Thats the day the U.K. government first advised Britons abroad to return home as soon as possible in advance of impending travel restrictions because of the growing coronavirus pandemic. But EasyJet could steal an increasing amount of market share from the legacy full-service carriers. At the end of January, EasyJet announced that it had secured another $1.9 billion through a five-year loan, secured against its aircraft. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. Clicking on the following button will update the content below. The global, interconnected nature of the aviation industry means that airlines, lessors, MROs and suppliers are highly vulnerable to external factors out of their control. Prioritising slot-constrained airports as these are where customers want to fly to and from and as a result have superior demand and yield characteristics. Ties are banned except for pilots! Adjust your investments to This will show how its critically important for EasyJet that strategic alliance, size and technological innovation have on its profitability. British Airways. easyJet is building a network of key cities, broadening their presence across Europe. Statista assumes no Healthcare workers were exposed to this highly infectious virus during the pandemic and suffered several social and psychological consequences, such as anxiety, psychological distress, and burnout. Failure to acquire adequate funding for your business can damage the chances of your business succeeding. Difficulties associated with a specific risk are transferred to another party, often insurance companies for coverage like cybersecurity liability insurance.Examples of risk transfer include: buying business interruption insurance to handle unplanned expenses in the aftermath of a cyber attack; reducing the likelihood of project That delay exposed EasyJet to greater risk of both hefty fines from Britains chief data protection regulator and class-action lawsuits from customers. Manual data entry opens your organisation up to costly data entry errors. Most of Europe was in the yellow category, requiring 10 days of self-isolation when coming back, and with the U.K. government still advising against leisure travel. EasyJet may be especially good at outbound logistics lined to its marketing and sales operations and supported by its technology development. Since the start of the pandemic, it has sold and leased back58aircraft, raising$2.1 billion. This will identify its strength, weaknesses, opportunities and threats. The company benefits from being one of just four airlines globally thatcurrentlyhave an investment-gradecreditrating, according to Gerald Khoo,a transportation analystwith brokerage firm Liberum. Copyright 2003 - 2023 - UKEssays is a trading name of Business Bliss Consultants FZE, a company registered in United Arab Emirates. Balance your retirement plan with your other financial goals. ECONOMIC the travel industry is vary recession prawn and also very sensitive to changes in oil prices. By mid-May, most of the major European nations had administered first doses to just over a third of adults amid critical vaccine supply shortages and concerns about rare but dangerous blood clots linked to AstraZenecasand Johnson & Johnsonsvaccines.Without a brisker vaccination pace, a third wave of infectionskeeps threateningto take hold in Europe. EasyJet is also Europes leading low-cost airline having completed a merger deal with Go to create Europes number one low-cost airline. No plagiarism, guaranteed! Healthcare workers were exposed to this highly infectious virus during the pandemic and suffered several social and psychological consequences, such as anxiety, psychological distress, and burnout. Risk 2: Geopolitical instability. These moves enabled EasyJet to reduce its operating costs, excluding fuel, by about 31% in the year through Sept. 30, 2020. Airlines in general are already coming off their worst year on record: Thanks to the coronavirus pandemic, the industry collectively lost $118 billion in 2020, according to the International Air Transport Association (IATA). EasyJet, on the other hand, flies fewer routes but operates from many more primary airports, with a heavier focus on Western Europe. It is possibly not as good in terms of operations and its inbound logistics. Potential negative outcomes include bad publicity and a FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. Background Coronavirus disease-19 emerged in December 2019. Terms & Conditions. We will consider the value chain for EasyJet in more detail later in our discussion. Developing the range of ancillaries on offer such as the Inflight retail proposition. WebSupport Risk Management by conducting risk awareness workshops and trainings. The increase growth of world tourism will offer opportunities in terms of undertaking joint venture with local/foreign travel companies; hence, Going places and Thomas Cooke are already providing such services to growing number of holidaymakers each year. But in the past, he says, most budget airlines have fallen down on execution, unable to make package holidays a profit-driver. WebAccordingly, children enrolled in childcare before age 12 months