Impact of COVID 19 and Brexit on Airline Industry

This report provides an overview of the impact of COVID 19 and Brexit on the Airline Industry, focusing on the market structure of UK's Airline Industry and the economic factors affecting EasyJet. It discusses the various market structures, the impact of Brexit and COVID 19 on EasyJet's business, and the economic factors of the UK.

Impact of COVID 19 and
Brexit on Airline Industry

Abstract
This report provides an overview of various Market Structure, they are Perfect
Competition, Monopoly, Monopolistic Competition and Oligopoly. Market structure represents
the pricing and nature of goods in Market. Furthermore, this report consist a discussion and
analysis of Market Structure of UK's Airline Industry. Due to Brexit and COVID 19 Airline
Industry have faced many problems in their functioning of business, they have faced a severe
loss. In this project an Impact of Brexit and COVID 19 on Airline Industry has been discussed
and the Economic factor of UK that could create an impact on Airline Industry also Explained.

Table of Contents
INTRODUCTION...........................................................................................................................3
Discussion and Analysis..................................................................................................................3
The Various Market Structure.....................................................................................................3
The Market Structure of UK's Airline Industry..........................................................................4
Economic Factor of UK and how it will affect EasyJet..............................................................4
Impact of Brexit on EasyJet's Business in UK............................................................................7
Impact of COVID 19 on EasyJet................................................................................................8
Conclusion.......................................................................................................................................9
Recommendation.............................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
In 2020, A disease occurred due to which people were falling sick and the death rate were
increasing, this virus was named as COVID 19 (Bas and Sivaprasad, 2020). The virus has
created a huge impact in the life of people. The businesses and Industry faces heavy loss due to
this disease, the whole world was in lock down and people were facing heavy loss of income.
The report was based on negative impact of COVID 19 on airline Industry (Gallego and Font,
2020). Aviation had faced many challenges such as decline in demand, closures of airlines,
reduction of fleets, and numerous people were suspended. Brexit had also created a huge decline
in the profit of airline Industry (Rosamond, 2019). It is a situation in which United Kingdom
wants to get separate from European union. They want to establish their own regulation policy of
trading. The Chosen airline EasyJet also faced problem due to virus such as cancellation of
flights, expenses, employees lay out, no income source, etc. In this report the discussion and
analysis is based on market structure of UK Airline Industry. The Various Economic Factor of
UK which can affect the business of Easyjet and how Brexit and COVID 19 have created an
impact on their business (Merkert and Swidan, 2019).
Discussion and Analysis
The Various Market Structure
Market is a place where products are purchase by the buyer and sell by seller. But In
economies, Market meaning is different they consider it as a whole area where purchaser and
sellers are spread for exchanging their commodities. Market Structure generally means a
characteristics of market that finds out the nature and pricing policy of product (Brueckner and
Flores-Fillol, 2020). The Market structure are categorised in various forms they are as follows-
 Perfect Competition-
Perfect Competition is a market structure in which there are large number of buyer and
seller engaged in Homogeneous product without any restriction and perfect knowledge of
Market.
 Monopoly-
In Monopoly Market Structure there is only one seller that controls the entire market.
They can set the prices and customer have no choice to pay for the set price by seller.
 Monopolistic Competition-

Monopolistic competition is the market where there is large number of buyer and sellers
but they sell different products. In this market sector there is a certain degree of market power in
which the seller can charge high price of products.
 Oligopoly-
In Oligopoly Market structure there is few firms which compete with each other. The
product in this market is Homogeneous or Heterogeneous. In this market there is entry barriers
and new firms face difficulty while establishing.
The Market Structure of UK's Airline Industry
The Market Structure of UK's Airline Industry is Oligopoly. In Airlines there is imperfect
competition where there is limited number of firms in Industry. In this market firms have to
power to set and change the prices by establishing output levels. The firms in Oligopoly Market
produce same output and they compete with their rivals so if an action is taken by any Airline
firm it will get noticed by competitors (Vatankhah, Zarra-Nezhad and Amirnejad, 2019). To
enhance their market share rivalries of Airlines can cut the prices to attract more customers. In an
oligopoly market the airlines firm are interdependent on each other. One of the characteristics of
Oligopolies is High Capital Investment for building capacity that results in High fixed Costs. All
the Airlines firms need to collude to raise the prices and earn higher economic profit. The reason
behind the existence of oligopolies is Collaboration. The Firms in Airline Industry look out for
an economic benefit in collaborating with their competitors on specific price. They consider
collaboration rather than competing with their rivalries. By having control on price, Airline
Industry raise entry barriers and restrict the entry of new entrants through which they can protect
themselves. For entering in Airline Industry the new entrant may face difficulty as it needs High
cost of aircraft acquisition and several capital requirements. In this Industry barriers to entry
includes legal requirements, economies of scale, high set up costs and Brand loyalty. The Airline
Industry works in Oligopoly by looking out one firms behaviour that can influence the outcomes
in Future periods. The consumers didn't get any harm by oligopolies firms, if they create any
harm government can take strict actions to protect customers (Woo, 2019).
Economic Factor of UK and how it will affect EasyJet
United Kingdom is Sixth largest economy producing country. The country have military
aerospace, pharmaceutical industries and important civil that contributes more in increasing GDP
of UK. There is huge impact of economic factors over the functioning of organisations. It is

