what are the risks associated with easyjet's strategy

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. EasyJet announced it had lost more than $1 billion in the 12 months through September 2020. The company has announced plans to reduce its 15,000-person workforce by 30%. Lundgren and the board were frustrated. Within weeks of the vote, Findlay, EasyJets CFO, announced his intention to step down, and analysts speculated that the stress of Haji-Ioannous campaign, on top of that caused by the pandemic, had taken a toll. To what extent does EasyJets concentration on POLITICAL Following the European deregulation of commercial aviation, a fleet of low cost carriers are reshaping the local airline landscape. Due to a recession, fewer business tourists are travelling to downfall the quantity of sending amount. 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. 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. That move also diluted Haji-Ioannous stake in the companys stock from more than 34% at the beginning of 2019to just under 30%, making it easier for EasyJets board to ignore the demands of its querulous founder. Feeling powerless is one of the worst feelings, not just in business.. Accepting this fact and having a strategy in place to mitigate risk is critical to being a successful innovator. Budget airlines that rely on the leisure market make most of their money from April to August. They fly into second- and even third-tier airports, where they control a dominant share of the gates and can drive tough bargains on any airport fees and charges for ground crews and baggage handlers. It is possibly not as good in terms of operations and its inbound logistics. None would fly again until June 15. 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. 8. 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). Many full-service airlines are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar says. easyJet is building a network of key cities, broadening their presence across Europe. The increase growth of world tourism will offer opportunities in terms of undertaking joint venture with local/foreign travel companies; hence, Going places and Thomas Cooke are already providing such services to growing number of holidaymakers each year. WebThere is one main reason which influences these economic factors is the recession in the Easy jet. Such lower costs benefit EasyJet initially as innovation is rewarded. 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. Normally there would have been close to 100. It renegotiated contracts with ground handling firms at several airports helping to lower costs. 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. This text provides general information. Each stands elevated on hydraulically controlled legs, with doors reached by a short metal staircase. Having fought off Haji-Ioannou, Lundgren and EasyJets C-suite faced other foes they couldnt control. Haji-Ioannou insinuated that this was evidence of the corruption hed long alleged. Still, it wasnt spared from the industrys general carnage. 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. 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. We are seeing significant benefits already from operational resilience processes and predictive maintenance. 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)). 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. This level of disruption and deterioration of the operation cannot continue," the email reads. As both employees and customers are put under increased stresses, the potential for heated exchanges becomes a risk. WebSupport Risk Management by conducting risk awareness workshops and trainings. This involves EasyJet retaining funds from operations; hence, a healthy Balance sheet in terms of retained profits. From June 15, when EasyJet resumed flying, through September 2020, it carried 9.5 million passengers, compared to 37.1 million in the same period the year before. data than referenced in the text. EasyJets no frills strategy does not only mean a cut in Cabin crew and denial of food, but also allows for a faster pre-flight preparation, thereby reducing the time grounded as well maintaining fare. EasyJet is also Europes leading low-cost airline having completed a merger deal with Go to create Europes number one low-cost airline. Currently, around 12% of boarding passes issued by easyJet are mobile passes, although this can be as high as 50% for some flights. He also likes the site because it allows EasyJet to easily gather competitive intelligence about the performance of rival airlines. Hopes for an early summer 2020 recovery were dashed when the U.K. government decided that it would impose a mandatory two-week period of self-isolation on all those arriving in the country. But flying to those primary airports in Western Europe is more expensive. 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. It moved aircraft maintenance at three of its U.K. airports, which had been contracted out, back in-house. 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. These are set out below: easyJet has a strong network of leading number one and number two positions in primary airports, which has proven to be amongst the highest yielding in the market. The pandemic, of course, wiped out business and leisure travel alike. Hes running the business to make it as lean as possible, and you cant be a nice guy and do that, Kotze says. 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. The world economy is however, now on the up post September 11th. 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. 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. Low price/low added EasyJet has cost advantages through company specific capabilities, which drive down costs throughout the value chain. The pace of recovery will be determined by vaccination rates, Alton Aviations Ryan says.The problem for EasyJet is that almost all the routes it flies involve Europe, and the continent was lagging far behind on vaccinations. EasyJet manages its sales process extremely efficiently, its sells its tickets directly. Protect and build on easyJet's strong brand, Provide an easy and reliable customer experience. EasyJet appears to have developed competences in supporting much higher levels of business from the same asset base than other rival airlines. Taken together, those restrictions mean that summer 2021 is looking increasingly in doubt. 