EasyJet: Comprehensive Business Analysis Report - Advance Management

This report provides a comprehensive business analysis of EasyJet, a prominent low-cost airline. It begins with an executive summary and an overview of the company, highlighting its strengths such as strong brand awareness and pricing advantages, while also addressing weaknesses like a higher cost base compared to competitors and seasonal earnings. The report delves into market opportunities, including market growth and targeting business passengers, alongside threats like increasing fuel prices and competitor activity. It includes a financial analysis with key ratios, a PESTLE analysis examining political, economic, social, technological, legal, and environmental factors, and a Porter's Five Forces analysis. Furthermore, the report discusses current news, compares EasyJet with rivals, and concludes with recommendations based on the analysis, offering insights into the airline's strategic positioning and future prospects.

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easyjet
Advance Management
(Student Name)
11/13/2018

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Table of Contents
Executive Summary...................................................................................................................2
Overview of company................................................................................................................3
Strength......................................................................................................................................3
Weaknesses................................................................................................................................4
Opportunity................................................................................................................................5
Threat.........................................................................................................................................5
Financial Analysis......................................................................................................................6
PESTLE......................................................................................................................................7
Porter Five..................................................................................................................................7
Current News.............................................................................................................................8
Comparison with Rivalry...........................................................................................................8
Recommendations......................................................................................................................8
Strength......................................................................................................................................8
Weakness....................................................................................................................................8
Opportunity................................................................................................................................8
Threat.........................................................................................................................................9

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References................................................................................................................................10
Appendices...............................................................................................................................12
SWOT Analysis.......................................................................................................................12
Porter Five................................................................................................................................12
PESTLE....................................................................................................................................13
Financial Summary & Ratio Analysis......................................................................................14

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Executive Summary
EasyJet is one of the leading airlines company at a global level. The company is mainly
known as one of the low-cost airlines. The company served more than 450 routes between 28
countries with over 182 aircraft. It is one of the fourth leading airlines in Europe. The
company served their services to forty six million passengers last year. Approximately 289
million people travel within one hour drive of an EasyJet carrier. It is forerunner in the use of
the internet for travel. EasyJet enjoys the advantage of low fare in the industry with a good
image of the brand in the aviation industry and these are the strengths of the company. In the
competitive aviation industry, Ryanair is one of the key competitors of EasyJet; the fare of
Ryanair is 50 % less than EasyJet. The earning of EasyJet is based on the season; this is the
major drawback for the company which the company needs to resolve. There are certain
opportunities which are waiting for the company to exploit such as market growth, increase
in the business passenger in near future. At the same time, EasyJet has certain threats such as
an increase in the price of fuel and so on which need to be taken certain steps by the
management of EasyJet. The financial performance of the company is efficient in a
comparison to other competitors ((Mayer, Ryley and Gillingwater, 2015). The company is
gradually growing which is a positive point for the company. The intention of the report is to
represent an independent assessment of this organization which covers the external analysis
of the company.

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Overview of the company
The EasyJet airlines company is known as the low fare based airlines in the airport of
London- Luton. EasyJet operates frequent services for their business as well as leisure
passengers; it also served more than 500 routes between twenty-eight countries with over 182
aircraft (Farouk, Cherian and Shaaban, 2017). EasyJet was funded by Greek Cypriot Stelio
Haji-loannou who is an entrepreneur, but in the recent it is listed on the London Stock
Exchange and the Easy Group owns an only small portion of the stake. Approximately, 6000
people are employed by the company in which it includes 1800 pilots as well as 3300 cabin
crew throughout Europe. In last year, the company has served 46 million passengers as well
as it has counted as one of the fourth largest airlines in Europe with number one in air
transport network (Mayer, Ryley andf Gillingwater, 2015). The company has initiated the use
of the internet for the travel. The BMIbaby, Buzz, Ryan air and MyTrabelLite are the key
competitors of the company in the UK. Germanwings, Air Berlin, Virgin Express, as well as
Hapag Lloyd Express are or might become the key competitors in the light of future
expansion plans. In recent, the company offers 125 routes from 39 airports of Europe as well
as it operates 72 aircraft (Mills, 2016).
Strengths
Strong Reputation and Brand Awareness
The company has a great reputation in the market of the airline industry. Most of the
customers prefer to travel via EasyJet which enhance brand awareness among the other
customers. The EasyJet has already enjoyed their perception of brand in the recent years
(Lawton, 2017). The company already spread their awareness about brand particulary in the

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UK, but the company has now planning to spread to other more countries (McLachlan, James
and Hampson, 2018).
Pricing
In the competitive environment, EasyJet has a great advantage of their price structure. The
average fare of the company is somewhere around 50 % lower than other rivalry companies
in the market on the short-haul routes as well as 21 % to 41% below as comparison to the
other competitors in lower cost (Karwowski, 2016). Moreover, the extremely dynamic
management system of revenue of EasyJet adjusts their price of tickets according to the level
of demand to target maximum customers and maximize the revenue rather than to charge the
low fare in a continuous basis.
Financial Performance
Over the past few years Easy Jet has enhanced their financial performance, under the new
managing team of Carolyn (CEO) McCall and CFO Chris Kennedy. The management of the
company target a minimum return on capital employed of twelve percent which also includes
capitalized operating leases on the capital base or 15 percent excluding the operating leases
(Jackson, 2016). The company has a strong balance sheet and generation of cash as well as
the return that exceed the cost of capital that make them different in the industry of airlines
globally (Teker, Teker and Guner, 2016). In September 2012, the company has attained
ROCE of 11.3 percent with involving operating leases or 14.5 percent ex-operating leases
that are just diminutive of their targets, but contentedly in front of their cost of capital
(Holloway, 2017).
Weakness
The cost base is not low against competitor

