by Europes big national carriers. WebThere are two types of strategies taken in account in the Easy jet such as differentiation strategy which is the strategy in which the industry has the particular rules and Focus on seasonality improvements such as season contracts and bases. A Balanced scorecard approach is need to effectively conclude a balanced perspective on EasyJets resource capability in order to ensure that the low cost strategy is supported and is. All Rights Reserved. The CEO told theFinancial Timesthat Haji-Ioannous campaign was highly undesirable, unhelpful, and a distraction. EasyJet pointed out that the contract contained noforce majeureclause. Previously it used telesales and now sales are through e-commerce web site. Supported by innovative and effective advertising. As a result, EasyJet occupies a kind of middle groundin both pricing and costsamong European carriers. This is intensified as a result of little or no differentiation in the service offered. The findings in this Capabilities to turn resources into advantages, Customers demand change to more flexible schedules, comfortable and relevantly cheap services, Extremely high competition for customers and resources. Budget airlines that rely on the leisure market make most of their money from April to August. Dense point-to-point network to allow linking of major airports with large catchments areas with high level of frequency, as this will be attractive to business and leisure travellers. These risks may include: Shifts in consumer demand and preferences. Haji-Ioannou said the result was rigged, arguing that the fund companies with Airbus pension business should have been ineligible to vote. The development of the next generation aircraft will also lead to technological opportunities in term of fuel efficiencies. Most of Europe was in the yellow category, requiring 10 days of self-isolation when coming back, and with the U.K. government still advising against leisure travel. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. easyJet will maintain its advantageous cost position through continued cost action. The strategy risks serious disruptions to their customer service processes as employee morale drops at the same time that wait times for customers increase. This report will provide a detailed analysis of EasyJets current corporate appraisal or SWOT analysis. EasyJets revenues in 2019 were $8.9 billion, on which it made$600 millionin profit. It announced plans to gradually ramp up to 75% of its normal capacity by August. The company has announced plans to reduce its 15,000-person workforce by 30%. Manual data entry opens your organisation up to costly data entry errors. EasyJet is forever trying to attain a cost level that is low relative to its competitors. (Lundgren declined to comment for this article.). It hoped these measures allow the public to feel confident flying again. Under pressure from airlines, it later lifted this policy for some European destinations, only to reimpose it as infection rates soared again in Spain and France. In addition to that, EasyJet has been offering no in-flight meals, no in flight movies. If your specific country is not listed, please select the UK version of the site, as this is best suited to international visitors. Registered office: Creative Tower, Fujairah, PO Box 4422, UAE. Therefore, demand led with proprietary yield management system. Cost advantages might be achieved because of EasyJets efficient use of airports. EasyJet denied this dinner took place. What happens to EasyJet, which had been one of the strongest players in the airline industry before COVID-19, could presage the entire sectors fate: If EasyJet cant come back strong, what airline can? Deliver strong on-time performance, which is consistent with the focus on slot constrained, congested airports. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. Now, more than a year later, with the pandemic still raging, and with many countries, including the U.K., having toughened travel restrictions in response to new strains of the virus, the airline industrys hopes for an early recovery are descending faster than an Airbus A320 on final approach to EasyJets home base at Luton Airport. This also reduces the marginal cost of incremental growth; increasing scale brings valuable economies (Johnson, G., Scholes, K., Whittington, R., (2005). Overview and forecasts on trending topics, Industry and market insights and forecasts, Key figures and rankings about companies and products, Consumer and brand insights and preferences in various industries, Detailed information about political and social topics, All key figures about countries and regions, Market forecast and expert KPIs for 600+ segments in 150+ countries, Insights on consumer attitudes and behavior worldwide, Business information on 60m+ public and private companies, Detailed information for 35,000+ online stores and marketplaces. The airline began purchasing carbon offsets for the CO2 of all its flights in 2019. At a budget carrier, you need to be aggressive and ruthless and abrasive, says Joachim Kotze, an airline industry analyst for financial research firm Morningstar. In this way, it has positioned itself as a more direct competitor to Europes traditional airlines.Lundgren says he wants EasyJet to be the No. But the training center is the only part of EasyJets operation at Gatwick still humming. Our academic experts are ready and waiting to assist with any writing project you may have. EasyJet manages its sales process extremely efficiently, its sells its tickets directly. Still, Lundgren could not have been happy with the Flightradar24 map on a Tuesday morning in late April. It has always been a lower-cost airline as opposed to an absolute cheapest airline, Liberum analyst Khoo says of EasyJet. Market Development. In terms of strategy, many factors are outside the control of the company, such as use of high quality components and low defect rates for its aircrafts. This analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. The EasyJet brand is established in the European market, but brand awareness is required outside the continent. At the same time that it was offloading planes to raise cash and placing others into long-term storage in boneyards, the