had experienced 0.5-0.7 more infections at age 6 years (in total 4.5-5.1 infections) than peers enrolled at age 3 years, differences that persisted throughout adolescence. This level of disruption and deterioration of the operation cannot continue," the email reads. The type of childcare had little impact on infection risks. Get the best reports to understand your industry. With so much uncertainty, leisure travelers are holding off on booking summer flights, prolonging EasyJets pain. In March 2020, he wrote to EasyJets chairman, John Barton, and demanded the company terminate the contract, citingforce majeure. SOCIAL changes in consumer taste and lifestyle represent both opportunities and threats for the industry. WebEasyjet favours an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. Over time, a brand may experience enough negative interactions that its reputation is placed into a vulnerable position. Competitive pressure. A strong and visible brand to create a high level of awareness with consumers. Deliver strong on-time performance, which is consistent with the focus on slot constrained, congested airports. Hover your cursor over an icon and you can see what type of plane it is, which airline it belongs to, where it is flying to and from, even its altitude and airspeed. In 2020, it transported a That move also diluted Haji-Ioannous stake in the companys stock from more than 34% at the beginning of 2019to just under 30%, making it easier for EasyJets board to ignore the demands of its querulous founder. So when the industry was slammed by COVID-19, government was responsive to pleas for help. If it failed to do so, he threatened to call a vote to remove one director from the board every seven weeks, until the board acquiesced. )The crisis has also posed complications for the 54-year-old Lundgren that his competitors dont face, including some particularly unwelcome excess baggage in the form of Stelios Haji-Ioannou. The airlines hopes for summer 2021, like those of almost all airlines, rest on vaccinations. But what are the internal weaknesses suffered by EasyJet? Having considered the possible future opportunities what are the potential threats that EasyJet needs to bear in mind? To enjoy unlimited access to our journalism, subscribe today. All airline companies within the industry will have similar value chain, which will include activities such as obtaining fuel, designing fare structures, airport facilities, developing co-operative agreements, and providing customer service. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! Given that they were doing almost nothing before, there is a big opportunity to move from zero to something, he says of the holiday tours. easyJet is delivering its strategy through four strategic priorities, which define the areas of focus to achieve their ambition. Although mostly private now, many of these airlines were once state owned, and some still have not insignificant government stakeholdings. Haji-Ioannou founded EasyJet in 1995, eventually using it as a springboard to create of an Easy-branded empire that extended from car rentals and pizza delivery to a hemp business. The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. All Rights Reserved. In the long term, this is concerned with the extent to which the organisation is operating profitably. Strategic risk represents one type of risk that businesses face, along with risks like operational, financial, and regulatory, to name a few. As a result, it finished 2020 with more aircraft in its fleet than it had at the beginning of the year, despite the pandemic-induced travel doldrums. Please do not hesitate to contact me. Supported by innovative and effective advertising. This analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. EasyJet is forever trying to attain a cost level that is low relative to its competitors. Since March 2020,European governmentshave provided more than$32.2 billion in bailouts to the airline industry,through a mix of grants, loans, and debt-for-equity deals, according to a report from HSBC. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. Founded in 1995, low-cost carrier EasyJet established itself among the largest airline based in the United Kingdom by passenger numbers. In many instances, strategic risks and the other kinds of risk will impact one another as they are interconnected. There are potential opportunities in terms of new routes and expansion of services offered, EasyJet has already launched a number of new European routes, how about expansion into the Asian Pacific? As both employees and customers are put under increased stresses, the potential for heated exchanges becomes a risk. Strategies are largely determined by the extent to which they deliver best value to both customers in terms of being competitiveness in the marketplace (leading low cost airline) and also to provide value to shareholders. The fuel-efficient jets could help EasyJet reduce its carbon footprint at a time when consumers and governments seemed increasingly likely to hold airlines accountable for their climate impact. Hopes for an early summer 2020 recovery were dashed when the U.K. government decided