EasyJet: Market Structure, Economic Factors, and Brexit Impact

This report provides a comprehensive analysis of EasyJet's business operations, focusing on its market structure within the UK, identified as an oligopoly. It examines the key economic factors influencing the airline, including GDP, foreign exchange rates, inflation, employment, disposable income, labor costs, and minimum wage, highlighting their potential positive and negative impacts. The report further explores the implications of Brexit on EasyJet's business, discussing the challenges and opportunities arising from the UK's departure from the European Union. Additionally, it analyzes the significant impact of the COVID-19 pandemic on EasyJet's sales and overall business performance, considering the disruptions caused by travel restrictions and reduced demand. The report concludes with a synthesis of these factors, offering insights into EasyJet's strategic positioning and future prospects within the dynamic aviation industry.

Business

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Discuss the market structure of UK in which the EasyJet operates.......................................1
TASK 2............................................................................................................................................3
Discuss the economic factors within the UK hat affects the business of the EasyJet............3
TASK 3............................................................................................................................................6
Discuss the likely impacts of Brexit on the business of EasyJet............................................6
TASK 4............................................................................................................................................7
Analyse the impact COVID-19 is likely to have on business of EasyJet...............................7
CONCLUSION................................................................................................................................8
References:.......................................................................................................................................9

INTRODUCTION
A business is term used for the enterprise that performs commercial activities to gain
profitability and productivity. In today’s era the businesses have shifted themselves towards the
technology to run their enterprise on the online platforms (Procacci, Phelan and Aste, 2020).
These businesses are termed as digital business. In this competitive world every organisation in
the economics is differentiated on the basis of number of buyers and sellers, price power,
competitions etc. And this is known as market structure. Market structure is a term used to define
the nature of the degree of competition prevailing in the particular market of goods and services.
It is also essential for the organisation to consistently analyse the economic environment of the
country in which it operates. The present report is on the EasyJet a low cost British airline.
EasyJet was started under the leadership of Greek- Cypriot entrepreneur Stelios Haji- loannou in
1995. The company flies both domestic and international routes the headquarter of easyjet is at
the London Luton airport, UK. The company operates its business in almost 30 countries across
the world. Easyjet is currently the second largest low cost airline in UK based on the number of
passengers. form is the seventh largest airline across the world. Easyjet has approx 15000
employees working in its organisation. Easyjet also trade and lease its aircrafts. The report
describes the oligopoly market structure in the UK within in which the EasyJet operates its
business activities. Oligopoly market structure contains few numbers of businesses and each of
them has no significant influence on each other and these few forms have the dominance in the
market. In the report economic factors such as currency fluctuations, foreign exchange rates,
unemployment, inflation etc. are briefly discussed with their affects on the business of EasyJet
UK. Brexit a crucial factor among the UK and it affects on the business operation of the EasyJet
in UK are also explained. Report also describes the impact of global Pandemic covid-19 on the
business operations and sales of the EasyJet in UK.
TASK 1
Discuss the market structure of UK in which the EasyJet operates
In the competitive markets, it is very important to analyse that in which market structure a firm
operates because market structure has great implications for the profits, prices, products and
suppliers of the firm (Indounas, 2018). Market structure helps us to depict how the organisations
are differentiated on the basis of types of products and services they offer and how their business
1

activities are affected by the external environmental factors. The market structure of the
organisation includes various determinants such as factors of production, numbers of buyers and
sellers, nature of product, entry barriers, government interventions etc. to understand the
operations of the firm. There are various forms of the market structure such as perfect
competition, Monopoly market structure, oligopoly market structure, monopolistic competition
market structure etc. in which the various firms of the UK operates their business activities.
EasyJet is a leading Airline company that operates in the oligopoly market structure of UK, a
market structure where there are few firms that offer such products or services to the large
number of buyers with dominance in the market (Thisse and Ushchev, 2018). It is market with
few businesses and higher dominance as companies collude together to set the price which are
non- negotiable and uncompetitive. Easyjet deals with the same service of transporation via air
through various aircrafts which have rare or no substitute therefore comes under homogenous
market structure. The services offered by the EasyJet have limited substitutes in the airline
industry with the same low cost. The firm believes that lower the cost of airline tickets, more the
people will fly.
Characteristics of the oligopoly market structure of easy jet, UK are discussed below:
 Interdependence
The firm's operating within the oligopoly market structure are independent as
there is influence of other firms operating in same industry. Major airline companies of the UK
operate under the oligopoly market structure. Easyjet operates in this market structure with the
few competitors like Ryanair, British Airways etc. The decrease of the prices of the easyjet has
made the company top most low cost flight airline thereby increasing its sales compared to other
companies.
 High entry Barriers
The barriers to entry in the oligopoly market structure are high the low barriers can bring
abnormal profits and which might reduce the market share of the dominant firms. But Easyjet
with its low cost airline has increased the competition and overcome the high entry barriers. The
reason for the high barriers to entry in airline industry in which Easyjet operates is due to the
government also as it may not grant the legal rights to the company's to land and fly the aircrafts
on the airports.
 Small number of firms
2