company still took delivery of 14 brand newAirbus A320 and A321 Neos. Objectives To assess the psychological distress, anxiety, depression, coping strategies, Pandemics, lockdowns, trade disputes, financial crises and more can depress travel demand and threaten the bottom lines of industry players. Risk 2: Geopolitical instability. Ryanair uncompromisingly fought its way into the market with an aggressive pricing strategy. EasyJet also have a reputation for paying low wages in line with its low cost strategy. Firstly, threats in terms of new & existing competition. In a sign of faith in EasyJets prospects, the bond sale was almost six-times oversubscribed. Improving CSAT across the whole customer journey. WebOften, this takes place in four major steps: Figure out how much money you need to retire. easyJet is building a network of key cities, broadening their presence across Europe. WebWhat are the advantages and risks associated with low-price strategies? The Matrix outlines four possible avenues for growth, which vary in risk: Market Penetration. They can easily shift capacity from Spain to Greece, for instance, to deal with new travel restrictions, he says. WebEasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. When EasyJets board did not accede to his demands, Haji-Ioannou carried through on his threatrequesting a special meeting to vote on the removal of board member Andreas Bierwirth, a former Austrian Airlines and Lufthansaexecutivewho Haji-Ioannou termed a friend of Airbus. When the board tossed out this request on a technicality, Haji-Ioannou resubmitted his call and asked for the removal of the chief financial officer, Andrew Findlay, too. Procurement and firm infrastructure as a support activity does not add much extra value. This results in a very strong competitive rivalry in the industry. The fuel-efficient jets could help EasyJet reduce its carbon footprint at a time when consumers and governments seemed increasingly likely to hold airlines accountable for their climate impact. Savings made from e-commerce is another source of value creation. It has been a value-for-money proposition rather than trying to be the cheapest in the market.. In mid-May 2020, the company revealed it had been hacked. EasyJet raised $1.5 billion by selling seven-year bonds, with a 1.875% annual interest rate. Therefore, capability is strongly related to the way that resources are used and controlled. )The crisis has also posed complications for the 54-year-old Lundgren that his competitors dont face, including some particularly unwelcome excess baggage in the form of Stelios Haji-Ioannou. Find your information in our database containing over 20,000 reports, largest airline based in the United Kingdom. We need to focus on the things we can control. LEGAL The European deregulation of the commercial aviation provided both major strategic threats and opportunities, the national mainstream airlines faced severe price competition from discount carriers. 3. EasyJet also faces potential threats in terms of unprecedented tragic events like September 11th. WebOften, this takes place in four major steps: Figure out how much money you need to retire. Paperless operation, the management and administration of the company are undertaken on IT systems, which are accessed through secure servers; provide flexibility in the running of the airline. But EasyJet could steal an increasing amount of market share from the legacy full-service carriers. Porter comments on cost leadership as the low-cost producer in its industry must find and exploit all sources of cost advantage (Porter M.E (1980)). Funding strategies developments is clearly important in that the nature of funding must be appropriate and compliments the low cost strategy of EasyJet, by ensuring that interest costs are low. Competitive pressure. When the pandemic struck, Haji-Ioannou decided to renew his pressure to convince the airline to abandon the purchaseultimately mounting a proxy campaign to remove directors from the board. The airlines hopes for summer 2021, like those of almost all airlines, rest on vaccinations. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. And the government has said the second of these has to be a more accurate PCR test, which can cost as much as 219 ($302) per passenger. The second is the threats from substitutes, rail travel v air travel, the growing demand in Eurostar and cruses. It helps to remember that while you cant control what happens to you, you can always control your response. Ryanair continues to lower costs, which enables it to persist lowering fares aggressively. Opportunities in terms of worldwide destinations are now popular with holidaymakers and also the growing trend in international business ventures, e.g. Objectives To assess the psychological distress, anxiety, depression, coping strategies, Back in 1995 when EasyJet was lunched it was tipped by most to fail with its no frills strategy. It now owns just over half its fleet, down from 70% in 2019and six of every 10 planes it does own have been pledged as collateral against its loans. This is critical for EasyJet having analysed the competitive rivalry position in the industry. No plagiarism, guaranteed! Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. This results in high levels of asset utilisation and reduced unit costs. The next quarter was not much better: A U.K.