Lundgren and the board were frustrated. But in the past, he says, most budget airlines have fallen down on execution, unable to make package holidays a profit-driver. They can easily shift capacity from Spain to Greece, for instance, to deal with new travel restrictions, he says. Kotze compared Lundgren to his rival CEO, Michael OLeary, who runs Ryanair and has a reputation for being merciless at containing expenses and being generally combative. 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. Improving scheduling processes to drive crew productivity, also benefitting from the seasonality of our network. EasyJet also have a reputation for paying low wages in line with its low cost strategy. This needs to be updated constantly as this will be a live system. The most important key figures provide you with a compact summary of the topic of "EasyJet" and take you straight to the corresponding statistics. Those planes are Airbuss most fuel-efficient models, offering operational savings for EasyJet in the long run. Dynamic fares with a simple structure and also ensuring that it are the cheapest fare on the route. We are happy to help. Study for free with our range of university lectures! And it secured two different term loans totaling$563 million, due for repayment in February 2022. Step 1: Identify and document risks. on its competitive advantages - an unparalleled network and market positions, efficient low cost model, well-known brand and strong balance sheet - positioning easyJet to deliver sustainable and disciplined growth and returns for shareholders. The primary outcomes were anxiety (GAD-7), depression (PHQ-9), risk perception towards COVID-19, interprofessional teamwork attitude, and coping strategies during the Coronavirus disease-19 pandemic. If easyJet were to raise money from shareholders, he risks falling below this figure a level at which he can no longer unilaterally block special resolutions. Remote working and hot-desking have been characteristics of easyJet since the beginning. Thats the day the U.K. government first advised Britons abroad to return home as soon as possible in advance of impending travel restrictions because of the growing coronavirus pandemic. 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. This affects value creation as follows: Table 1: Sales and Trading Profit of EasyJet. As a result, it finished 2020 with more aircraft in its fleet than it had at the beginning of the year, despite the pandemic-induced travel doldrums. The price of EasyJets tickets various as a function of the number of seats remaining, the time until the flight, and historical trends. Taken together, those restrictions mean that summer 2021 is looking increasingly in doubt. Balance your retirement plan with your other financial goals. EasyJet has cost advantages through company specific capabilities, which drive down costs throughout the value chain. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. 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. EasyJet also drew down the entirety of its existing revolving credit facilityraising $500 million in cash. The EasyJet brand is established in the European market, but brand awareness is required outside the continent. But these savings barely stanched the arterial bleed of cash gushing from the companys coffers:In 2019, the airlines operations had generated more than $1 billion in cash. The threemost prominent firms that advise shareholders onhow to cast ballotsin proxy votesISS, Glass Lewis, and Pircall recommended against backing his proposals. 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. Follow on from market expansion will also create opportunities for new facilities or services Free Lunch offer on board catering facilities to compete with mainstream airlines. 6. After overcoming the many hurdles of producing a model with a viable context and associated risk factors, often the user of the innovation is neglected. This eliminates the need to any commissions to external sales agency. Table below provides an analysis of EasyJets sales revenue and profitability ratio since 1998. In 2020, those months were grim. This is intensified as a result of little or no differentiation in the service offered. The concept of the value chain is particularly useful in understanding an organisations strategic capability since its concentrates on value activities and the linkages between activities rather ran just resources. The U.K. requireseven those returning from green countriestake COVID-19 tests before boarding a plane to return to the U.K. as well as within two days of returning. EasyJet manages its sales process extremely efficiently, its sells its tickets directly. Product Development. 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. But the training center is the only part of EasyJets operation at Gatwick still humming. However the sustainability of competitive advantages may be problematic: as rivals copy successful strategies, EasyJet will loose its initial advantages. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. Porter explains that there are five forces inherent in a market, which will jointly determine the intensity of competition and profitability of EasyJet and the airline industry. Enterprise risk management does not create the organisations strategy, but it helps in understanding the risks associated with alternative strategies being considered and, ultimately, with the adopted strategy. EasyJet may be prepared and has to a large extend engaged in price war with competitors via its lower cost structure (economies of scales due to its larger operations) and also has the financial resource capability to fund short to medium-term losses with the aim of driving out competitors in the longer terms. Findlay said only that after almost six years with EasyJet, it will be the right time to pass the financial reins to someone who will help take EasyJet into its next chapter, and Lundgren said he was sorry to see [Findlay] leave.. The minute consumers start to make a choice based on this, and I think they will, an emphasis on sustainability will pay off, says BCG consultant Molenaar, and EasyJet has been out front in preparing for this.. Of popular holiday destinations, only Portugal and Gibraltar were put on the initial green list, with no requirement to self-isolate upon return. Also, mainstream airlines are now lowering fares to engage in price competition. Legal and regulatory change. To understand EasyJets prospects, its important to understand its strategic positioning. easyJet holidays is on track to meet the medium-term target of 100m+ PBT. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. For an independent carrier like EasyJet, finding money was more complicated, especially since the U.K. government initially balked at providing the airline industry with a custom bailout package. The airline also managed to reduce itsfuel cost per seat flown by 2.9% through a series of small changes: instructing pilots to use only one engine when taxiing, for example, and to climb to cruising altitude as fast as possible, since level, higher-altitude flying is more fuel-efficient. Overall the analysis will highlight the inherent threats and weaknesses suffered throughout the industry, and also the importance of innovation to maintain low cost advantage, alliances and size to success. 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. Clicking on the following button will update the content below. WebWhere risks produce outcomes that adversely affect EasyJet, it is crucial that these risks are either eliminated (if possible) or minimised. Background Coronavirus disease-19 emerged in December 2019. As both employees and customers are put under increased stresses, the potential for heated exchanges becomes a risk. While it is often lumped into the same European budget airline category as Dublin-based Ryanair and upstart Hungarian carrier Wizz Air, there are some key differences between EasyJet and those other airlines. 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. This analysis will highlight the fundamental changes that the airline industry is undergoing, especially; in defence to the turbulent environment it faces from exogenous forces (terrorism, oil prices, SARS etc) and endogenous forces. Before a new business starts making profits, it needs to be kept afloat with money. Organizations continue to develop new applications in or migrate existing applications to cloud-based services. It can restore the reputation of a brand. In the long term, this is concerned with the extent to which the organisation is operating profitably. 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 Healthcare workers were exposed to this highly infectious virus during the pandemic and suffered several social and psychological consequences, such as anxiety, psychological distress, and burnout. No plagiarism, guaranteed! However, by year 2000 it has not only managed to survive but also increased its market shares and assets of aircrafts to 74 and servicing 105 routes and carrying over 20 million passengers a year. Healthcare workers were exposed to this highly infectious virus during the pandemic and suffered several social and psychological consequences, such as anxiety, psychological distress, and burnout. EasyJet is an international example, The introduction of Airbus A319 aircraft, combined with the retirement of old generation Boeing 737 aircraft, will result in a two-type new technology fleet, which will commonality and lessen complexity and deliver high level of asset utilisation and reduce unit costs. This report will provide a detailed analysis of EasyJets current corporate appraisal or SWOT analysis. Lundgrens recovery plans hinge on infection rates throughout Europe, which have remained stubbornly high in many places, and vaccination rateswhich, in most of Europe, have badly lagged places like the U.S., U.K., and Israel. 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. 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). The airline cut a deal with a health care company to provide the test at half the normal cost, or 60 per test. After implementation, these are areas still must be monitored by leadership to ensure the plan's goals are being achieved. These large airline groups are so big and so important for so many economies that the national governments will do whatever they can to keep them alive, saysDirk-Maarten Molenaar, atravel and tourismindustry consultant at Boston Consulting Group. 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. Developing the range of ancillaries on offer such as the Inflight retail proposition. The fourth force is the bargaining power of buyers. The development of the next generation aircraft will also lead to technological opportunities in term of fuel efficiencies. That loan would buy EasyJet some more time. It moved aircraft maintenance at three of its U.K. airports, which had been contracted out, back in-house. EasyJet may be especially good at outbound logistics lined to its marketing and sales operations and supported by its technology development. As Internet transactions have a lower cost associated with it EasyJet encourages its customers to book on-line by offering them a discount for on-line ticket reservations. In terms of competitive advantage, the internet offers overall cost leaders new abilities to reduce costs in primary activities such as marketing (i.e. 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)). Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. For the battered airline, 2020 couldnt end soon enough. Budget airlines that fly point-to-point, such as EasyJet, can easily stimulate their demand by running price promotions and advertising and then shifting flight schedules to cover those new bookings. It has been a value-for-money proposition rather than trying to be the cheapest in the market.. FORTUNE may receive compensation for some links to products and services on this website. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. Today, a year after Easy Jets announcement, those perils still hang over the airline. Price wars are becoming more prevalent as traveller use the Internet to compare prices and shop around. It is difficult to co-ordinate the individual employee because in principle they operate independently of each other. 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. When rival European budget carrier Air Berlin went belly up in 2017, Lundgren spent$48 millionto buy its operations at several German airports and take on 25 of its airplanes. Investments in assets are also key consideration in value creation in that consideration of the extent to which assets and working capital are being utilised. )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. The management of the element of working capital. After listing the risks and putting them in a risk matrix, the report will then aim to explain how the risk will affect easyJet and justify the position of it in the risk map. e-commerce) and support activities such as fir infrastructure (e.g. This section we will investigate EasyJets resources as a means of assessing the organisations strategic capability. 1 or No. Table 1 shows that EasyJets sales has increase year on year since 1998, with profit and gross margins also experiencing a positive trends. Focus on seasonality improvements such as season contracts and bases. Its not clear what role Haji-Ioannous pressure played in this decision. This will help the companies decision makers understand where the organisation is now. And at least one key holiday localeTurkeywound up on the red list, meaning those traveling there would have to quarantine in a hotel for 10 days. Our academic experts are ready and waiting to assist with any writing project you may have. The 2002/03 annual report reconfirmed this business model of the airline: Another price-based strategy is the hybrid strategy this seeks to achieve an element of differentiation and a price lower than that of competitors. easyJets strategy will seek to continue to lead the market in sustainability, working with our partners to achieve our Net Zero Roadmap and the decarbonisation of the aviation industry. 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. Research expert covering mobility and logistics. Manual data entry opens your organisation up to costly data entry errors. The purchases rankled Haji-Ioannou, who had opposed EasyJets tie-up with Airbus ever since it had been signed in 2013. But EasyJet could steal an increasing amount of market share from the legacy full-service carriers. EasyJet is forever trying to attain a cost level that is low relative to its competitors. Budget airlines that rely on the leisure market make most of their money from April to August. data than referenced in the text. Adjust your investments to Web1) Economic Risks. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. 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. Building on our existing leading positions in Western Europes top leisure destinations to provide network breadth and flexibility. Undertaking market shift to globalisation expanding outside the European market will be key to continuous enhancement of business performance. Haji-Ioannou said the result was rigged, arguing that the fund companies with Airbus pension business should have been ineligible to vote. We will consider the value chain for EasyJet in more detail later in our discussion. He added Barton and Lundgren to the list of scoundrels he wanted to oust.Haji-Ioannou kept upping the stakes. The airline began purchasing carbon offsets for the CO2 of all its flights in 2019. WebeasyJet is aiming to become the worlds most data-driven airline. The existing competition also have strong brand image globally, EasyJet is recognised nationally and within the European markets, however, national airlines like British Airways is recognised worldwide and has stronger brand awareness. Ryanair and Wizz Air cater almost exclusively to leisure travelers. In 2020, it hemorrhaged the same amount. Lundgren has pulled every financial lever available to him to keep EasyJetaloft. This has the highest risk, but 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. In mid-May 2020, the company revealed it had been hacked. Just two EasyJet aircraft were in the air, one en route from Londons Gatwick Airport to Lyon in France; another from Belfast to the English Channel island of Jersey. Before the pandemic, EasyJet was looking like it could emerge as one of the biggest winners in the European air-travel dogfight. EasyJet also faces potential threats in terms of unprecedented tragic events like September 11th. In practice, this means EasyJet has little chance of beating Ryanair or Wizz head-to-head on routes and pricing. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs And while optimism about leisure travel in Europe is slowly rekindlingthis week, the U.K. announced a resumption of international travel to a limited number of destinationsEasyJet still faces plenty of potential turbulence, as the likelihood of a robust summer season recedes. Brand Awareness is another strength that is attributable to the company In November 1999, selected as a business super brand by the Super Brand Council, recognising EasyJet as an outstanding brand name. WebAs seen, both prioritizing an organization's needs and risks is an ongoing process especially during the planning, writing, and implementation stages in a strategic plan. These risks may include: Shifts in consumer demand and preferences. 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. 