that it would impose a mandatory two-week period of self-isolation on all those arriving in the country. Those planes are Airbuss most fuel-efficient models, offering operational savings for EasyJet in the long run. In the May showdown vote, the disgruntled founders effort was roundly defeated, with 99% of the shares not held by the entrepreneur and his family casting ballots against removingthe directors. Cost advantages might be achieved because of EasyJets efficient use of airports. A typical approach for risk identification is to map out and assess the value chains of all major products. Advantages of Choosing In-House. Registered office: Creative Tower, Fujairah, PO Box 4422, UAE. This text provides general information. The minute consumers start to make a choice based on this, and I think they will, an emphasis on sustainability will pay off, says BCG consultant Molenaar, and EasyJet has been out front in preparing for this.. But the training center is the only part of EasyJets operation at Gatwick still humming. Objectives To assess the psychological distress, anxiety, depression, coping strategies, Also, suffers weakness in the area of hospitality in terms of on board offer of Free Lunch, the eliminating of free catering on board may result in loss of potential customers. The carriers were expected to pare their loses to about$38 billionthis year, as vaccines are rolled out across the world. Protect and build on easyJet's strong brand, Provide an easy and reliable customer experience. Transfer the risk. Porter comments on cost leadership as the low-cost producer in its industry must find and exploit all sources of cost advantage (Porter M.E (1980)). In addition to that, EasyJet has been offering no in-flight meals, no in flight movies. Powered and implemented by Interactive Data Managed Solutions. This enables easyJet to be efficient with network choices, with an emphasis on maximising returns. Improving CSAT across the whole customer journey. He also likes the site because it allows EasyJet to easily gather competitive intelligence about the performance of rival airlines. Yield management is a form of risk management and therefore, adds value. Lundgren has pulled every financial lever available to him to keep EasyJetaloft. The website features a map of the world that displays a small airplane icon for every flight in the air, based on radar and transponder data. The company has announced plans to reduce its 15,000-person workforce by 30%. Still, it wasnt spared from the industrys general carnage. To accomplish that, Lundgren has taken drastic steps. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. Easy Jet: Company Operation Strategy : Historical-Hall-2840 But nothing has been normal for EasyJet since March 23, 2020. This will involve retention of best salespeople supported by HR management, engineering support in terms of maintenance of the web page supported by technology development to ensure that web site has the latest prices and route and flight information. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. We're here to answer any questions you have about our services. Our mission to make business better is fueled by readers like you. Brand Awareness is another strength that is attributable to the company In November 1999, selected as a business super brand by the Super Brand Council, recognising EasyJet as an outstanding brand name. 8. Table 1 shows that EasyJets sales has increase year on year since 1998, with profit and gross margins also experiencing a positive trends. Legal and regulatory change. Finally, the key to sustaining high levels of growth is the scalability of the operations. As a result, EasyJet occupies a kind of middle groundin both pricing and costsamong European carriers. The focused network strategy can be summarised as follows: easyJet recognises that the continued evolution of our product portfolio represents a significant opportunity to build on spend per customer, delivering enhanced sustainable returns. It takes up to last extend in the time. Lundgren had been an industry leader in trying to position EasyJet for this new world. Hes running the business to make it as lean as possible, and you cant be a nice guy and do that, Kotze says. At the end of March 2020, EasyJet grounded its entire fleet. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. The CEO told theFinancial Timesthat Haji-Ioannous campaign was highly undesirable, unhelpful, and a distraction. EasyJet pointed out that the contract contained noforce majeureclause. It has been streamlines by using e-commerce, firstly by telesales and now through the Internet. Enabling risk management through a easyJet will maintain its advantageous cost position through continued cost action. Back in 1995 when EasyJet was lunched it was tipped by most to fail with its no frills strategy. It moved aircraft maintenance at three of its U.K. airports, which had been contracted out, back in-house. Objectives To assess the psychological distress, anxiety, depression, coping strategies, This is critical for EasyJet having analysed the competitive rivalry position in the industry. And hes moved aggressively to grab additional takeoff and landing slots in markets he sees as important. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. The primary weakness is the perception of low quality low cost can also be seen as low quality service than that offered by the established national airline i.e. And the company continued to insist it saw the opportunity for wins amid the travel industrys carnage: Europes legacy carriers were hurting even worse than EasyJet, which offered the discount airline a chance to gain new flight slots at key airports in Paris, Milan, London Gatwick, and Geneva. Given EasyJets cash burn, it needed to raise more moneyand quickly. Strategic risk management is the process of identifying, quantifying, and mitigating any risk that affects or is inherent in a companys business strategy, strategic objectives, and strategy execution. Organizations continue to develop new applications in or migrate existing applications to cloud-based services. Implementing this strategy successfully depends on EasyJets ability to deliver enhanced benefits to customers over its competitors together with low prices. They assess the different risks throughout all areas of the EasyJet business. EasyJets competitive advantages via low prices are sustained in a number of ways. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. After implementation, these are areas still must be monitored by leadership to ensure the plan's goals are being achieved. As opposed to cost leadership, in which businesses rely on reducing costs to gain a significant market share, a differentiation strategy is typically It is not helpful to have a shareholder barking up managements neck the whole time, Morningstar analystKotze says. Haji-Ioannou insinuated that this was evidence of the corruption hed long alleged. And it secured two different term loans totaling$563 million, due for repayment in February 2022. EasyJets decision to use its aircraft as collateral for loans it needed to get through the pandemic means that its cost base will be higher going forward, once debt service is included in the calculations, says Savanthi Syth, an airline analyst for brokerage Raymond James & Associates: Theyve traded liquidity for today in exchange for their aircraft ownership costs going up in the future.. In April 2020, EasyJet announced that it had reached an agreement with Airbus to defer delivery of 24 of the aircraft, meaning it would take on no new aircraft in 2021. We are happy to help. And he was not a happy shareholder: For a decade, he had sparred with a succession of EasyJet CEOs and boardsfaulting them for overly ambitious and costly expansion plans and for ordering too many new aircraft from manufacturing giant Airbus. This analysis will highlight the fundamental changes that the airline industry is undergoing, especially; in defence to the turbulent environment it faces from exogenous forces (terrorism, oil prices, SARS etc) and endogenous forces. In an interview with LondonsEvening Standard newspaper in January, Lundgren sounded down, admitting he missed frequent trips to the Spanish island of Majorca, where he owns a house and where he and a friend also own a recording studio. Are you interested in testing our business solutions? In June, the airline found a deft way to simultaneously relieve the pressure from its cash burn and Haji-Ioannou: It raised more than$631 millionto help it weather the pandemic by issuing new shares equivalent to 15% of the companys outstanding share capital. Opting for in-house initiatives provides several advantages that can potentially increase margins and overall efficiency, including: 1. Looking for a flexible role? And Lundgren, who took overin late 2017, had big plans to build on that differentiation with potentially lucrative new ventures, including vacation packages, more benefits for business, and a new loyalty program. Our revenues have been benefitting from data projects in late yield initiatives and differential seat pricing. Create a retirement strategy that diversifies your assets and manages risk. The second is the threats from substitutes, rail travel v air travel, the growing demand in Eurostar and cruses. However the sustainability of competitive advantages may be problematic: as rivals copy successful strategies, EasyJet will loose its initial advantages. After overcoming the many hurdles of producing a model with a viable context and associated risk factors, often the user of the innovation is neglected. EasyJet raised $1.5 billion by selling seven-year bonds, with a 1.875% annual interest rate. He also threatened to sue the airline if its payments to Airbus pushed it toward bankruptcy. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. The 2002/03 annual report reconfirmed this business model of the airline: Another price-based strategy is the hybrid strategy this seeks to achieve an element of differentiation and a price lower than that of competitors. EasyJet announced it had lost more than $1 billion in the 12 months through September 2020. Effective use of digital and data tools to underpin growth and deepen customer relationships. This also reduces the marginal cost of incremental growth; increasing scale brings valuable economies (Johnson, G., Scholes, K., Whittington, R., (2005). At the same time, it was wooing at least some business travelers by differentiating itself from no-frills rivals like Ryanair and Wizz, offering some perks and serving first-tier airports. Thats better, but still a big burden on, say, a family of four. The risks are Customers reaction to a product Change in market dynamics Providing product differentiation Convincing need for your product/service Many startups/new business ventures fall in this segment. In terms of support activities, EasyJet takes advantage of technological developments in order to reduce costs. Hannibal HanschkePool/AFP via Getty Images, Christoph SoederPicture Alliance via Getty Images, Chris RatcliffeBloomberg via Getty Images, one of the biggest winners in the European air-travel dogfight, agreed in January 2020 to deferred prosecution agreements, began purchasing carbon offsets for the CO2 of all its flights, might not fully recover from the pandemic until 2024, LinkedIn has officially entered its cringe era, and its working. WebWhat are the advantages and risks associated with low-price strategies? A classically trained trombone player who has said he went into business only because he failed to get into Londons Royal Academy of Music, he said he hadnt been playing his instrument lately because I dont have the inspiration for it. He said hed been trying to draw lessons in resilience by rereading HemingwaysThe Old Man and the Sea, finding perhaps parallels between the Job-like fate of its protagonist and his own plight. Continuing to drive product conversions by improving the way ancillaries are sold and product merchandising. Budget airlines that rely on the leisure market make most of their money from April to August. Most theories argue that strategic success and improved wealth generation stem from two strategies. Enterprise risk management does not create the organisations strategy, but it helps in understanding the risks associated with alternative strategies being considered and, ultimately, with the adopted strategy. Just two EasyJet aircraft were in the air, one en route from Londons Gatwick Airport to Lyon in France; another from Belfast to the English Channel island of Jersey. All of those (political, economic, social, technical, legal and environmental) factors will to some extent apply to the airline industry. EasyJet airplanes parked on the tarmac during the official opening of Berlin Brandenburg Airport on Oct. 31, 2020. 2023 Fortune Media IP Limited. The concept of the value chain is particularly useful in understanding an organisations strategic capability since its concentrates on value activities and the linkages between activities rather ran just resources. In April 2020, the airline was able to negotiate a$845 millionloan through the U.K. governments COVID Corporate Finance Facility for large U.K. employers. Diversification. The strategy risks serious disruptions to their customer service processes as employee morale drops at the same time that wait times for customers increase. on its competitive advantages - an unparalleled network and market positions, efficient low cost model, well-known brand and strong balance sheet - positioning easyJet to deliver sustainable and disciplined growth and returns for shareholders. Offers may be subject to change without notice. Lundgren and the board were frustrated. The threats are in terms of fines and rise in cost of raw materials. EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs and cost drivers. EasyJet is forever trying to attain a cost level that is low relative to its competitors. Analysis of financial resources in order to understand the strategic capability of EasyJet will need examination of financial capability and performance. In practice, this means EasyJet has little chance of beating Ryanair or Wizz head-to-head on routes and pricing. This report will provide a detailed analysis of EasyJets current corporate appraisal or SWOT analysis. Marketing and sales will involve making customers aware of EasyJets services are price information and also selling. Johan Lundgren, the chief executive officer of EasyJet, one of Europes largest budget airlines, is a fan of Flightradar24. Many full-service airlines are locked into hub-and-spoke flight networks that limit their scheduling flexibility, BCGs Molenaar says. Get in touch with us. The airline founders misgivings had only mounted after the aircraft maker agreed in January 2020 to deferred prosecution agreements with the U.S., France, and the U.K. and to pay billions of dollars in fines stemming from charges that it had for years routinely bribed airline executives to secure contracts.When the pandemic struck, the aggrieved founder saw an opportunity to force EasyJet to abandon the deal. Applications in or migrate existing applications to cloud-based what are the risks associated with easyjet's strategy travel, the key to sustaining levels. United Arab Emirates underpin growth and deepen customer relationships EasyJet in the time or Wizz on. If its payments to Airbus pushed it toward bankruptcy efficient with network,! 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