necessary for each and very organisation that they focus over study of these factors so they able
to sustain in market for longer period of time (Zhu, Gao and Sherman, 2020). EasyJet is a British
airline company which is situated in London Luton Airport. It is a low cost airline group which
operates domestic and international services in more than 30 countries. The associate companies
are EasyJet Europe, EasyJet UK, and EasyJet Switzerland which operates more than 300
aircraft's. EasyJet is an airline organisation having major business operations in UK and EU. So,
it is necessary for the management of an organisation to focus over different economic factors
and their behaviour for developing perfect strategies in respect to growth of an organisation
(Kelly, 2020). The analysis of all these factors along with their impact over business functioning
and decision is provided below;
Income level-
This is the factor that also known as per capita income. This includes the study about the
income level of people residing in particular country. UK is developed nation and also having
large number of resources and opportunities to earn livelihood. This factor has the positive
impact on all the different category of individuals to earn sufficient amount of income and live
healthy life. The another aspect that depicts the optimistic point behind effective level of income
among UK individuals is high rate of education. This not help in getting of good jobs but also
provide an opportunity to start own business as entrepreneur and contribute in the economy of
nation along with aspect of employment generation. So, according to the overall discussion, the
impact of this factor over the functioning of EasyJet is positive because they can easily attract the
large number of individuals towards their offerings (Sun and Lin, 2019). The another benefit that
can be ascertained by an organisation with the help and support of this factor is to improve
current level of offerings and gain competitive edge in market. The current scenario is negative
because of COVID but the impact of same can be minimised in future as per the progressions
towards growth. Also, current scenario of COVID 19 adversely affects the capacity of
individuals to earn higher and good amount of earnings from all the different fields that
automatically turns into the negative point for EasyJet in respect of business operations. The
economic Factor which can impact the EasyJet business are as follows-
Employment rates-
The contribution of this factor is high towards the development of any business. This
includes the study of employment among individuals of society. This depicts the level of

employment generation capacity in nation or its economy. Higher level of rate depicts good
number of employment opportunities among individuals. In respect to UK, the rate of
employment is high (Zhang, and Graham, 2020). This shows that the capacity of economy
towards generation of employment is good and efficient in nature. The direct impact of this
activity is over earning capacity because large number of opportunities provide a chance to grow
with higher level of rate. So, it is clear from the above discussion that the impact of this factor
over the functioning of an organisation like EasyJet is positive because individuals are able to
afford all the different offerings. The another benefit that can be ascertained from this factor that
they can hire the good pool of candidates with an organisation whom can contribute towards the
direction of success in future.
Demand and Supply-
There is an inverse relationship between demand and supply which means when demand
increases supply remain constant. If demand and supply gets change it directly create an impact
on Economy. Demand can be changed due to various factor such as if any competitor reduce
their prices in this case customer will get attracted towards the low price and they would opt their
products. EasyJet has started their business in 1995 at that time supply of raw materials was not
high as comparison to their increment over the years it is because they can't afford new planes.
Demand of Easy jet was not high at that time when it was established. But later the demand get
high lots of customers wanted to go for vacation but the supply was low. When there is increase
in demand, supply get decreased. In beginning supply was high as EasyJet have all the supplies
they need. For example, Demand and supply was High during 2008-11 at that time Easyjet get
into recession, the demand was decreasing and supply get increased. Due to low budget airline
the demand of Easyjet remains high in that period. So, if demand increases supply automatically
decreases (Chambers, McLaughlin and Stanley, 2019).
Forex Rate-
Foreign Exchange is the value between two currencies. It is the rate in which domestic
currency is stated in terms of another country currency. Aviation Industry face risk due to
currency fluctuation, they need to translate different currency cash flows. The foreign Exchange
rates creates a direct impact on consumer, airline decisions and financial accounts. The annual
profit of EasyJet get impacted due to Foreign Exchange rate movements. The aviation Industry
have to face many issues and currency exchange rate plays a major role in terms of cost. As