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. The linkages with the value chains of channels and customers which are the essence of EasyJets capability and which can protect its market leadership and maintain cost leadership competitive advantage from competitors. In terms of support activities, EasyJet takes advantage of technological developments in order to reduce costs. 8. 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. EasyJet is known for its low-cost competitive pricing. WebWhat are the advantages and risks associated with low-price strategies? Create a retirement strategy that diversifies your assets and manages risk. Its also hard to monitor the performance of each individual. But with new, more infectious variants of COVID-19 spreading rapidly in Europe, in October renewed lockdowns were imposed across many parts of the U.K. and from Helsinki to Tel Aviv. Standardisation in its activities as an airline leads to both economies of scale and a simpler product, which is cheaper and easier to distribute. Previously it used telesales and now sales are through e-commerce web site. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. Protecting and building brand awareness and consideration. The54-year-old Greek-Cypriot entrepreneur hasnt had a formal management role in the airline since he stepped down as chairman in 2002, but he remained a major shareholder, owning more than a third of the company before the pandemic hit. When the risks are specific to a certain activity the risks will be managed, and maintained 100 per cent direct selling of fares; over 90 per cent of sales are online. The greatest dangers, however, may be the market leaders need to manage its evolving Finally, opportunities may also exist in the area of innovation and alliances, how about a joint venture scheme with Ryanair to maintain and enforce the low cost competitive advantage. All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the airline industry. Disappointing your customers. The first is to reduce the bottom line costs of operation (low cost strategy) and the second is to increase the value of the organisation and its reputation to customers, so that they will demand more or pay more for what they receive (differentiation strategy) (ACCA Paper 3.5 (2001)). This time, he succeeded in scheduling a showdown vote for May 22, 2020. 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. Although mostly private now, many of these airlines were once state owned, and some still have not insignificant government stakeholdings. The UKs second-largest union has slammed easyJet flight cancellations in a scathing email obtained by Euronews. The primary weakness is the perception of low quality low cost can also be seen as low quality service than that offered by the established national airline i.e. Since the start of the pandemic, it has sold and leased back58aircraft, raising$2.1 billion. Finally, EasyJet has sustained its price-based advantage by focusing on market segments where low fares are critical and valued by customers. Potential threats of economic recession, since air travel is effectively a commodity product, it is recession prawn. Potential negative outcomes include bad publicity and a Airlines in general are already coming off their worst year on record: Thanks to the coronavirus pandemic, the industry collectively lost $118 billion in 2020, according to the International Air Transport Association (IATA). 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. Every so often Easyjet has aligned to face some unusual risks, for example, IT security and fraud risk, brand ownership, dependence on technology, Industrial action, financing and interest rate risk; while the key risk management system of the company is very formal rather than deepest, Create a retirement strategy that diversifies your assets and manages risk. This results in high levels of asset utilisation and reduced unit costs. The companys Online booking facility in October 1999 aided Internet sales to pass the one million mark. Another major industry wide threat is the volatility in price of fuel Oil price record high of $53 a barrel. this was the headline in the business pages of all the newspapers last November. We mentioned the seven most common risk events above, but other project risks could include contractor failure, unexpected life events, data transfer issues, shifting priorities, legal risk, market risk, and project deferral. Still, the connection was critical for airlines. But nothing has been normal for EasyJet since March 23, 2020. All Rights Reserved. Data security and regulatory risk Data security and regulatory risk can be associated with loss, leakage, or unavailability of data. It hoped these measures allow the public to feel confident flying again. Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. Also, only one type of aircraft is used, in order to minimise maintenance costs. Firstly, threats in terms of new & existing competition. He offered a $7 million reward to any whistleblower who could provide him useful information leading to the cancellation of the Airbus contract. Worse, the company had discovered the hack back in January but hadnt notified people whose credit card details had been accessed until April, and was only now letting other customers know. This involves EasyJet retaining funds from operations; hence, a healthy Balance sheet in terms of retained profits. 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. Strategical moves like this have enabled it to reduce cost and improve the convenience for the customers. Upgauging the fleet enables easyJet to improve competitiveness on costs. EasyJet cost efficiency is achieved in a variety of way as shown in the following diagram: The success of low-fare (cost) strategy is primarily dependent on the maintenance of a low cost base. The first is the threat posed by new entrants, as with the European deregulation of commercial aviation and the emergent of low cost carriers.
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