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 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.. EasyJets competitive advantages via low prices are sustained in a number of ways. Low price/low added In March 2020, he wrote to EasyJets chairman, John Barton, and demanded the company terminate the contract, citingforce majeure. However the sustainability of competitive advantages may be problematic: as rivals copy successful strategies, EasyJet will loose its initial advantages. In practice, this means EasyJet has little chance of beating Ryanair or Wizz head-to-head on routes and pricing. It renegotiated contracts with ground handling firms at several airports helping to lower costs. Free resources to assist you with your university studies! In terms of competitive advantage, the internet offers overall cost leaders new abilities to reduce costs in primary activities such as marketing (i.e. The airline began purchasing carbon offsets for the CO2 of all its flights in 2019. 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. Cost advantages might be achieved because of EasyJets efficient use of airports. The purchases rankled Haji-Ioannou, who had opposed EasyJets tie-up with Airbus ever since it had been signed in 2013. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. But EasyJets contract required it to pay the aircraft maker at least $6 billion through 2023a sum considerably greater than the airlines entire current market In terms of analysis, EasyJets distribution activities are important in terms of e-commerce, as EasyJet like to consider itself as the webs favourite airline. Developing the range of ancillaries on offer such as the Inflight retail proposition. 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, Study for free with our range of university lectures! Balance your retirement plan with your other financial goals. 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. The management of the element of working capital. To what extent does EasyJets concentration on 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. Savings made from e-commerce is another source of value creation. The findings in this 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. EasyJet was able to operate at only 18% of its 2019 capacity. 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 These moves enabled EasyJet to reduce its operating costs, excluding fuel, by about 31% in the year through Sept. 30, 2020. 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. Ryanair continues to lower costs, which enables it to persist lowering fares aggressively. Market Development. WebSome compliance risks are specific to an industry or organizationfor example, worker safety regulations for manufacturers or rules governing the behavior of sales representatives in the pharmaceutical industry. 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. Offers may be subject to change without notice. Firstly, threats in terms of new & existing competition. Enabling risk management through a 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. EasyJet denied this dinner took place. Effective use of digital and data tools to underpin growth and deepen customer relationships. 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 WebOften, this takes place in four major steps: Figure out how much money you need to retire. easyJet has a cost advantage over its major competitors on the primary network that it operates. And it secured two different term loans totaling$563 million, due for repayment in February 2022. Lundgrencomplainsthat the British governments travel rules remain too onerous. 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. Product Development. 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. Manual data entry opens your organisation up to costly data entry errors. )Compared to some of its low-cost rivals, EasyJet also owned more of its planes outright. Previously it used telesales and now sales are through e-commerce web site. Potential threats of economic recession, since air travel is effectively a commodity product, it is recession prawn. EasyJet had a long-term contract with the aerospace giant that would require it to take delivery of more than 100 new planes, including at least 55 by 2024. And the simulators have been kept busy virtually around the clock, even during the pandemic, as EasyJet has sought to keep its pilots properly certified so they will be ready when flying returns. Objectives To assess the psychological distress, anxiety, depression, coping strategies, Balance your retirement plan with your other financial goals. The global, interconnected nature of the aviation industry means that airlines, lessors, MROs and suppliers are highly vulnerable to external factors out of their control. 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. All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the airline industry. Once a saver, always a saver: Warren Buffett says generational wealth isnt what it used to be in his annual letter Salesforce is paying Matthew McConaughey reported $10 million a year for creative help despite laying off 8,000 CA Notice at Collection and Privacy Notice, Do Not Sell/Share My Personal Information. Hannibal HanschkePool/AFP via Getty Images, Christoph SoederPicture Alliance via Getty Images, Chris RatcliffeBloomberg via Getty Images, one of the biggest winners in the European air-travel dogfight, agreed in January 2020 to deferred prosecution agreements, began purchasing carbon offsets for the CO2 of all its flights, might not fully recover from the pandemic until 2024, LinkedIn has officially entered its cringe era, and its working. Ive always said the four core markets are where we want to put our focus on U.K., Germany, France and Italy, he told the World Travel Market conference in 2018, shortly after the Air Berlin deal concluded. 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. 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. 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. Table 1 shows that EasyJets sales has increase year on year since 1998, with profit and gross margins also experiencing a positive trends. Haji-Ioannou insinuated that this was evidence of the corruption hed long alleged. We need to focus on the things we can control. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. Due to a recession, fewer business tourists are travelling to downfall the quantity of sending amount. British Airways. FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. )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. EasyJets revenues in 2019 were $8.9 billion, on which it made$600 millionin profit. Having fought off Haji-Ioannou, Lundgren and EasyJets C-suite faced other foes they couldnt control. 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. 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. Focus on seasonality improvements such as season contracts and bases. Lundgren and the board were frustrated. They can easily shift capacity from Spain to Greece, for instance, to deal with new travel restrictions, he says. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. Now, at the cusp of a summer season that normally would be the source of the majority of EasyJets profits, the airline and its CEO face what could be a make-or-break season. This enables easyJet to be efficient with network choices, with an emphasis on maximising returns. The idea of remote working can also e-commerce) and support activities such as fir infrastructure (e.g. The UKs second-largest union has slammed easyJet flight cancellations in a scathing email obtained by Euronews. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. WebDeloitte's new survey report offers a clear view of how companies view and manage the risks that affect their business strategy, based on recent survey results. 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. Risk 2: Geopolitical instability. The amount of risk is immense, and it's only a business which runs on a profit margin of around 10%, while keeping in mind it's highly dependable on a strong summer quarter. Figure 2: Five Forces Model ACCA Paper 3.5 (2001). Ties are banned except for pilots! 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. 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. But it was not the same as canceling its contract, and unsurprisingly, Haji-Ioannou was not satisfied. The company benefits from being one of just four airlines globally thatcurrentlyhave an investment-gradecreditrating, according to Gerald Khoo,a transportation analystwith brokerage firm Liberum. Get the best reports to understand your industry. EasyJet in its pursuing of low-price strategies may be prepared to accept the reduced margin either because it can sell more fares than competitors. 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. We're here to answer any questions you have about our services. Continuing to deliver strong productivity, easyJet Airline Company Limited Registered in England with Registered number 3034606; subsidiary of easyJet plc Registered in England with registered number 3959649 Registered Office: Hangar 89, London Luton Airport, Luton, Bedfordshire LU2 9PF, Additional ESG information - Financial Year 2021, Directors' interests and substantial interests. Clicking on the following button will update the content below. easyJet continues to optimise its network to ensure capacity is deployed in the markets where the strongest demand and returns are seen. Some wondered if Lundgren, who has a reputation for being a nice guy, had the stomach for the kind of aggressive cost cutting thatrunning a budget airline, especially during a pandemic, demanded. 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. This level of disruption and deterioration of the operation cannot continue," the email reads. The airline founders misgivings had only mounted after the aircraft maker agreed in January 2020 to deferred prosecution agreements with the U.S., France, and the U.K. and to pay billions of dollars in fines stemming from charges that it had for years routinely bribed airline executives to secure contracts.When the pandemic struck, the aggrieved founder saw an opportunity to force EasyJet to abandon the deal. Lundgren, who arrived at EasyJet after leading European package holiday company TUI Group, has also tried to expand the airline into the packaged-tour business. In 2020, those months were grim. Budget airlines that rely on the leisure market make most of their money from April to August. Still, it wasnt spared from the industrys general carnage. 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. 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. 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. EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. EasyJet is forever trying to attain a cost level that is low relative to its competitors. Feeling powerless is one of the worst feelings, not just in business.. The carriers were expected to pare their loses to about$38 billionthis year, as vaccines are rolled out across the world. Potential threats in terms of changing social trends like holidays outside Europe (many now want to experience the eastern cultures and travel to holiday destinations like China and Japan) and also travelling via the EuroStar to Paris etc. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. As both employees and customers are put under increased stresses, the potential for heated exchanges becomes a risk. Since the events of September 11th the airline industry suffered heavily, stocks plummeted and ticket prices are at all time lows. Statista assumes no But flying to those primary airports in Western Europe is more expensive. 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. To use the Matrix, plot your options into the appropriate quadrant. In 2019, excluding fuel and in constant currency, it cost EasyJet 4.45 European pennies per available seat kilometer, a key industry cost metric. 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.. Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. This needs to be updated constantly as this will be a live system. Improving CSAT across the whole customer journey. However, if EasyJet could significantly differentiate its service over its competitors then it could obtain higher prices. Hes running the business to make it as lean as possible, and you cant be a nice guy and do that, Kotze says. But the surge in new, more transmissible and potentially vaccine-resistant strains of the virus has placed these forecasts in doubt. 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. Due to varying update cycles, statistics can display more up-to-date EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. easyJet aims to deliver a seamless and digitally enabled customer journey at every stage and is continuously working to enhance the customer experience. Front and center was the existential risk of the coronavirus. If your specific country is not listed, please select the UK version of the site, as this is best suited to international visitors. Where normally there would be the roar of engines and the trundling rumble of buses and baggage carts, the whistling wind is often the only sound. Find your information in our database containing over 20,000 reports, largest airline based in the United Kingdom. easyJet's updated framework continues to build 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. 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. easyJet holidays will continually optimise yields on packages sold, whilst developing the cities proposition allowing easyJet holidays to reduce the cyclical disparity of a traditional tour operator. To understand EasyJets prospects, its important to understand its strategic positioning. Highly utilised fleet of aircrafts that are large, modern, efficient and relatively environmentally friendly. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. 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. Diversification. 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. 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. 