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The cost base of EasyJet is not low as comparison to Ryanair. The company has a advantage
of unit against various rivalry but cannot able to compete Ryanair for their cost. The cost per
seat of Ryanair is 50 percent low as a comparison to EasyJet. Therefore, it is susceptible to
direct competition on the pairs of airport to airport or even pairs of city to city from its Irish
competition. The rivalry of EasyJet with the main competitor Ryanair could enhance for the
period of long-term which affected the development of the company from their active
networks (Horner and Swarbrooke, 2016).
Seasonality of Earning
It has been analyzed that the earning of EasyJet are highly seasonal as well as their profits
mostly rely on a half year of summer (April to September). The company has faced the lean
season as well as winters considered as loss-making which cover the moth between Octobers
to March. Therefore, the profit margin of the company depends on the seasons rather than
earn all the year, which make it more susceptible to any unpredicted struggle in the months of
summer (Waltenberger and Ruff-Stahl, 2018).
(Source: CAPA, 2013)

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Legacy Carriers vs. Brand
The brand name of EasyJet is possibly robust as comparison to other LCC competitors, but
EasyJet, the company as a whole suffer from a disadvantage of brand which is related to the
chief legacy carriers. Undoubtedly, the company has improved their on-time performance
which is slowly changing as well as offer further features of product which cover flexibility
of re-booking the tickets, allocated seating. But the products still have few accompaniments
than that of full-service carriers of legacy (Ringham and Miles, 2018).
Justification
The reason to select such strength and weakness is that these strengths play a major role in
the success of the business. They are the actual strength of the business. Through such
strength, the company would able to cope up from the challenges which they have faced.
With the help of such weakness, the company would able to get knowledge about their
performance gap and would able to work to change the weaknesses into strength.
Opportunities
Market Growth
Scandalously cyclical as well as presently going through a lethargic point, the segment of
aviation remains growing industries, which cover medium to long-term by the general
consent. The company as a considerable player in the market is well-placed to contribute in
such a growth. The company with their cost advantage as well as existing capacity compete
from most of their bequest carrier competitors will help to lay down and gain the shares in
marekt (Myint, Lupi, and Tsomocos, 2017).
Further Cost Cutting

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In order to maintain the cost advantage, the company must ensure that it maintains their cost
advantage unit against their legacy carriers that are continuously looking to cut the cost as
well as transfer the significant parts of their short-haul network to lower cost subsidiaries.
The initiative such as EasyJet Lean has identified the areas for reductions which include
airports, engineering, and fuel, ground handling, as well as aim to decrease the costs by
GBP190m by 2015 of which it had delivered c.GBP100M to the closing stages of September
2012.
Business Passengers
It has been estimated that approximately 18 percent passenger of EasyJet were flying for the
purpose of business. It would be an opportunity for the company to target business class
passengers. Therefore, there is an aim of EasyJet to enhance this to 21% - 25% over 3 to 5
years. The attraction for business travelers involves their prime airports, a relative focus on
privileged frequencies as well as their flexibility fares product that allow the passenger's free
data changes.
Threats
Increase difficulty
In the recent, as the EasyJet has developed and their model of business has also grown which
covers unbundled pricing, the superfluities such as allocated the seating as well as the
channels of distribution such as GDSs has also been increased the complexity in the business.
The increase in the complexity could be the threat for the company if the management loses
their focus on the complexity.
Return of competitor capacity growth

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In the recent scenario, from a well-organized and balanced approach EasyJet is benefiting
which help in to measure the development in their market as comparison in the past. Any
occurrence of loss restraint among the competitors would create a threat for the company. It
can be explained with an example as the low-cost alternatives of legacy airlines entrance in
the new markets, could also intimidate the benevolent succumb situation that the company
EasyJet is enjoying.
Price of Fuel and currency Fluctuation
The increase in the fuel price, as well as fluctuation in the rate of the currency, would greatly
affect the company as a whole. The increase in the price of fuel would definitely increase the
price of EasyJet that would make tough for the company to compete in the competitive
environment. The jet fuel price is responsible for approximately 30 % of the cost of the
company which is highly unstable. It does not only reflect the volatile price of crude oil, but
also variation in the refinery premium or crack spread. Moreover, fluctuation in currency rate
would increase the cost of EasyJet up to 35% without revenue. These could be the threats for
EasyJet (O'Connell and Williams, 2016)
Justification
The company has enchased lots of opportunities but these are the main opportunities that
need to be concerned by EasyJet. Moreover, in the uncertain market, the company has to face
some threats, these three are the main threats which the company needs to focus, and get
prepare for such a threat. It would help the company to stand in the competitive market and
able to overcome from the threat which can face in the near future by the company.

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Financial Analysis
RATIO FORMULA Also referred to as…
Profitability Ratios
Return on sales (ROS) = Net income / Revenue 0.06439469
Return on assets
(ROA) = Net income / Total assets 0.054429744
Liquidity Ratios
Current ratio
= Current assets / Current
liabilities 1.038323353
Quick Ratio
= Cash + Marketable securities
+ Accounts receivable / Current
liabilities 1.038323353
Debt ratios
Debt ratio = Total liabilities / Total assets 0.530731871
Financial leverage = Total assets / Total equity 21.325

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PESTLE
Political Protectionism
Political Instability
Aviation Policy
Economic Economies of Scale
Crude Oil Price
Enhancement in Disposable Income
Social Increase in Travellers
Changing Population Demographics
Increase in Tourism
Technological Increasing in fuel-efficient aircrafts
Increase refinement of technology with mostly focus on the smartphones
Increase in Videoconferencing
Legal Open Skies Agreement with the U.S.
Open Skies within the country Europe
Environmental Noise Pollution
Greenhouse and Carbon Emission