Impact of Government Regulations on EasyJet's Operations and Sustainability

EasyJet, a low-cost airline, has established itself as a major player in the UK market due to its competitive strategy and cost structure. Despite facing intense competition, EasyJet has delivered better affordability in ticket prices with additional services. However, government intervention and legal barriers have restricted the company's ability to expand further. The airline industry contributes 3% of global carbon emissions, prompting EasyJet to restrict its carbon footprint. The company's standardization and core competency have improved its position, but it faces rivalry from competitors.

AIRLINE INDUSTRY: EASYJET
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Table of Contents
Introduction...................................................................................................................... 3
Competitive advantage.................................................................................................... 3
Contribution of the company to the airline industry 1000................................................7
Conclusion..................................................................................................................... 10
Refrence List.................................................................................................................. 11
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Introduction
EasyJet is a low-cost airline based at London operating domestic and international
airlines that has made gained remarkable competitive advantage by providing cost-
advantage (affordable fares) facilities to the customers (Easyjet.com, 2017). The
company is committed towards positive contribution to the society meeting demands of
the customers and facilitating safety mechanism (risk-assessment). In this study, efforts
will be made to analyze the competitive position (competitive advantage) of the
company highlighting its contribution towards airline industry by applying different
analytical tools.
Competitive advantage
Airline industry in UK provides substantial economic benefit to the nation contributing
£51.966 billion in the GDP. EasyJet, one of the leading low-cost airlines has ensured its
competitive position by giving preference to the following areas.
 Low-fare comparing to the competitors by rejecting frilling cost
 Monitor and manage safety related risk
 Enhanced customer services making it easy and affordable
 Integrity, simplicity, values of safety
 Diversity within the organization
 Contribution towards environment
 Strong relationship with the partners
 Corporate social responsibility (includes Unicef program)
All the above mentioned areas has ensured a strong hold in the UK airline market that is
tough to chase by the competitors such as Ryanair and Wizz (Beaumont, 2015). In
order to know the competitive forces within the industry and to evaluate the competitive
advantage of the company the following analytical tool is applicable.
Porter’s five forces
High: Red
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Medium: green
Low: yellow
Forces Rating
Competitive rivalry HIGH
Bargaining power of the customers MEDIUM
Threat of new entrants LOW
Bargaining power of the supplier MEDIUM
Threat of Substitute MEDIUM
Table 1: Rating competitive forces
(Source: Beaumont, 2015)
Competitive rivalry: There is extensive competition in the industry due to the presence
of several competitors providing offering same service to the customers. As the industry
is sluggish in nature and reached, maturity helps the company to stay in the business.
Due to the brand identity, competition may be lessened for instance EasyJet can be
taken that provides low cost services. Stronghold of the supplier also fuels up the
competition and big firms tend to take cost advantage mitigating the powers of
competitors.
Bargaining power of the customers: In UK, buyers enjoy low switching cost due to
presence of many options as per the choices (Bush and Starkie, 2014). Most
importantly, each airline targets a particular niche to attract the customers of that
segment providing them with exclusive services. Different airline companies use
different strategies such as focus on cost or focusing on other aspects (safety) of
service, therefore customer may not switch resulting in low or medium bargaining power
within the airline industry.
Threat of new entrants: high investment and operating cost minimizes the threat of
new entrants within the industry. Most of the companies regardless of EasyJet enjoy
cost advantage making it hard for the new entries to enter the market. On other hand,
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customers always opt for popular airlines that makes hard for new entries to grab
attention.
Bargaining power of the supplier: Suppliers are the aircraft manufactures, where two
giant exists Airbus and Boeing. Close glance reveal that all the aircrafts are quite similar
and manufacturer are focusing on eco-friendly aircrafts (Malighetti et al., 2015). The
airlines companies may switch easily however there are only a certain number of
manufacturers and most of the companies sign long-term loan arrangements.
Therefore, the threat of the supplier is also moderate.
Threat of Substitute: substitutes to airline may be other modes of transport such as
car, bus, and trains to reach the destination. Customers may need to pay substantial
cost to switch as sometimes plane tickets may incur fewer amounts than other modes of
transport. However, airlines are proven effective for big distance and fast transportation,
there hardly exists any substitute. Therefore, the threat of substitute is low in the
industry.