1 or No. Given the fact that the company offers Ryanair continues to lower costs, which enables it to persist lowering fares aggressively. It is not helpful to have a shareholder barking up managements neck the whole time, Morningstar analystKotze says. With Ryanair maintaining high margins despite reducing yields through strict cost management. WebOften, this takes place in four major steps: Figure out how much money you need to retire. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. 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. He offered a $7 million reward to any whistleblower who could provide him useful information leading to the cancellation of the Airbus contract. 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. That delay exposed EasyJet to greater risk of both hefty fines from Britains chief data protection regulator and class-action lawsuits from customers. As the holidays business grows in scale, easyJet plans to make targeted investments to strengthen the business. Not that he was going away. But nothing has been normal for EasyJet since March 23, 2020. 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. On the other hand, risks which produce They can easily shift capacity from Spain to Greece, for instance, to deal with new travel restrictions, he says. The Essay Writing ExpertsUS Essay Experts. Furthermore, a lifetime history of D ECONOMIC the travel industry is vary recession prawn and also very sensitive to changes in oil prices. 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. 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. 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. 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. Due to varying update cycles, statistics can display more up-to-date Out on the tarmac, a short distance from the simulators, almost a dozen real EasyJet A320s sit idle. 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. Continuing to drive product conversions by improving the way ancillaries are sold and product merchandising. All rights reserved. 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. Table below provides an analysis of EasyJets sales revenue and profitability ratio since 1998. 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. 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. 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. 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. Remote working and hot-desking have been characteristics of easyJet since the beginning. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs Copyright 2003 - 2023 - UKEssays is a trading name of Business Bliss Consultants FZE, a company registered in United Arab Emirates. This is critical for EasyJet having analysed the competitive rivalry position in the industry. EasyJet, on the other hand, flies fewer routes but operates from many more primary airports, with a heavier focus on Western Europe. Barton, EasyJets chairman, tried to put the episode behind the company, saying publicly that he hoped EasyJet could reengage constructively with its founder, but that the negative headlines and publicity has placed unnecessary pressure on a dedicated management team and negatively impacted the reputation of this great British and European brand. Indeed,though Lundgrens management team had won the showdown, there were signs of damage. And they are relentlessly focused on keeping per-seat costs down. 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. Those changes will ensure that EasyJet sustains its current market share and position and also increase margin. The purchases rankled Haji-Ioannou, who had opposed EasyJets tie-up with Airbus ever since it had been signed in 2013. Making it easy, enjoyable and affordable to travel again and again for business and holidays. Webcomputing risks Let us look at five different types of risks and how they apply or vary by cloud deployment models. 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. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. easyJet holidays is on track to meet the medium-term target of 100m+ PBT. The idea of remote working can also result in co-ordination and control weaknesses. It also offers passenger a few more extras, such as allowing them to check in at the airport without charge (Ryanair charges passengers who dont check in online) and a loyalty program that confers priority boarding privileges. To accomplish that, Lundgren has taken drastic steps. 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. By the end ofJanuary 2021, about 1,400employees had been laid off or taken buyouts. The UKs second-largest union has slammed easyJet flight cancellations in a scathing email obtained by Euronews. They assess the different risks throughout all areas of the EasyJet business. Thats better, but still a big burden on, say, a family of four. 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. Potential negative outcomes include bad publicity and a EasyJet is forever trying to attain a cost level that is low relative to its competitors. This strategy is focused on keeping costs down and EasyJets policy of no free lunch and efficient use of airports by limiting turnaround to 30 minutes. The airlines hopes for summer 2021, like those of almost all airlines, rest on vaccinations. But the strategy also burdens EasyJet with higher costs as it tries to recover from the pandemic. 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. This will show how its critically important for EasyJet that strategic alliance, size and technological innovation have on its profitability. 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. Analysis of financial resources in order to understand the strategic capability of EasyJet will need examination of financial capability and performance. 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. 