Easyjet: PESTLE, SWOT and Porter's Analysis

RUNNING HEAD: Advance Management 0
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

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Porter Five
Threat of New Entrants
The threat of new entrants is low because of the recent economic downturn. High investment
of capital is required.
Threat of Substitute
Threat of substitute is medium with the reason of high-speed train as well as development in
the infrastructure of the road across Europe.
Bargaining Power of Consumers
The bargaining power of customers is high with the reason that the consumer is more
sensitive towards price as there are airlines with a low fare, therefore, the consumer can
easily switch of other airlines.
Bargaining Power of Suppliers
The power of bargaining of suppliers is medium as the manufacturers of aircraft can switch
from the carrier of supplying to commercial carriers to the defense carrier.
Rivalry
The market of LCC is highly competitive. There are various service providers than needed in
both the local and international market (Moreno-Izquierdo, Ramon-Rodríguez and Perles-
Ribes, 2016).

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Current News
The revenue of EasyJet grew from 14 percent to $2 billion in the third quarter till 30th June
2018, with the ancillary revenues such as the baggage up 21.1 % to $400 million. it is
estimated that 10 % more passenger flew as a comparison to the last year (BBC News, 2018).
Comparison with Rivalry
EasyJet serves transparency in price as a comparison to Ryanair. The website on EasyJet
provides the facility of debit and credit cards as well as show the actual price on the flight
selection screen whereas Ryan does not showcase the actual amount until after the individual
put all the passenger details (Dobruszkes, Givoni and Vowles, 2017).
Recommendations
Strength
The strength can be improved from the following way:
 The EasyJet can develop their strength by expanding their presence in the international
market. The company should enhance their flights at international level to cover the potential
of huge market. The company does not have their existence in the international flights
towards the countries such as USA which has a vast market.
 EasyJet has already enjoyed the advantage of low fare but they should maintain their focal
point on the recent strategies of operational distinction and should focus on consumers as
well as a financial discipline which are the main pillars for the triumph of the company.
 Moreover, EasyJet can expand their services as well as fleet size for the penetration in the
market. The borrowing power such as low debt ratio as well as a brand image which carried
highest passengers is readily available for the successful expansion.

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Weakness
The weakness of the company can be resolved in the following ways:
 The fare of the company is not low as a comparison to Ryanair therefore; the company can
provide free food service to their passenger to compete their rival company Ryanair. It will
help the company to cope up with the weakness that they face.
 The earning of EasyJet is based on the season. In summer, the company earns a huge amount
in a comparison to winter. Therefore, the company should diversify rather than investing their
entire amount into a particular business it would help the company to increase their earning
as well as decrease the dependency from one source of income or on the season.
 The company should begin their flights to Asia as well as Africa to keep away from the
potential losses due to the dispersion in the industry of aviation in near future. EasyJet can
able to attract maximum customers for the reason that of their sturdy brand image as well as
low fare policy.
Opportunity
The company can exhaust the opportunities from the following ways:
 The company can offer free refreshment on their flights with a travel time of over two hours
or more than two hours. This would help the company to offer an extra perk as well as deliver
comfort to their passengers which make their experience with EasyJet more enjoyable as well
as comfortable.
 The company can provide an updated version of the fly on the documentaries wall which
would provide the brand of the company with more coverage as well as publicity.

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 It is an opportunity for the company to expand their roots. The company can offer packages
of tour and travels which would able to attract potential customers, who are seeking the
specific type of travel experience.
 The carrier should consider the developing strategic partnership with the airports that would
help in expanding their route system as well as offer more travel options for their customers.
Threat
The company can cope up from the challenges of the threat from the following ways:
 To overcome the threat of the return of competitor capacity growth, the company should
provide as well as formed some kind of loyalty scheme which includes the loyalty cards and
member cards. Then the customers will gather the points each time when the passenger
travels when the passengers have earned sufficient points they could able to receive several
kind of rewards which covers offer discount on flights or can also offer free flights and so on.
It would benefit both EasyJet as well as the consumer would want to travel with EasyJet
instead of another company.
 The company should evaluate the competitors properly to cope up from the threat of
competition. The main competitor of EasyJet was British Airway which merged with
Swedish airlines. The merger helped British Airways to cover their losses as well as achieve
cost efficiency. Therefore, EasyJet should focus on their marketing strategies as well as
efforts to tackle with the synergies created by the merger.