many cost occurred due to foreign currencies and revenue is generated in local currency. If forex
rate increases the cost also increases and when forex rate decreases cost also decreased (Swidan
and Merkert, 2019). The value of local currency is totally depend on currency exchange rate. For
example, if exchange rate of pound increases than the impact on other countries currency is
different due to value of local currency.
Impact of Brexit on EasyJet's Business in UK
Brexit is a situation in which British has taken the exit from European Union. The UK
government will pursue their own trade deals with countries. This happened due to differences
between the MP's (Badiani, 2019). The Brexit has created a negative impact on Economy as
there is no support of businesses which are the part of European Union. The aviation system and
regulatory laws of UK was made according to EU law which create an impact on movement and
trade between other countries and UK. The Economic Growth of UK get damaged due to Brexit.
The benefit of Brexit is that UK government get freedom to create their own trade rules and
regulations, they could give access to single market and customs union. The Drawback which
can be ascertain due to Brexit is that the country will loose the power of negotiating and free
trade with other countries in European Union. It also creates an Impact on businesses operation
activities (Adam, 2020).
The Airline Industry also faces heavy loss due to occurrence of Brexit. They have to
negotiate new trade agreements with countries which are outside of EU. The airline industry
faces a huge problem due to increased passport and Visa control requirements. They need more
resource for managing the passenger and border operations. The British government has
prepared for Brexit by providing answers of question arose by customers and they also published
a guide lines for UK residents related to Visa and Passport (Minford, 2019). EasyJet has faced a
loss of millions in March due to Brexit they also issued Brexit warning and prepare for this
situation by establishing an Air operator certificates and licence for protecting its Flying rights
within EU. The passengers in this situation keep their wallets closed due to no deal Brexit. The
UK and EU airlines had concerned about post Brexit environment in Airline Industry. The
Government of UK prepared a draft regulation in which it is stated that UK airlines will continue
to fly at least March 2020. EasyJet had taken a temporary solution in which they are taking
matters in their hand and made Brexit plans to handle the situation. They were looking out to
move beyond its Luton Base and set up their operations in Europe. The Flights of EasyJet were

scheduled outside the UK and even they have shifted license of their pilots from UK to Austria.
There was a fear that EU will not recognised the licence of pilot which was issued by UK.
Despite of attaining heavy loss, EasyJet is confident to manage the impact of Brexit in future. In
this difficult time Easyjet have performed strongly during the three month period, they had faced
many problems like exchange rate fluctuation, impact of demand from terrorist events, travel
cost etc., (Hill, Korczak and Korczak, 2019).
Impact of COVID 19 on EasyJet
COVID 19 has create a huge impact on many industries due to national lock downs and
restrictions during quarantine. So as the Airline Industry also face a heavy loss due to COVID
19, they face drop in number of passengers to low as government has announced lock down and
shut the boarders (Dube, Nhamo and Chikodzi, 2021). On Airline Sector the disease had created
a impact they are going bankrupts, cutting the jobs of employees and seeking bailouts. They
faced travel restriction and low demand of travelling among travellers. EasyJet has faced huge
loss even they cut their workforce so that they can cope up with pandemic. They face reduction
in number of passengers due to which the flights are getting cancelled and air planes are flying
empty which reduce the profit of airline (Gupta et. al., 2020). The flights get cancelled due to the
diseases and government had also declared a national lock down due to which EasyJet has avoid
to refund the amount of cancelled trips as they will face heavy loss if they refund the amount to
passengers. Instead of refunding they have offer vouchers and travel credit cards for the
customers so that they can use it at end of the pandemic. The airline industry could grab an
opportunities after lock down restriction get eased they can focus on premium customers who
want to travel safely by creating social distancing in EasyJet. The Long term Impact of COVID
19 on EasyJet is that they must properly take care of health and safety of passengers and make
sure all the customers must be disease free. They Can also earn high profit from people who
want to maintain social distancing and ready to pay good amount for their safety. EasyJet have to
focus on premium customers by taking care of their safety and heath. They have to take proper
measures and actions such as heath and safety procedures or protocols, restrictions and
requirements in new travels, creating new mind set of travelling (Yeh, 2020).

