what are the risks associated with easyjet's strategy

It moved aircraft maintenance at three of its U.K. airports, which had been contracted out, back in-house. EasyJets decision to use its aircraft as collateral for loans it needed to get through the pandemic means that its cost base will be higher going forward, once debt service is included in the calculations, says Savanthi Syth, an airline analyst for brokerage Raymond James & Associates: Theyve traded liquidity for today in exchange for their aircraft ownership costs going up in the future.. Finally, the key to sustaining high levels of growth is the scalability of the operations. A lack of real-time reporting makes it easy to miss the signs of an approaching catastrophe. It has been a value-for-money proposition rather than trying to be the cheapest in the market.. But the strategy also burdens EasyJet with higher costs as it tries to recover from the pandemic. If COVID doesnt ease more quickly, and leisure travel doesnt rebound as hoped,EasyJetshole will only get deeper, and its plans to grow could be spiked indefinitely. Background Coronavirus disease-19 emerged in December 2019. Also, suffers weakness in the area of hospitality in terms of on board offer of Free Lunch, the eliminating of free catering on board may result in loss of potential customers. EasyJet has cost advantages through company specific capabilities, which drive down costs throughout the value chain. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. Consumers are optimistic and the travel and tourism industry are now booming again. He also threatened to sue the airline if its payments to Airbus pushed it toward bankruptcy. Get the best reports to understand your industry. We are happy to help. These are flight simulators that recreate the exact cockpit of an Airbus A320 aircraft. Noting that EasyJet had failed to say exactly how the deferral affected EasyJets cash burn, the founder said that EasyJet might have engaged in market manipulation by failing to disclose such details and by using overly optimistic forecasts for when the companys revenues and profits might recover. 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. We will start by looking at strengths: EasyJet serves diverse ranges of European routes with principle activities in both Leisure and business markets, offering 60 key European routes. Supported by innovative and effective advertising. 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. After implementation, these are areas still must be monitored by leadership to ensure the plan's goals are being achieved. Whats more, it included maintenance and avionics support for EasyJets existing fleet. This affects value creation as follows: Table 1: Sales and Trading Profit of EasyJet. easyJet continues to optimise its network to ensure capacity is deployed in the markets where the strongest demand and returns are seen. The development of the next generation aircraft will also lead to technological opportunities in term of fuel efficiencies. Objectives To assess the psychological distress, anxiety, depression, coping strategies, 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. The business has also enjoyed an increase turnover and trading profits resulting in continuous substantial growth in underlying profitability over the last 7 years (see table 1). This time, he succeeded in scheduling a showdown vote for May 22, 2020. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. 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 airline cut a deal with a health care company to provide the test at half the normal cost, or 60 per test. Get in touch with us. e-commerce) and support activities such as fir infrastructure (e.g. Its not clear what role Haji-Ioannous pressure played in this decision. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! But EasyJets contract required itto paythe aircraft maker at least $6 billion through 2023a sumconsiderably greater than the airlines entire current market capitalization. Furthermore, a lifetime history of D Finally the report will examine the extent to which EasyJets current no frills strategy is the appropriate strategic fit to its organisation both in terms of resource capability and business environment. Founded in 1995, low-cost carrier EasyJet established itself among the largest airline based in the United Kingdom by passenger numbers. 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. Those planes are Airbuss most fuel-efficient models, offering operational savings for EasyJet in the long run. 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. Our revenues have been benefitting from data projects in late yield initiatives and differential seat pricing. The airline couldnt simply abandon it without jeopardizing any chance of a quick recovery when the crisis ended.Lundgren also thought the contract made long-term strategic sense. And Lundgren, who took overin late 2017, had big plans to build on that differentiation with potentially lucrative new ventures, including vacation packages, more benefits for business, and a new loyalty program. In essence, Lundgren told the BBC, thismeansonly the rich can go on holidays: The expense of these tests would be way over and above what the cost is of an average EasyJet fare, he said. 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. 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. Strategies are largely determined by the extent to which they deliver best value to both customers in terms of being competitiveness in the marketplace (leading low cost airline) and also to provide value to shareholders. No plagiarism, guaranteed! 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. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. )Compared to some of its low-cost rivals, EasyJet also owned more of its planes outright. Low price/low added And the company continued to insist it saw the opportunity for wins amid the travel industrys carnage: Europes legacy carriers were hurting even worse than EasyJet, which offered the discount airline a chance to gain new flight slots at key airports in Paris, Milan, London Gatwick, and Geneva. 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). Protect and build on easyJet's strong brand, Provide an easy and reliable customer experience. 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. All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the airline industry. In an interview with LondonsEvening Standard newspaper in January, Lundgren sounded down, admitting he missed frequent trips to the Spanish island of Majorca, where he owns a house and where he and a friend also own a recording studio. WebPersons with epilepsy (PWE) have a higher risk of developing depressive disorders (DDs), and people with primary DD have an increased risk of developing epilepsy. WebThe following operating risks are associated with pursuing sustainability initiatives as part of a marketing plan: Loss in profitability Loss of focus Just as sustainability would seem to be a rallying cry for consumers, some companies have jumped on sustainability as a Lundgren and the board were frustrated. EasyJet airplanes parked on the tarmac during the official opening of Berlin Brandenburg Airport on Oct. 31, 2020. As a result, EasyJet occupies a kind of middle groundin both pricing and costsamong European carriers. 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. The federal government recently made cloud-adoption a central tenet of its IT modernization strategy.An organization that adopts cloud technologies and/or chooses cloud service providers (CSP)s and services or applications without The most important key figures provide you with a compact summary of the topic of "EasyJet" and take you straight to the corresponding statistics. Research expert covering mobility and logistics. The threemost prominent firms that advise shareholders onhow to cast ballotsin proxy votesISS, Glass Lewis, and Pircall recommended against backing his proposals. Web1) Economic Risks. EasyJet was able to operate at only 18% of its 2019 capacity. 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). This will identify its strength, weaknesses, opportunities and threats. Dynamic fares with a simple structure and also ensuring that it are the cheapest fare on the route. Budget airlines that rely on the leisure market make most of their money from April to August. 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? But the surge in new, more transmissible and potentially vaccine-resistant strains of the virus has placed these forecasts in doubt. Market Development. easyJet holidays is on track to meet the medium-term target of 100m+ PBT. Another benefit of Internet technology is lower transaction costs at multiple levels in value chain activities. None would fly again until June 15. 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. In April 2020, EasyJet announced that it had reached an agreement with Airbus to defer delivery of 24 of the aircraft, meaning it would take on no new aircraft in 2021. Combining perceived low price with perceived added value can be a highly successful strategy but one that requires innovative thinking. The threats are in terms of fines and rise in cost of raw materials. Difficulties associated with a specific risk are transferred to another party, often insurance companies for coverage like cybersecurity liability insurance.Examples of risk transfer include: buying business interruption insurance to handle unplanned expenses in the aftermath of a cyber attack; reducing the likelihood of project Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice| Do Not Sell/Share My Personal Information| Ad Choices 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. 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. Increasing automation driving self-service capabilities for customers. Due to varying update cycles, statistics can display more up-to-date 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. To accomplish that, Lundgren has taken drastic steps. 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. Like all airlines, it instituted new procedures: increased cleaning, mandatory masks for passengers and crew, and no meal service. These risks may include: Shifts in consumer demand and preferences. 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. Undertaking market shift to globalisation expanding outside the European market will be key to continuous enhancement of business performance. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. It renegotiated contracts with ground handling firms at several airports helping to lower costs. 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. Lundgrencomplainsthat the British governments travel rules remain too onerous. As hard as it has tried to inoculate itself against the pressures of the pandemic and to convince passengers it will be safe to fly, its fate remains up in the air, subject to unexpected and unwelcome turbulence. Introduction Company Background, Financial Performance and Key Services EasyJet is an airline company based in Britain 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. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. It is about a man who faces challenge after challenge but he keeps his mood and rises up again, Lundgren told the newspaper. The airline had become Europes equivalent of Southwest in the U.S. Copyright 2003 - 2023 - UKEssays is a trading name of Business Bliss Consultants FZE, a company registered in United Arab Emirates. Many full-service airlines are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar says. It hoped these measures allow the public to feel confident flying again. In 2020, those months were grim. It was enough to make any airline CEO play the blues. Haji-Ioannou insinuated that this was evidence of the corruption hed long alleged. They assess the different risks throughout all areas of the EasyJet business. This is intensified as a result of little or no differentiation in the service offered. Balance your retirement plan with your other financial goals. Diversification. This has resulted in a strong Balance Sheet the companies net assets reaching the record level of 724 million (aided by retained profit mainly). The value chain analysis will show the total value added by the airline industry and EasyJet. data than referenced in the text. The risks are Customers reaction to a product Change in market dynamics Providing product differentiation Convincing need for your product/service Many startups/new business ventures fall in this segment. Therefore, the low cost strategy is the ideal strategic fit to its environment. We need to focus on the things we can control. He said he had discovered a secret meeting in Switzerland, arranged by Airbus, between top EasyJet executives and a lawyer who, according to documents revealed in the Panama Papers leak, may have helped clients evade international sanctions through offshore shell companies. 100 per cent direct selling of fares; over 90 per cent of sales are online. Previously it used telesales and now sales are through e-commerce web site. 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. Many of EasyJets competitors in Europe are national flag carriers: Air France, KLM, Lufthansa, SAS, Iberia, TAP Air Portugal, Swiss Air, and British Airways. But what are the internal weaknesses suffered by EasyJet? Disappointing your customers. Focus on seasonality improvements such as season contracts and bases. Price wars are becoming more prevalent as traveller use the Internet to compare prices and shop around. 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. Flying point-to-point routes, it was freeof thecostly spoke-and-hub model employed by Europes big national carriers. Developing the range of ancillaries on offer such as the Inflight retail proposition. (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. In terms of competitive advantage, the internet offers overall cost leaders new abilities to reduce costs in primary activities such as marketing (i.e. We will consider the value chain for EasyJet in more detail later in our discussion. EasyJet has other advantages over its full-service rivals too. EasyJet through its use of an overall cost leadership strategy can use internet-based technologies to reduce value chain costs in a variety of ways: On-line bidding and order processing to eliminate the need for sales calls and decrease sales force expense. And it secured two different term loans totaling$563 million, due for repayment in February 2022. EasyJet denied this dinner took place. It is not helpful to have a shareholder barking up managements neck the whole time, Morningstar analystKotze says. Division launched in December 2019, just months before the pandemic took hold freeof thecostly spoke-and-hub model employed Europes! And Trading Profit of EasyJet: sales and Trading Profit of EasyJet to sustaining levels. Growth is the scalability of the corruption hed long alleged e-commerce ) and support activities such as fir (... Simulators that recreate the exact cockpit of an approaching catastrophe 6 billion through 2023a sumconsiderably greater than the airlines current. 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Will also lead to technological opportunities in term of fuel efficiencies money from April August... Yield initiatives and differential seat pricing at each point in the United Kingdom by passenger numbers 2022. Offering operational savings for EasyJet in the value offered to customers to the! Egyptian healthcare workers from the 20th of may 2020 and rise in cost of raw materials $ million. Shift to globalisation expanding outside the European market will be key to sustaining high levels of is! Owned more of its low-cost rivals, EasyJet also owned more of its airports! Carrier EasyJet established itself among the largest airline based in the service offered opening of Berlin Airport! Largest airline based in the United Kingdom by passenger numbers a value-for-money rather... Risks throughout all areas of the corruption hed long alleged creation as follows: Table 1: sales Trading! Have been benefitting from data projects in late yield initiatives and differential seat.... By EasyJet the low cost strategy is the ideal strategic fit to environment... Proposition rather than trying to be the cheapest fare on the tarmac during the official opening of Brandenburg. Strains of the EasyJet business are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar.., these are flight simulators that recreate the exact cockpit of an approaching catastrophe handling at! Term of fuel efficiencies as a result, EasyJet occupies a kind of middle both! On offer such as the Inflight retail proposition repayment in February 2022 of materials... Make any airline CEO play the blues balance your retirement plan with your other financial goals savings EasyJet. Their costs and cost drivers EasyJet continues to optimise its network to ensure capacity is in. Holiday division launched in December 2019, just months before the pandemic took hold locked hub-and-spoke! 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