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References
BBC News. (2018) EasyJet [Online]. Available from:
https://www.bbc.com/news/topics/c302m85q52jt/easyjet [Accessed on 13/11/2018]
Business-to-You. (2016) Porter Five Forces [Onlne]. Available from: https://www.business-
to-you.com/porters-five-forces/ [Accessed on 03/08/2016]
CAPA. (2013) EasyJet Swot Analysis [Online]. Available from:
https://centreforaviation.com/analysis/reports/easyjet-swot-analysis---is-stelios-strength-
weakness-opportunity-and-threat-all-in-one-96290 [Accessed on 05/02/2013]
Dobruszkes, F., Givoni, M. and Vowles, T. (2017) Hello major airports, goodbye regional
airports? Recent changes in European and US low-cost airline airport choice. Journal of Air
Transport Management, 59, pp.50-62.
EasyJet plc. (2018) Report and Presentation [Online]. Available from:
http://corporate.easyjet.com/investors/reports-and-presentations/2017 [Accessed on
14/11/2018]
Farouk, S., Cherian, J. and Shaaban, I. (2017) Low cost carriers versus traditional carriers and
its impact on financial performance: a comparative study on the UAE airlines
companies. International Journal of Value Chain Management, 8(4), pp.325-341.
Holloway, S. (2017) Straight and Level: Practical Airline Economics: Practical Airline
Economics. London: Routledge.
Ho, J.K.K. (2014) Formulation of a systemic PEST analysis for strategic analysis. European
academic research, 2(5), pp.6478-6492.

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Horner, S. and Swarbrooke, J. (2016) Consumer behaviour in tourism. London: Routledge.
Jackson, J. (2016) Airline finance. Air Transport Management: An international perspective,
p.169.
Karwowski, M. (2016) The risk in using financial reports in the study of airline business
models. Journal of Air Transport Management, 55, pp.185-192.
Lawton, T.C. (2017) Cleared for take-off: structure and strategy in the low fare airline
business. London: Routledge.
Mayer, R., Ryley, T., and Gillingwater, D. (2015) Eco-positioning of airlines: Perception
versus actual performance. Journal of Air Transport Management, 44, pp. 82-89.
McLachlan, J., James, K. and Hampson, B. (2018) Assessing whether environmental impact
is a criterion of consumers when selecting an airline. International Journal of Advanced
Research, 6(3), pp.740-755.
Mills, G. (2016) The Airline Revolution: Economic analysis of airline performance and
public policy. London: Routledge.
Moreno-Izquierdo, L., Ramón-Rodríguez, A.B. and Perles-Ribes, J.F. (2016) Pricing
strategies of the European low-cost carriers explained using Porter's Five Forces
Model. Tourism Economics, 22(2), pp.293-310.
Myint, S., Lupi, A. and Tsomocos, D.P. (2017) How Investment Opportunities Affect
Optimal Capital Structure. Journal of Applied Corporate Finance, 29(4), pp.112-124.
O'Connell, J.F. and Williams, G. (2016) Ancillary revenues: The new trend in strategic
airline marketing. In Air Transport in the 21st Century (pp. 195-220). London: Routledge.

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Ringham, K. and Miles, S. (2018) The boundary of corporate social responsibility reporting:
the case of the airline industry. Journal of Sustainable Tourism, pp.1-20.
Teker, S., Teker, D. and Guner, A. (2016) Financial performance of top 20 airlines. Procedia-
Social and Behavioral Sciences, 235, pp.603-610.
Waltenberger, J. and Ruff-Stahl, H.J.K. (2018) Implications of Short Scheduled Ground
Times for European Carriers. International Journal of Aviation, Aeronautics, and
Aerospace, 5(3), p.8.