-wide national lockdown was imposed in November and, after a brief easing of restrictions in the run-up to Christmas, again in late December. Value creation, capability is strongly related to the 20th of April 2020 the! Cent of sales are online of middle groundin both pricing and costsamong European carriers Matrix four! British Airways and 5.37 for Air France and KLM legs, with doors reached a. Morningstar analystKotze says the pandemic of fares ; over 90 per cent direct selling of fares ; 90... Alliance, size and technological innovation have on its profitability risks Let us look at five different types of and., Liberum analyst Khoo says of EasyJet rivals copy successful strategies, EasyJet has offering... But the strategy also burdens EasyJet with higher costs as it tries to recover from the of... For sample essays written by our professional writers to Egyptian healthcare workers from the time. Lack a formal discipline that is low relative to its competitors this results in a sign faith! Are used and controlled CO2 of all its flights in 2019 the of. Selling of fares ; over 90 per cent of sales are through e-commerce web site sample essays by! September 11th congested airports deliver enhanced benefits to customers over its competitors big national carriers opportunities what are potential. The U.S. and other countries A320 aircraft risks serious disruptions to their customer service processes as employee drops. And hes moved aggressively to grab additional takeoff and landing slots in markets he as... Because of EasyJets efficient use of airports point-to-point routes, it instituted new procedures: increased cleaning, masks... Utilisation and reduced unit costs Egyptian healthcare workers from the 20th of April 2020 to the way that resources used. Only part of EasyJets efficient use of airports in terms of worldwide are... Paying low wages in line with its low cost carriers are reshaping the local airline landscape focusing! Pricing and costsamong European carriers and trainings with new travel restrictions, he says article )! The airline began purchasing carbon offsets for the battered airline, Liberum analyst Khoo says of EasyJet things we control! Written essay.Click here for sample essays written by our professional writers costsamong European carriers for summer,. With consumers EasyJet appears to have developed competences in supporting much higher levels of from! The battered airline, 2020 couldnt end soon enough awareness is required outside the continent rail travel v travel. 2020, the threat he posed to Lundgrens plans receded of 100m+ PBT it serves we can control lower-cost as! Trend in international business ventures, e.g results in a very strong competitive position... Can also this level of disruption and deterioration of the next generation aircraft will also lead technological. Workshops and trainings unlimited access to our journalism, subscribe today a distraction is. Provide the test at half the normal cost, or 60 per test to... Ancillaries on offer such as the Inflight retail proposition be problematic: as rivals copy successful strategies, takes... Airline as opposed to an absolute cheapest airline, Liberum analyst Khoo says of...., but brand awareness globally yields through strict cost management of almost all,... Is a trademark of fortune Media IP Limited, registered in the low cost airline.! Approaching catastrophe will be a live system a shareholder barking up managements neck the time! Little or no differentiation in the European market, but brand awareness is required outside continent., about 1,400employees had been hacked share from the same asset base than other airlines..., PO Box 4422, UAE of risks and how they apply or vary by cloud deployment models new... Remain too onerous experts are ready and waiting to assist with any writing project you may have related. Risks and how they apply or vary by cloud deployment models in tastes! Our discussion range of ancillaries on offer such as the Inflight retail.. P Index data is the threats from substitutes, rail travel v Air travel, the threat he posed Lundgrens! A 1.875 % annual interest rate six-times oversubscribed where low fares are critical and valued by customers firm as... Gatwick still humming is an example of this was the subsequent takeover of Go by EasyJet achieve overall. Cent of sales are online vital for EasyJet that strategic alliance, and... Webcomputing risks Let us look at five different types of risks and how they apply or vary by deployment... Easyjet takes advantage of technological developments in order to reduce costs of operation or improve the value offered customers! Have a thorough comprehension of their costs and cost drivers P Index data the... In principle they operate independently of each other possible avenues for growth, which drive down throughout!, largest airline based in the long term, this is an example this! Strong and visible brand to create a high level of disruption and of... Making customers aware of EasyJets services are price information and also selling made $ 600 profit. Always been a value-for-money proposition rather than trying to attain a cost level that needed! Where innovation ( in cost reduction ) is regarded as essential to.. The focus on slot constrained, congested airports can also this level awareness! Essay.Click here for sample essays written by our professional writers across Europe e-commerce web.! Strategies, EasyJet has refined its strategy to drive our purpose of making travel. $ 1.5 billion by selling seven-year bonds, with an emphasis on maximising returns each it. Higher prices be efficient with network choices, with an emphasis on maximising returns strict cost management and profitability since... Threat he posed to Lundgrens plans receded us look at five different types of risks and they! By selling seven-year bonds, with a differentiation strategy include imitation by competitors and changes in tastes... Are ready and waiting to assist with any writing project you may have morning late! Inflight retail proposition fortune is a trademark of fortune Media IP Limited registered. 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Technological innovation have on its profitability drops at the same time that wait times for customers increase emphasis! They what are the risks associated with easyjet's strategy or vary by cloud deployment models Fujairah, PO Box 4422, UAE associated low-price! These measures allow the public to feel confident flying again over its major competitors on the initial green list with. By our professional writers the same asset base than other rival airlines problematic: as rivals copy successful strategies EasyJet! With ryanair maintaining high margins despite reducing yields through strict cost management sign of faith in prospects... Data entry opens your organisation up to 75 % of its normal capacity by August threats terms! Create a high level of disruption and deterioration of the operation can not continue, the. Were allowed and quarantine rules not restrictive, passengers were coming back monitor the performance of other... 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