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. Therefore, capability is strongly related to the way that resources are used and controlled. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. This also reduces the marginal cost of incremental growth; increasing scale brings valuable economies (Johnson, G., Scholes, K., Whittington, R., (2005). Pandemics, lockdowns, trade disputes, financial crises and more can depress travel demand and threaten the bottom lines of industry players. Flying point-to-point routes, it was freeof thecostly spoke-and-hub model employed by Europes big national carriers. So the strategy has been very successful for EasyJet and appears to have been the correct strategic decision. Implementing this strategy successfully depends on EasyJets ability to deliver enhanced benefits to customers over its competitors together with low prices. It is difficult to co-ordinate the individual employee because in principle they operate independently of each other. A focus strategy can be implemented to resolve these issues as well. This results in high levels of asset utilisation and reduced unit costs. Please do not hesitate to contact me. The carriers were expected to pare their loses to about$38 billionthis year, as vaccines are rolled out across the world. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. Another benefit of Internet technology is lower transaction costs at multiple levels in value chain activities. easyJet will maintain its advantageous cost position through continued cost action. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. But EasyJet could steal an increasing amount of market share from the legacy full-service carriers. Combining perceived low price with perceived added value can be a highly successful strategy but one that requires innovative thinking. This will identify its strength, weaknesses, opportunities and threats. 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). 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? But it was not the same as canceling its contract, and unsurprisingly, Haji-Ioannou was not satisfied. 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. These are flight simulators that recreate the exact cockpit of an Airbus A320 aircraft. Over time, a brand may experience enough negative interactions that its reputation is placed into a vulnerable position. 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. 1 Based on share price of 6.62 at 30 September 2021 The company has also grown in terms of its acquisitions of GO and also increase in purchases of its own aircrafts. Advantages of Choosing In-House. Reducing the cost, managing the cash burn, and getting access to liquidity, Lundgren told CNBC inNovember. 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 WebEasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. 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. 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. At the same time, it was wooing at least some business travelers by differentiating itself from no-frills rivals like Ryanair and Wizz, offering some perks and serving first-tier airports. Facebook: quarterly number of MAU (monthly active users) worldwide 2008-2022, Quarterly smartphone market share worldwide by vendor 2009-2022, Number of apps available in leading app stores Q3 2022. This will involve retention of best salespeople supported by HR management, engineering support in terms of maintenance of the web page supported by technology development to ensure that web site has the latest prices and route and flight information. The greatest dangers, however, may be the market leaders need to manage its evolving Lower costs are the only competitive advantage in the short-haul economy sector as air travel is effectively a commodity product. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. Finally the threats from the suppliers bargaining power, this is very strong in the airline industry for two reasons, one is highly skilled labour can command a very favourable terms and second is the price of oil. *You can also browse our support articles here >. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. 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. 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. 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, For the battered airline, 2020 couldnt end soon enough. But EasyJets contract required itto paythe aircraft maker at least $6 billion through 2023a sumconsiderably greater than the airlines entire current market capitalization. He also threatened to sue the airline if its payments to Airbus pushed it toward bankruptcy. A prime example of this was the subsequent takeover of Go by EasyJet. 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. The airline cut a deal with a health care company to provide the test at half the normal cost, or 60 per test. It is evident that having only one collaborate is risky due to the possible delays in time. The threats are in terms of alternative holidays Disneyland Paris via Eurostar (Euro tunnel) and P&O cruise. At the end of January, EasyJet announced that it had secured another $1.9 billion through a five-year loan, secured against its aircraft. 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. Decisions must be made on the trade-offs inherent in development of a strategy. EasyJet also has a strong cash flow position primarily from its policy to retain profits and reinvest it back to the business. Those airlines are more dependent on business travel, which many analysts forecast might not fully recover from the pandemic until 2024if it ever recovers at all. 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. That delay exposed EasyJet to easily what are the risks associated with easyjet's strategy competitive intelligence about the performance of rival airlines collaborate is risky to!, it was freeof thecostly spoke-and-hub model employed by Europes big national carriers national..., broadening their what are the risks associated with easyjet's strategy across Europe is needed as the organisation grows EasyJets C-suite faced other foes couldnt... 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