Conclusion
It has been concluded from above information that there are various market structure
which are different from each other. These are of Four types Perfect market, Monopoly,
Monopolistic and Oligopoly. Airline Industry is a Oligopoly market structure which are
interdependent on their rivals, the action of one firm is noticed by its competitors. In This the
aviation firms collaborate with each other and set up a price. In this industry there is a entry
barriers the new firm cannot enter in the Industry easily they may face difficulty while entering it
could be legal impacts, high cost of buying aircraft, creating loyalty among customers and other
requirements of Capital. The Economy of the country is affected by Brexit and COVID 19. The
Brexit has created a huge impact as there were no support of business parties in European Union.
After Brexit a disease occurred which has created a impact on world. The whole world was in
lock down due to COVID 19. In this period people and businesses were facing huge problem of
income, physical and metal problem. Heath issues, etc. The airline Industry had also witness
drastic reduction in passengers, closure of airlines and many other issues. Hence, these both
issues had created a huge loss in Airline industry.
Recommendation
From the above discussion it is been recommended that-
 There are various External Factor which must be analysed by Airline Industry as these
factor may affect the business directly. A proper analysis should be conduct to overcome
the impact of Economic Factor whether it would be of Income level, Employment rate,
demand and supply, Forex Rate. These are the factor which could affect the Airline
business, it must be thoroughly analysed and make suitable changes to adapt these
factors.
 EasyJet must strengthen their Internal resources as this is the medium through which they
can expand their operations and leads to profitable growth.
 Easyjet must use sustainable practices as it helps to gain benefits into business operations.
Sustainable practices helps to improve brand image and competitive advantage. If
EasyJet integrate sustainability into their business it helps to meet changing regulations in
effective manner. By implementing sustainable business practices the aviation can earn
huge profit as with the help of this they can conserve resources through which employee
productivity can be enhanced and cost can be reduced.

 The aviation Industry must follow the latest customer trend as customer are the important
factor in this Industry without them the airlines industry doesn't exist.
 EasyJet have to Focus on increasing their profit as they have suffer many losses due to
the impact of Brexit and COVID 19. They have to adapt a new normal that will helps to
emerge as a result of these two crisis.

REFERENCES
Books and Journals
Adam, R .G., 2020. Brexit and No End. In Brexit (pp. 195-282). Springer, Cham.
Badiani, R., 2019. Outlook on UK-EU Brexit negotiations and possible economic
risks. International Economics and Economic Policy. 16(1). pp.5-16.
Bas, T. and Sivaprasad, S., 2020. The impact of the COVID-19 pandemic crisis on the travel and
tourism sector: UK evidence. Available at SSRN 3623404.
Brueckner, J. K. and Flores-Fillol, R., 2020. Market structure and quality determination for
complementary products: Alliances and service quality in the airline
industry. International journal of industrial organization. 68. p.102557.
Chambers, D., McLaughlin, P.A. and Stanley, L., 2019. Barriers to prosperity: the harmful
impact of entry regulations on income inequality. Public Choice. 180(1). pp.165-190.
Dube, K., Nhamo, G. and Chikodzi, D., 2021. COVID-19 pandemic and prospects for recovery
of the global aviation industry. Journal of Air Transport Management. 92. p.102022.
Gallego, I. and Font, X., 2020. Changes in air passenger demand as a result of the COVID-19
crisis: using Big Data to inform tourism policy. Journal of Sustainable Tourism. pp.1-
20.
Gupta, M and et. al., 2020. COVID‐19 and economy. Dermatologic therapy.
Hill, P., Korczak, A. and Korczak, P., 2019. Political uncertainty exposure of individual
companies: The case of the Brexit referendum. Journal of Banking & Finance. 100.
pp.58-76.
Kelly, J., 2020. Airline finance and financial management. Air Transport Management: An
International Perspective. p.197.
Merkert, R. and Swidan, H., 2019. Flying with (out) a safety net: Financial hedging in the airline
industry. Transportation Research Part E: Logistics and Transportation Review. 127.
pp.206-219.
Minford, P., 2019. The UK Approach to Brexit. In Brexit Negotiations After Article 50:
Assessing Process, Progress and Impact. Emerald Publishing Limited.
Rosamond, B., 2019. Brexit and the politics of UK growth models. New political
economy. 24(3). pp.408-421.
Sun, Y. Y. and Lin, P. C., 2019. How far will we travel? A global distance pattern of
international travel from both demand and supply perspectives. Tourism
Economics. 25(8). pp.1200-1223.
Swidan, H. and Merkert, R., 2019. The relative effect of operational hedging on airline operating
costs. Transport Policy. 80. pp.70-77.
Vatankhah, S., Zarra-Nezhad, M. and Amirnejad, G., 2019. Tackling the fuzziness of business
model concept: A study in the airline industry. Tourism Management. 74. pp.134-143.
Woo, M., 2019. Assessing customer citizenship behaviors in the airline industry: Investigation of
service quality and value. Journal of Air Transport Management. 76. pp.40-47.
Yeh, S. S., 2020. Tourism recovery strategy against COVID-19 pandemic. Tourism Recreation
Research. pp.1-7.
Zhang, F. and Graham, D. J., 2020. Air transport and economic growth: a review of the impact
mechanism and causal relationships. Transport Reviews. 40(4). pp.506-528.

Zhu, S., Gao, J. and Sherman, M., 2020. The role of future economic conditions in the cross-
section of stock returns: Evidence from the US and UK. Research in International
Business and Finance. 52. p.101193.