But these savings barely stanched the arterial bleed of cash gushing from the companys coffers:In 2019, the airlines operations had generated more than $1 billion in cash. When the risks are specific to a certain activity the risks will be managed, and maintained Ive always said the four core markets are where we want to put our focus on U.K., Germany, France and Italy, he told the World Travel Market conference in 2018, shortly after the Air Berlin deal concluded. After implementation, these are areas still must be monitored by leadership to ensure the plan's goals are being achieved. Background Coronavirus disease-19 emerged in December 2019. easyJets strategy will seek to continue to lead the market in sustainability, working with our partners to achieve our Net Zero Roadmap and the decarbonisation of the aviation industry. For the battered airline, 2020 couldnt end soon enough. Now, at the cusp of a summer season that normally would be the source of the majority of EasyJets profits, the airline and its CEO face what could be a make-or-break season. Investments in assets are also key consideration in value creation in that consideration of the extent to which assets and working capital are being utilised. Appendices 1. Therefore, it is vital for EasyJet to have a thorough comprehension of their costs WebThere is one main reason which influences these economic factors is the recession in the Easy jet. It moved aircraft maintenance at three of its U.K. airports, which had been contracted out, back in-house. EasyJet through its use of an overall cost leadership strategy can use internet-based technologies to reduce value chain costs in a variety of ways: On-line bidding and order processing to eliminate the need for sales calls and decrease sales force expense. Adjust your investments to This report will provide a detailed analysis of EasyJets current corporate appraisal or SWOT analysis. EasyJets overall cost leadership strategy uses low costs at each point in the value chain to lower costs. The airline has differentiated itself from other budget carriers by serving top-tier European airports. Low price/low added In addition to that, EasyJet has been offering no in-flight meals, no in flight movies. Free resources to assist you with your university studies! The value chain analysis will show the total value added by the airline industry and EasyJet. To what extent does EasyJets concentration on Price wars are becoming more prevalent as traveller use the Internet to compare prices and shop around. Our academic experts are ready and waiting to assist with any writing project you may have. The U.K. requireseven those returning from green countriestake COVID-19 tests before boarding a plane to return to the U.K. as well as within two days of returning. POLITICAL Following the European deregulation of commercial aviation, a fleet of low cost carriers are reshaping the local airline landscape. At the same time that it was offloading planes to raise cash and placing others into long-term storage in boneyards, the company still took delivery of 14 brand newAirbus A320 and A321 Neos. Enabling risk management through a 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). That loan would buy EasyJet some more time. In mid-May 2020, the company revealed it had been hacked. Lundgren and the board were frustrated. This will provide an evaluation of the external business environment in which the company operates. He said he had discovered a secret meeting in Switzerland, arranged by Airbus, between top EasyJet executives and a lawyer who, according to documents revealed in the Panama Papers leak, may have helped clients evade international sanctions through offshore shell companies. If you need assistance with writing your essay, our professional essay writing service is here to help! Increasing automation driving self-service capabilities for customers. The next quarter was not much better: A U.K.-wide national lockdown was imposed in November and, after a brief easing of restrictions in the run-up to Christmas, again in late December. Meanwhile, the U.K. has announced international travelwill resume as of May 17, but willoperate according to a traffic light system, with arrivals from red-, yellow-, or green-designated countries subject to different requirements. EasyJet cost efficiency is achieved in a variety of way as shown in the following diagram: The success of low-fare (cost) strategy is primarily dependent on the maintenance of a low cost base. These moves enabled EasyJet to reduce its operating costs, excluding fuel, by about 31% in the year through Sept. 30, 2020. Pandemics, lockdowns, trade disputes, financial crises and more can depress travel demand and threaten the bottom lines of industry players. The airline began purchasing carbon offsets for the CO2 of all its flights in 2019. Yield management is a form of risk management and therefore, adds value. WebDeloitte's new survey report offers a clear view of how companies view and manage the risks that affect their business strategy, based on recent survey results. easyJet is building a network of key cities, broadening their presence across Europe. Savings made from e-commerce is another source of value creation. 