Very few numbers of firms that are operating within the airline industry of UK that
comes under the oligopoly market structure. Therefore there is high competition is between the
limited firm therefore the strategy of the rival company is easy to influence on other and also can
be easily recognised by other firms. Due to the small number of firms they can be the possibility
of the collusion between the various companies of the airline industry.
 Price making ability
In the oligopoly market structure the few firms has an ability and capacity of the price
making. EasyJet introduced the low cost airlines and rapidly increased its sales with this strategy
of price making. Due to this the dominant company like British Airways was losing its market
share and therefore introduced its low cost service. Hence price making also benefits the Easyjet
to become top most low cost airline of UK.
TASK 2
Discuss the economic factors within the UK hat affects the business of the EasyJet
External analysis also known as micro environment of country in which the organisation
performs its functioning has a very crucial role in the operations of the organisation. There are
the several factors in the macro environment of a particular country which creates the potential
impact on the functioning of the organisation (Etro, 2019). One is the external factor is economic
factors are factors that affects the economy of the country as well as organisation either
positively or negatively. Various economic factors includes interest rate, law, policies, wages,
GDP, inflation rate etc. For every organisation to grow and prosper with high productivity and
profitability the economic stability is must. It is highly believed by the economic researchers,
that to run the organisation for the long-term it is very important for a business to operate
country that has economic stability.
 GDP of UK: GDP is a term used for the gross domestic product which means the market
value of the finished product and services which are produced by the organisations within
the country borders for the particular time period (Qiu, Zhouand Wei, 2018). GDP of the
country is measured on the annual basis. GDP provides the economic framework of a
particular country which helps you to calculate the growth rate and economy size. Due to
Covid-19 the decrease in the GDP of the UK but still it depicts the economic stability.
3

Hence therefore Easyjet has a great opportunity with its low cost flights to foster its profit
and revenue in UK market.
 Foreign exchange rate: Foreign exchange rate is the value of the currency of one nation
that will be exchanged with value of the currency of another country. Basically exchange
rate is the price at which there is exchange of currencies between the two different
countries (Cooley and Prescott, 2021). Foreign exchange rate of the UK keeps on
fluctuating that hinders the growth and profit margin of the Easyjet as the firm operates
globally. The reduce in the rate of the currency of UK can bring a loss to the Easyjet as it
is British company that operates in Euros. The fluctuation of exchange rate in the UK
disturbs the international payments and the price of goods of the EasyJet that affect
economy of the organisation.
 Inflation rate: The inflation rate is the price at which there is the rise in the level of the
demand price of goods and services in economy of the particular country. Hence,
inflation is the rate at which the price of the currency is declining and respectively price
of products are raised (Bonacich and Modell, 2021). High inflation in the UK economy is
beneficial for EasyJet to gain more profit. The control of inflation rate in UK can
decrease the price of the products and services of the EasyJet thereby reducing the
profitability and growth in economy of the organisation.
 Employment rate: Employment rate defines the measure to which labour resources are
being utilised by the country. In most simple words employment rate is the ratio of the
population between the number of people employed and unemployed. Employment rate
is the major cause to growth in GDP of a country. Low employment rate causes the low
GDP thereby creating the economic instability which will reduce the operations and the
functioning of the EasyJet in the UK market. The EasyJet with low price airline has given
assistance to many people to travel to their homes at low prices this has increased the
reputation of the company and thereby more employees are retained and hired.
 Disposable income: The disposable income is the personal income minus personal
income tax. Basically the disposable income is the spending limit of the consumers (Xie
and et. al., 2018). The Covid-19 has lowered the disposable income of the citizens of the
UK but the Easyjet is known for its low price fleets that created the benefit for the
Easyjet to attract high consumers. It was observed that due to high prices people were no
4