SWOT analysis
Strengths
 Low travels cost
 Low operating cost avoiding frills
 Safety priority
 Less cancellation
 On time flight
 Utilization of technology (online
tickets)
Weaknesses
 Augmented competition
 Negative publicity
 Limited access to big airports
 Third party service
Opportunities
 Presence of untapped market
 Expansion prospects
 Partnership
 Acquisition
 Pre-departure refreshment
Threat
 Currency fluctuation
 Hike in fuel price
 Terrorism
 EU policies
 Strength of competitors
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Table: SWOT analysis of EasyJet
(source: Fageda, 2016)
Based on the porter’s five forces and SWOT analysis, it can be averred that EasyJet
has positioned itself in a way that has strengthen the various dimensions of marketing,
supply and promotion as follows.
Supply chain: EasyJet maintains a strong supply chain by ensuring resources and
supplying those to the end customers within time. It owns e-commerce website
providing fast and safe service to the customers. This helps in reducing backlogs and
ensures hassle free services to the customers.
Figure: Supply chain of Easy Jet
(Source: Malighetti et al., 2015)
Pricing: EasyJet follows low-cost model that provides affordable yet quality services to
the customers. This is one of the notable attributes of the airline company to grab
attention of the customers. Dynamic pricing is used where seats are priced differently
according to demands. Sometimes special discounts and offers are provided to the
customers on selected seats boosting attraction.
Brand values: brand value of the company is high as it is one of the well-known lost-
cost airline service providers giving preference to simplicity. People can easily
recognize the brand by its name providing competitive strengths.
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Marketing: EasyJet takes active participation in the online marketing. It provides e-
website to the customers to book flights and enjoys hassle free services. Social media
is also used for promotional purpose such as face book.
HR: The organization fosters the notion of cultural diversity and provides equal
preference to all the employees regardless of gender, cultural background. It helps in
fostering a diversified working environment minimizing cultural conflicts. Most
importantly skilled employees are employed to ensure quality service. The HR
department also offers training facilities to the staffs to ensure personal and professional
developments.
Contribution of the company to the airline industry 1000
Contribution of the company to the airline industry refers to the monetary contribution in
the form of tax liabilities and income generation for better GDP of the country. Being
one of the leading airline companies in the UK, the economic contribution of the
company in the country has attained a significant growth in terms of revenue and
employment creation. In evidence, Easy Jet has achieved significant number of
passengers amounted to 73.1 million that accounts 6.6% growth in the number of
passengers. Therefore, increment in number of passenger reveals the increasing
revenue of the company and thus, the profitability for future sustainability. On the
contrary, the statistics reveals that the revenue of Easy Jet in the year 2015 has faced a
significant drop of 0.4% while facing reduction in the revenue per seat of £58.46 that
discloses a 6.4% decline in the revenue per person or seat. The reason for such decline
has been accumulated from the increment in the cost per seat of 2% during 2015-2016
(Aoa.org.uk. 2017). In the broader section, the airline industry has contributed £51.966
billion to the UK GDP coming from the largest airport in the UK. In this context, Manna
and Roy (2014) started that the contribution further discloses the creation of
employment opportunities and earning scope of the UK residents. Therefore,
employment opportunity contributes to the GDP of the country in terms if improved
national income and purposing power of the market.
PESTLE
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Political:
In political perspective, the company would face both the opportunities and threats in
terms of government rules and regulations. Government is active to provide the
guidance to the company to operate its travel and tourism businesses. Moreover,
another opportunity that the company has gained is the permit of purchasing additional
aircraft for improved service range and better revenue. The same complements the
statistics of Easy Jet in increasing its passengers and revenue per seat. Thus, in
opinion of Grant (2016), cooperation from UK government has enabled the airline
organization to conduct better service range and improved contribution to the country in
terms of financial and non-financial terms.
Economic:
Economic fact reveals that the state of demand and supply of the concerned company
and contribution of the business in the country GDP and other macroeconomic
elements. In that case, Greenstein and Nagle (2014) stated that government
cooperation in new aircraft purchase has allowed the company to create a new
employment opportunity. In evidence, the number of passengers in the Easy Jet has
attained a significant rise of 60% during the current year amounting 11.4 million
indicating improved demand and thus, increased supply of aircrafts through
government’s permit in purchasing new passer airbuses. On the other hand, the
declination in the revenue per seat indicates the lower margin of profitability to offer
better services and affordable price range of tickets.