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. These large airline groups are so big and so important for so many economies that the national governments will do whatever they can to keep them alive, saysDirk-Maarten Molenaar, atravel and tourismindustry consultant at Boston Consulting Group. After rejecting the bid, easyJet plans to raise 1.2 billion pounds ($1.7 billion) to stay in the race by funding growth at airports. So when the industry was slammed by COVID-19, government was responsive to pleas for help. In terms of competitive advantage, the internet offers overall cost leaders new abilities to reduce costs in primary activities such as marketing (i.e. Statista assumes no Given the fact that the company offers Directly accessible data for 170 industries from 50 countries and over 1 million facts: Get quick analyses with our professional research service. Overall the analysis will highlight the inherent threats and weaknesses suffered throughout the industry, and also the importance of innovation to maintain low cost advantage, alliances and size to success. The primary outcomes were anxiety (GAD-7), depression (PHQ-9), risk perception towards COVID-19, interprofessional teamwork attitude, and coping strategies during the Coronavirus disease-19 pandemic. WebSome compliance risks are specific to an industry or organizationfor example, worker safety regulations for manufacturers or rules governing the behavior of sales representatives in the pharmaceutical industry. Protecting and building brand awareness and consideration. The airline resumed flying on June 15, 2020, with limited routes within the U.K. and to France. 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. But EasyJets contract required itto paythe aircraft maker at least $6 billion through 2023a sumconsiderably greater than the airlines entire current market capitalization. The web-based questionnaire was distributed to Egyptian healthcare workers from the 20th of April 2020 to the 20th of May 2020. They have focused on expanding into new markets in Eastern Europe. easyJet seek to strengthen their position in key markets as the competitive landscape evolves. (Lundgren declined to comment for this article.). In terms of strategy, many factors are outside the control of the company, such as use of high quality components and low defect rates for its aircrafts. This analysis outlines for EasyJets management how individual activities may be altered to reduce costs of operation or improve the value offered to customers. Noting that EasyJet had failed to say exactly how the deferral affected EasyJets cash burn, the founder said that EasyJet might have engaged in market manipulation by failing to disclose such details and by using overly optimistic forecasts for when the companys revenues and profits might recover. The first is to reduce the bottom line costs of operation (low cost strategy) and the second is to increase the value of the organisation and its reputation to customers, so that they will demand more or pay more for what they receive (differentiation strategy) (ACCA Paper 3.5 (2001)). Therefore, capability is strongly related to the way that resources are used and controlled. Continuing to drive product conversions by improving the way ancillaries are sold and product merchandising. WebEasyjet favours an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. Please do not hesitate to contact me. Previously it used telesales and now sales are through e-commerce web site. But EasyJets contract required it to pay the aircraft maker at least $6 billion through 2023a sum considerably greater than the airlines entire current market 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. Undoubtedly, one of the biggest differentiation strategy risks that businesses are facing when undertaking this approach is consumer disappointment. As funding from operations are clearly a major contributor to value creation. S&P Index data is the property of Chicago Mercantile Exchange Inc. and its licensors. 2023 Fortune Media IP Limited. Here you can choose which regional hub you wish to view, providing you with the most relevant information we have for your specific region. Finally, EasyJet has sustained its price-based advantage by focusing on market segments where low fares are critical and valued by customers. 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. 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? Do you have a 2:1 degree or higher? EasyJet is forever trying to attain a cost level that is low relative to its competitors. As it turned out, it wouldnt need those flights. 