preferring to travel in aircraft but reduced price has helped the customers to rech fast by
travelling with air. This increases the profitability, net sales and hikes the revenue of the
Easyjet in UK.
 Labour cost: Labour cost is the amount of wage an organisation pay to its employees.
Labour cost also includes the employee’s benefits and the period Taxes of the employees
which are paid by the organisation. Due to Brexit the labour cost of EasyJet has increased
the employees are demanding for more income for their working hours. This factor is
creating a negative impact on the economy of the EasyJet. The increased labour cost is
also reduced the productivity of the EasyJet as there is no supply of employees between
UK and EU.
 Minimum wage: Minimum wages is the particular Amount that is compulsory for every
organisation to pay its employees as per the terms and conditions. In UK the minimum
wages is segregated on the basis of age (Pettifor, 2017). UK as the National minimum
wage policy for each hour the employees are working in the firm. The national minimum
wage of UK is 1,598.69 Euro per month. The Government of UK has announced to
increase in national minimum wage of the employees working in the United Kingdom by
2.2% till April 2021. Recently EasyJet operates in UK therefore offers every crew
members and other staffs minimum wage to support the decision of government of UK.
Hence, the organisation must be prepared for the consequences that firm can face due the
economic factors.
The recession of economy can give power to Easyjet as it offers the low cost airline service
across the world. There are several economic factors that might create an opportunity for the
EasyJet to grow its business and earn profit for the long term.
For the development of the country like UK and the organisation like EasyJet that is operating in
that country it is very important to consider the economic factors, as they have strong impact on
development and to build the economic stability. For the proper functioning of the United
Kingdom and its organisations, UK needs to be economic stable at macro level and to create the
competitive advantages and to acquire the long-term profitability and productivity the businesses
must create the stable economy and analyse the external economic factors that can hinder their
growth (Nikaido, 2015).
5

TASK 3
Discuss the likely impacts of Brexit on the business of EasyJet
Brexit is a term used for an exit of Britain (United Kingdom) from the EU (European
Union). The Brexit has created the adverse uncertainty in the businesses of UK (Mattiand Zhou,
2017). Brexit has negatively impacted the sales, exports and the cost of the businesses in the UK.
There is eventual decline in the sales of the businesses thereby increase in the labour cost,
reduction in the export of the businesses, financial cost are expected to increase due to the Brexit.
It has caused the disruption in the supply chain of goods and services from UK to EU which
reduced the sales as demand of the customers were hard to fulfil without availability of resources
and goods. The various Brexit impacts on the EasyJet, UK are highlighted underneath:
 Negative hiring impact: EasyJet before the Brexit has been carrying out the business in
Europe affiliated with EasyJet Europe. It is observed that EasyJet was relied on the
external immigrant’s workers for the staffing on airports and for the cabin crew in UK.
But Brexit has restricted the working and leaving of European's employees. Brexit has
caused economic uncertainty not able to hire talent from UK at reasonable price
(Congreve, Haldaneand Kumwenda, 2021).
 Unlikely to Ground Flights: Large amount of flights travelling between the UK and the
EU but the swirl of no deal Brexit has leaded to ground the flights reducing the air traffic.
For which the UK government has drafted the regulation that will be implemented on the
aviation industry of the UK.
 Negotiating new relationship: Earlier under the EU membership UK airlines were
having the liability to fly in the states of the EU with no restrictions but brexit it has cause
the restrictions over the transport of passengers and the cargo in the EU. UK seeking for
the various negotiable terms to allow the trade of airline services in the EU. If the
negotiable terms become too expensive then there will be no chance of Operations within
EU. Hence UK Government is creating the option of an operating licence from the EU
member state through which the aviation industries having those licence will be free to
operate their airline services within the states of the EU.
 Impact on cost base: The operating cost of the airline industry is based on the staff and
the fuel. Due to Brexit there were changes in the foreign exchange rates and that
6

impacted the fuel rates of the Easyjet. The cost base of the Easy jet has been affected
adversely due to the brexit.
TASK 4
Analyse the impact COVID-19 is likely to have on business of EasyJet
The global pandemic covid-19 has impacted the lives and businesses of the human being all over
the globe. The diseases has lead to lock down of the country's forcing people to keep their
businesses shut down and to stay at their home for the safety and security of lives of the humans
(Chatterjee, 2010). The government has also announced and implemented the complete
lockdown in UK due to which the whole airline industry including Easyjet, UK was completely
off the runways. EasyJet has faced many consequences due to the Covid-19.
Negative impact
 Employees were cut down: Due to Covid-19 the Government of UK grounded all the
airline industries including Easyjet for almost six months. There was no demand and
supply of the passengers in the aviation industry which increased the maintenance cost of
their fleets and resulted in cut down off employees. Easyjet has to cut down 30% of its
workforce as the company was facing liquidity and the financial losses due to the
complete lock down. It was very difficult for the Easyjet to pay salaries to their
employees when there was no income coming due to the restrictions on the airline
industries.
 Increase in cost of health related measures: The operating costs of the airline
industries have increased due to the covid-19. Easyjet is facing the high operating cost on
the health and safety measures required in both airports and the aircrafts for the safety of
the consumers travelling through EasyJet fleets. The government of UK has compulsory
made many health and safety requirements such as PPE kit, disinfection, temperature
check, sanitization, Covid-19 checkups etc. On airports and flights which requires lots of
funds which are given by Easyjet. Covid-19 has also reduce the load factor due to the
social distancing measures which means the fuel costing is same but the seats occupied
are less.
7