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Appendices
SWOT Analysis
Strength
 The fare of EasyJet is quite low as a
comparison to the other airlines
 The brand image of the company is
good especially in the UK
 The company has improved their
financial performance with a strong
grip in term of Return on investment
as well as cash flow
Weakness
 The fare of EasyJet is low as a
comparison to other airlines but it is
still 50 % high as compare to Ryanair
 The company has a strong brand image
in a comparison to many low-cost
carriers but the major legacy carrier
still have a strong image of their brand.
 The earning of EasyJet depend on the
season
Opportunities
 The company has a great
opportunity for market growth
which has potential in the medium to
long-term with more opportunity in
future partnership.
 The company will have more space
for further cost-cutting through fuel
Threats
 The company has planned the allocation
of the seat as well as unbundled pricing
is a departure from their norm. It would
increase the complexity against the
airlines if management loses their focus.
 It would be a threat for the company
from those new players who may enter

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innovation by engineering, ground
handling in the airport
 There has been estimated that the
business traveler will increase to 20-
25 % in 3-5 years
the low-cost market niche.
 The fluctuation in the price of fuel, as
well as currency, would be the threat for
the company at a greater extent.
Porter Five
(Source: Business-to-You, 2016)
PESTLE
Political
In the UK, the year of 2016, was one of the blustery years in the world of politics which has
created the level of uncertainty. The separation of UK from the European Union as well the
election of Triumph was both charged, protectionist as well as populist movements which

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may result in a diminishing of global trade which negatively affected airlines. It increases the
threat to the company.
Economic
In the UK many countries such as Ireland are moving towards the fuller employment which
allows for the increase in the disposable income of public, simultaneously the price of the
curd oil continues to rise which affected the fare of airlines. It would be an opportunity for
the company to increase the business traveler because of the increase in disposable income
but at the same time affected the profit margin due to a rise in the price of cured oil.
Social
Most of the countries in Europe, as well as the west, have an aging population as they are
living for longer which signify the change in demographics with more people over the age of
retirement having a high income with leisure time. it is likely that over 65’s will be a facility
the growth in the aviation industry.
Technological
The refinements within the technology are enhancing the efficiency at airports as well as
reducing the overall travel time. Moreover, the booking of flights can be made through
smartphones as well as within the minutes which allows for a seamless customer journey
experience.
Environmental
As the climate changes, the social conscious passengers, as well as a company, are becoming
increasingly participating to reduce their carbon footprints. To encourage the production of

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fuel-efficient aircraft, the industry has responded to it by investing in the department of
Research & Development.
Legal
The airlines exist in a highly regulated market, where the safety of consumers is at high
priority thus, the strict legality will pose a massive issue n term of barriers to entry (Ho,
2014).
Financial Summary & Ratio Analysis
The annual report of EasyJet represents that the business has achieved as sustainable growth
both in term of revenue from $ 4.67 billion in 2016 to $ 5.05 billion in 2017. The gross profit
of the company has also been increased from $913 million in 2016 to $915 million in 2017
which compares favorably with those of their competitors (EasyJet plc, 2018).
Current Ratio – EasyJet had a lower current ratio as a comparison with their key competitor.
From the data, it can be concluded that the liquidity position was close to the industry
average.
Quick Ratio – the ideal ratio for the quick ratio is 1, slightly above than 1 will also consider
being better as well as acceptable. The quick ratio of EasyJet is higher than 1 which
represents that company would able to pay their current liabilities in an efficient manner.
Debt Ratio – the lower debt-equity ratio represents that the company is more financially
strong as well as stable than their competitors which is the positive sign for the company.
Return on sale ratio – it indicates the profit margin earned by the company. The ratio of ROS
is declining every year which shows that the company either not efficiently managing their

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expenses or they failed to keep up with their competition, therefore, losing their significant
market share.
Return on Assets- the above ratio indicates that EasyJet utilized their assets more efficiently
that it generates income in an efficient manner.