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. EasyJet appears to have internal strengths in terms of brand awareness, cash flows, and operational efficiencies. The strategy risks serious disruptions to their customer service processes as employee morale drops at the same time that wait times for customers increase. EasyJets first generic strategy is to achieve an overall cost leadership in the low cost airline industry. Easyjet are situated extremely in strategic option 1 ( low monetary value, depression added value ) The eight nucleus strategic options are: 1. The reason for EasyJet to put so much emphasis on the human factor as one of the primary risk sources is quite understandable. Our mission to make business better is fueled by readers like you. Having fought off Haji-Ioannou, Lundgren and EasyJets C-suite faced other foes they couldnt control. It now owns just over half its fleet, down from 70% in 2019and six of every 10 planes it does own have been pledged as collateral against its loans. easyJet aims to deliver a seamless and digitally enabled customer journey at every stage and is continuously working to enhance the customer experience. easyJet continues to optimise its network to ensure capacity is deployed in the markets where the strongest demand and returns are seen. 8. EasyJet also faces potential threats in terms of unprecedented tragic events like September 11th. This section we will investigate EasyJets resources as a means of assessing the organisations strategic capability. Significant investment in assets and managing financing costs. Bills will pile up, suppliers will need payments, and your employees will be expecting their salaries. Some wondered if Lundgren, who has a reputation for being a nice guy, had the stomach for the kind of aggressive cost cutting thatrunning a budget airline, especially during a pandemic, demanded. Potential threats in terms of changing social trends like holidays outside Europe (many now want to experience the eastern cultures and travel to holiday destinations like China and Japan) and also travelling via the EuroStar to Paris etc. Johan Lundgren, the chief executive officer of EasyJet, one of Europes largest budget airlines, is a fan of Flightradar24. major banks and insurance companies relocation call centres in Asia. Hes running the business to make it as lean as possible, and you cant be a nice guy and do that, Kotze says. The carriers were expected to pare their loses to about$38 billionthis year, as vaccines are rolled out across the world. And while optimism about leisure travel in Europe is slowly rekindlingthis week, the U.K. announced a resumption of international travel to a limited number of destinationsEasyJet still faces plenty of potential turbulence, as the likelihood of a robust summer season recedes. Having considered the possible future opportunities what are the potential threats that EasyJet needs to bear in mind? Since the start of the pandemic, it has sold and leased back58aircraft, raising$2.1 billion. Given EasyJets cash burn, it needed to raise more moneyand quickly. The airlines hopes for summer 2021, like those of almost all airlines, rest on vaccinations. EasyJet had a long-term contract with the aerospace giant that would require it to take delivery of more than 100 new planes, including at least 55 by 2024. The company negotiated with trade unions to move more of its pilots and cabin crew on to seasonal contracts, which would allow the company to better match its expenses to periods, such as the summer, when it generated moreprofit. Finally, in February 2021, the company took advantage of a sudden uptick in investor confidence on the news that vaccinations in the U.K. might allow international travel to return by late summer. 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. It is here that EasyJets pilots practice and maintain their skills. Clicking on the following button will update the content below. He added Barton and Lundgren to the list of scoundrels he wanted to oust.Haji-Ioannou kept upping the stakes. Paperless operation, the management and administration of the company are undertaken on IT systems, which are accessed through secure servers; provide flexibility in the running of the airline. EasyJet also operates a flat management structure, which may lack a formal discipline that is needed as the organisation grows. Its not clear what role Haji-Ioannous pressure played in this decision. Over time, a brand may experience enough negative interactions that its reputation is placed into a vulnerable position. Finally, the key to sustaining high levels of growth is the scalability of the operations. EasyJets new holiday division launched in December 2019, just months before the pandemic took hold. A no frills strategy is often associated with low cost airline companies like EasyJet. 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. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. In the long term, this is concerned with the extent to which the organisation is operating profitably. The primary outcomes were anxiety (GAD-7), depression (PHQ-9), risk perception towards COVID-19, interprofessional teamwork attitude, and coping strategies during the Coronavirus disease-19 pandemic. The airline also managed to reduce itsfuel cost per seat flown by 2.9% through a series of small changes: instructing pilots to use only one engine when taxiing, for example, and to climb to cruising altitude as fast as possible, since level, higher-altitude flying is more fuel-efficient. Many of those airlines are limping along on government funding they might never be able to repay, says Leah Ryan, managing director of Alton Aviation, a leading industry consultant. 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