Social:
In context of a viable change in the passengers’ lifestyle, there has been an ample
movement in the behavior of passenger in terms of selection of mode of transport. In
emergence of affordable and low cost airline company, people are more interested in
travelling with airlines. Apart from the same, integration of the travel and tourism
operation aligning with Easy Jet operation, a significant increment in travelling with
airlines has been observed during last few years. The improvement in the travel and
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tourism operation across the world is the main example for such societal enrichment
and changes in passenger behavior in the choice of travelling modes.
Technological:
Rapid growth of the online tools has improved the service delivery and quality of the
offers faster than the existing operational procedure. In the words of Rosenbusch et al.
(2013), use of technology in airline operation has enabled the company to operate in
virtual world and thus, improve the communication with its customers. Using internet
and other online tools, Easy Jet communicates with its passengers to gather the
information on new tourist spots to enlarge the service range of the company.
Development of e-commerce in Easy Jet has allowed almost 95% of its entire market
share to avail online service in case of communication, review and purchasing tickets.
Such integration of technology has maintained a transparent market view in terms of
prices to compare the service quality of the company.
Legal:
Legal factor incorporates the regulatory framework that develops the barrier and
opportunity for the company either to flourish the business or face interruption in the
operation. In case of private airline company, the regulations are present in case of
landing and taking off slots in the airport while governed that same by the government
of the country. Therefore, permit of opening a new airport would be beneficial for the
company to operate separately with delivery of its full range of services. According to
CAA regulation, the slot of take off and landing is limited for Easy Jet to offer all range of
its services.
Environmental:
According to the government statistics, the airline industry contributes 3% of the total
carbon emission causing global warming across the world. New governance policy and
legal framework has enforced the company to restrict its carbon emission during the
operation of aircrafts and other airline activities. In the opinion of Bowers (2014),
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environmental rules revealed usage of natural resources in operation to ensure
sustainability of non-renewable energy resources for future use.
Conclusion
From the above discussion, it is revealed that easy Jet has attained a good market
position due to its cost structure and competitive strategy to acquire comparatively
better market share while struggling an intense competitiveness. Being the low cost
airline in the UK, the organization has delivered better affordability in the ticket price
with the additional services along with its core service offerings. Apart from that, its
standardize governance and core competency has improved the position of the
company while creating intense rivalry for its competitors. The increasing revenue and
passenger has enabled the company to contribute significant financial and non-financial
benefits to both the economy and the society it targeted. However, government
intervention and legal barriers have also resisted the company to extend its operation
further due to lack in government cooperation and presence of potential rivalry.
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Refrence List
Aoa.org.uk. (2017). New report shows UK aviation contributing £52 billion in overall
GDP, 960,000 jobs and £8.7 billion in taxation | AOA. Available at:
http://www.aoa.org.uk/2014/11/new-report-shows-uk-aviation-contributing-52-billion-in-
overall-gdp-960000-jobs-and-8-7-billion-in-taxation/ [Accessed on 28 Feb. 2017].
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Bowers, K., (2014). ‘Risky facilities: crime radiators or crime absorbers? A comparison
of internal and external levels of theft’. Journal of Quantitative Criminology, 30(3),
pp.389-414.
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relationships.’ Journal of Air Transport Management, 41, pp.45-49.
Easyjet.com. (2017). Book direct for our guaranteed cheapest prices | easyJet.com.
Available from: https://www.easyjet.com/en [Accessed on 13 Feb. 2017].
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routes.’ Liberalization in Aviation: Competition, Cooperation and Public Policy, p.91.
Grant, R.M., (2016). Contemporary strategy analysis: Text and cases edition. John
Wiley & Sons.
Greenstein, S. and Nagle, F., (2014). ‘Digital dark matter and the economic contribution
of Apache’. Research Policy, 43(4), pp.623-631.
Malighetti, P., Paleari, S. and Redondi, R., (2015). ‘EasyJet pricing strategy:
determinants and developments.’ Transportmetrica A: Transport Science, 11(8),
pp.686-701.
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Manna, S. and Roy, A., (2014). ‘Economic contribution of wild edible mushrooms to a
forest fringe ethnic community in some eastern lateritic parts of India’. Journal of forest
research, 19(1), pp.52-61.
Rosenbusch, N., Rauch, A. and Bausch, A., (2013). ‘The mediating role of
entrepreneurial orientation in the task environment–performance relationship: A meta-
analysis’. Journal of Management, 39(3), pp.633-659.
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