Positive impact
But it is also analysed that EasyJet as a leading low cost airline has greatly benefited from this
pandemic (Epps, 2017). After flights started the low financial conditions of people has made
them travel with Easyjet low cost fleets with all the safety measures. The fuel prices were also
reduced due to Covid-19 which was beneficial for the Easyjet. The company also traded and
leased its aircraft.
EasyJet responding to COVID-19
EasyJet is responding to the Covid-19 crisis very impressively the firm’s employees and the
workers are working very hard in providing the services to passengers with low cost and high
safety measures for their safe and secure flight to their homes. The firm is prioritizing the safety
and security of health of passengers first. The EasyJet has put air filtration systems n the cabins
for the safety of pilots and other crew members and also the cabins and the whole aircrafts are
disinfected after every journey. With this EasyJet is keeping high care for their employees and
passengers around the world for their health and well-being by providing them proper medical
care, regular Covid-19 test, sanitization, PPE kit etc.
CONCLUSION
It is concluded from the above report that every organisation operates under some kind of a
market structure such as oligopoly market structure, perfect competition market structure,
Monopoly market structure, monopolistic competition market structure etc. These market
structures describes the number of buyers and sellers, nature of product, competition, factors of
production and others factors that defines the nature and operations of the firm. Is also analysed
that economic factors of the country in which an organisation operates creates a likely impact on
the business operations, revenues, trading, profits and sales of the firm. Brexit in UK has adverse
impact on the foreign trade, supply chain, customer base and sales of the businesses that used to
operate in EU from UK. Covid-19 global pandemic has badly impacted the businesses due to
shutdown in the various countries globally but digital business has also gained benefits after the
post Covid-19 by selling products and service online with social distancing measures and healthy
safety measures.
8

References:
Books and Journals
Bonacich, E. and Modell, J., 2021. The economic basis of ethnic solidarity: Small business in the
Japanese American community. University of California press. Bonacich, E. and Modell,
J., 2021. The economic basis of ethnic solidarity: Small business in the Japanese
American community. University of California press.
Chatterjee, S., 2010. The impact of working capital management on the profitability of the listed
companies in the London stock exchange. Available at SSRN 1587249.
Congreve, E., Haldane, S. and Kumwenda, M., 2021. The policy response to Coronavirus: theory
and application. Fraser of Allander Economic Commentary, 45(1).
Cooley, T.F. and Prescott, E.C., 2021. 1. Economic Growth and Business Cycles. In Frontiers of
business cycle research (pp. 1-38). Princeton University Press.
Epps, P., 2017. Subsistence pattern and contact-driven language change: A view from the
EasyJet basin. Language Dynamics and Change. 7(1). pp.47-101.
Etro, F., 2019. The Romer model with monopolistic competition and general
technologies. Economics Letters. 181. pp.1-6.
Indounas, K., 2018. Market structure and pricing objectives in the services sector. Journal of
Services Marketing.
Matti, J. and Zhou, Y., 2017. The political economy of Brexit: explaining the vote. Applied
Economics Letters. 24(16). pp.1131-1134.
Nikaido, H., 2015. Monopolistic Competition and Effective Demand.(PSME-6). Princeton
University Press.
Pettifor, A., 2017. Brexit and its consequences. Globalizations. 14(1). pp.127-132.
Procacci, P.F., Phelan, C.E. and Aste, T., 2020. Market structure dynamics during COVID-19
outbreak. arXiv preprint arXiv:2003.10922.
Qiu, L.D., Zhou, M. and Wei, X., 2018. Regulation, innovation, and firm selection: The porter
hypothesis under monopolistic competition. Journal of Environmental Economics and
Management. 92. pp.638-658.
Rosamond, B., 2019. Brexit and the politics of UK growth models. New political
economy. 24(3). pp.408-421.
Thisse, J.F. and Ushchev, P., 2018. Monopolistic competition without apology. In Handbook of
Game Theory and Industrial Organization, Volume I. Edward Elgar Publishing.
Xie, C and et. al., 2018. An economic feasibility assessment of decoupled energy storage in the
UK: With liquid air energy storage as a case study. Applied Energy, 225, pp.244-257.
9