Financial Performance Evaluation of EasyJet Plc and Ryanair

Running head: ACCOUNTING FOR MANAGERS
Accounting for Managers
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1ACCOUNTING FOR MANAGERS
Table of Contents
Task One:...................................................................................................................................2
Task Two:.................................................................................................................................10
Task Three:...............................................................................................................................10
References:...............................................................................................................................14

2ACCOUNTING FOR MANAGERS
Task One:
This paper would intend to evaluate the financial performance of EasyJet Plc for the
period 2013 to 2017. It is a leading British airline organisation providing domestic and global
services on over 820 routes in more than 30 nations. It is headquartered in London Luton
Airport having employee base of around 12,280 in 2017 (Corporate.easyjet.com 2018). For
better evaluation of its financial performance, it is contrasted with its major competitor in the
UK market, which is Ryanair. It is an Irish low-cost airline established in 1985 and it is one
of the biggest airlines in the world having staff base of around 13,000 (Corporate.ryanair.com
2018). In order to analyse the financial condition of the two chosen organisations, the
following ratios are taken into consideration and their detailed analysis is provided as
follows:
Profitability analysis:
In order to conduct profitability analysis of EasyJet Plc and comparison with Ryanair,
the two ratios considered include net margin and return on capital employed.
Table 1: Profitability ratios of EasyJet Plc and Ryanair for the years 2013-2017
(Source: Corporate.easyjet.com 2018: Investor.ryanair.com 2018)

3ACCOUNTING FOR MANAGERS
2013
2014
2015
2016
2017
2013
2014
2015
2016
2017
Easyjet Ryanair
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Profitability Ratios
Net margin
Return on capital
employed (ROCE)
Figure 1: Profitability ratios of EasyJet Plc and Ryanair for the years 2013-2017
(Source: Corporate.easyjet.com 2018: Investor.ryanair.com 2018)
From the above table and figure, it is evident that the net margin of EasyJet Plc after
increasing from 2013 to 2015 has experienced a steady decline in net margin in the next two
years. With the help of net margin, the profitability position of an organisation could be
determined, as it signifies the amount remaining after deduction of all business expenses
(Vogel 2014). The reasons behind the declining net margin are due to the aggressive pricing
strategy adopted by the organisation and inability to improve load factor. On the other hand,
the ratio for Ryanair has increased from 10.38% in 2013 to 19.80% in 2017, although there is
a decline from the previous year. The reason that Ryanair has managed to increase its net
margin is due to the capacity growth of its aircrafts.
The trends are observed to be similar in case of both organisations for return on
capital employed. This ratio helps in denoting the efficiency of an organisation in generating
profits from capital employed (Shah 2015). The main reason behind the decline in this ratio
for EayJet Plc is due to the injection of share capital in the form of investments, while