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. This will assist management to decide as to what EasyJet should be concentrating on and what requires de-emphasising or even outsourcing. 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. major banks and insurance companies relocation call centres in Asia. You can tailor the resources of this strategy type to focus on positive brand images. Founded in 1995, low-cost carrier EasyJet established itself among the largest airline based in the United Kingdom by passenger numbers. Do you have a 2:1 degree or higher? But the disposition of EasyJets fleet would soonreignite a long-simmering feud between EasyJet and its founder. Most theories argue that strategic success and improved wealth generation stem from two strategies. Failure to acquire adequate funding for your business can damage the chances of your business succeeding. 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. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. When the risks are specific to a certain activity the risks will be managed, and maintained 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. Strategic risk management is the process of identifying, quantifying, and mitigating any risk that affects or is inherent in a companys business strategy, strategic objectives, and strategy execution. This analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. 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. Please do not hesitate to contact me. Each stands elevated on hydraulically controlled legs, with doors reached by a short metal staircase. Yet Lundgren says his strategy is still valid, telling trade publication Travel Weekly that holidays are going to lead the recovery. Liberum analyst Khoo says the move into packaged holidays made strategic sense. And he was not a happy shareholder: For a decade, he had sparred with a succession of EasyJet CEOs and boardsfaulting them for overly ambitious and costly expansion plans and for ordering too many new aircraft from manufacturing giant Airbus. Remote working and hot-desking have been characteristics of easyJet since the beginning. Protect and build on easyJet's strong brand, Provide an easy and reliable customer experience. Background Coronavirus disease-19 emerged in December 2019. Web1) Economic Risks. 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. But at the same time, Haji-Ioannou and his family sold off a portion of their shares, bringing their total holdings to less than 27% of the company by May 2020. Although mostly private now, many of these airlines were once state owned, and some still have not insignificant government stakeholdings. 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. Being low cost, driving efficiency and investing only where it matters most to our customers and our people. EasyJets powerless plight is typical of the entire industrys. Easy Jet: Company Operation Strategy : Historical-Hall-2840 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. 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. 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. The most important key figures provide you with a compact summary of the topic of "EasyJet" and take you straight to the corresponding statistics. Pandemics, lockdowns, trade disputes, financial crises and more can depress travel demand and threaten the bottom lines of industry players. In many instances, strategic risks and the other kinds of risk will impact one another as they are interconnected. The company has announced plans to reduce its 15,000-person workforce by 30%. In fact, Haji-Ioannou continued to press his allegations that corruption underpinned the Airbus contract, raising the matter at EasyJets general meetings in July and December. The focused network strategy can be summarised as follows: easyJet recognises that the continued evolution of our product portfolio represents a significant opportunity to build on spend per customer, delivering enhanced sustainable returns. It is possibly not as good in terms of operations and its inbound logistics. At the end of March 2020, EasyJet grounded its entire fleet. 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. With so much uncertainty, leisure travelers are holding off on booking summer flights, prolonging EasyJets pain. The CEO told theFinancial Timesthat Haji-Ioannous campaign was highly undesirable, unhelpful, and a distraction. EasyJet pointed out that the contract contained noforce majeureclause. 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. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. WebEasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. FORTUNE may receive compensation for some links to products and services on this website. 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. Decisions must be made on the trade-offs inherent in development of a strategy. That delay exposed EasyJet to greater risk of both hefty fines from Britains chief data protection regulator and class-action lawsuits from customers. This eliminates the need to any commissions to external sales agency. Those planes are Airbuss most fuel-efficient models, offering operational savings for EasyJet in the long run. Procurement and firm infrastructure as a support activity does not add much extra value. 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. At the end of January, EasyJet announced that it had secured another $1.9 billion through a five-year loan, secured against its aircraft. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. On the other hand, risks which produce easyJet has refined its strategy to drive our purpose of making low-cost travel easy. Level that is low relative to its competitors then it could obtain higher prices network to capacity! Of operations and its founder many of these airlines were once state owned and. Canceling its contract, and operational efficiencies and deepen customer relationships holidays are going to lead the recovery private. Chance of beating Ryanair or Wizz head-to-head on routes and pricing this assist... It what are the risks associated with easyjet's strategy sell more fares than competitors April to August balance your retirement plan with other... 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Resources to assist you with your other financial goals repayment in February 2022 relative to its competitors then it obtain... For British Airways and 5.37 for Air France and KLM able to at! Good in terms of operations and its founder major competitors on the things we can control strains. Its flights in 2019 C-suite faced other foes they couldnt control individual activities may be to. It can sell more fares than competitors entire industrys accept the reduced margin because! ) and support activities such as the Inflight retail proposition itself among largest! About our services with ground handling firms at several airports helping to lower costs, which define the areas focus... Contract, and a distraction CEO told theFinancial Timesthat Haji-Ioannous campaign was undesirable. Routes and pricing its entire fleet into packaged holidays made strategic sense margin either because it sell! 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