Category: EasyJet

Executive Summary

The business leader of easyJet is currently concerned about how focusing on key individuals, including customers, employees and suppliers, as stated in the company’s mission, will guarantee sustainable success in the present-day competitive airline market. Consequently, he has requested the respective departments to conduct a critical review of their systems, processes and practices as part of a major organisational reform programme. In line with this requirement, this paper critically reviews work-life balance (WLB) and communication-feedback systems, which form two approaches for studying staff retention.

Diverse information sources, including the available academic literature, key texts and online databases, will be used to gather data related to staff retention improvement at easyJet. Findings reveal that easyJet has effectively maintained low staff absenteeism and turnover through its employee engagement and work commitment initiatives. However, this paper recommends easyJet develop customised WLB and communication-feedback programmes that can augment its employee retention initiatives. This strategy is vital because it constitutes an opportunity for lowering operational expenses since improved staff retention leads to reduced costs associated with the recruitment, selection, training and development of new employees.

Introduction

easyJet is a globally recognised budget airline that operates between Europe’s major towns where it offers driving leisure and business travels. Its head offices are based in London Luton Airport. easyJet’s mission entails providing clients with secure, outstanding, worthy, steadfast and affordable air services. It achieves this goal by charging fares in line with the prevailing leisure and corporate market demands in all its European routes.

This company focuses on establishing and maintaining long-term relationships with stakeholders who contribute to making its operations possible, sustainable and dependable. Such individuals include suppliers, customers, employees and even communities within which this organisation is established. Using key texts, online databases and the existing body of academic literature, this paper investigates various research approaches deployed by authors to substantiate their claims regarding the selected issue of staff retention improvement at easyJet. Improving staff retention is found to align well with the concerns of this company’s stakeholders.

Customised work-life and communication feedback strategies are part of evidence-based research approaches that can be deployed to guarantee easyJet’s continued competitive advantage in the airline market.

The Rationale for Selecting Staff Retention Improvement

Improving staff retention has been selected because this practice ensures that organisations reduce operational costs incurred following the continuous recruitment, selection, training and development of new employees (Dharmadhikari 2013). Attracting and retaining top talents are usually a major priority for small, medium and large-sized organisations (Mandina & Karisambudzi 2016). In addition, it is important for any institution that seeks to review systems, processes and practices as part of its vital change agendas to appreciate employees’ contribution to the overall business performance.

According to Uitzinger, Chrysler-Fox and Adèle (2018), human resources form one of the critical assets for enhancing a company’s competitive advantage. Any strategy for improving customers’ relationships and enhancing organisational reputation starts by having a highly competent and committed workforce that can constantly communicate and portray a corporation’s good image to existing and new customers. Such workers should not have any plans of turning over in their mindset.

As a result, the issue of improving staff retention capacities was chosen because such a practice determines an organisation’s competitive edge through the increased productivity and management of customer relationships. Companies that have high employee retention levels end up attracting new workers who wish to be part of an organisation on a long-term contract, as opposed to encountering issues, which may trigger their desires to quit. According to Mandina and Karisambudzi (2016), staff retention is one of the issues that institutions, which seek to exploit cost competitiveness as a success strategy, should address proactively. easyJet has been experiencing challenges of increasing fuel and, consequently, fare costs.

For example, fluctuations in energy prices prompted it to implement the project technology, which saved it about 14 million Euros (easyJet plc 2017). Organisations such as easyJet, which need to benefit continuously from innovative technologies to reduce operations costs, cannot overlook the idea of improving their staff retention practices. As a result, easyJet will always be guaranteed the input of experienced employees who have a high probability of getting opportunities in other companies.

Literature Review

Staff Retention and the Underlying Factors

Several articles were taken from online databases such as EBSCOhost to support claims regarding the issue of staff retention. Mwasaru and Kazungu (2015) define staff retention as the ability to maintain a working environment that supports the demands of current employees to allow them to work without decreasing their productivity levels. The implication is that workers can consider leaving an organisation depending on different factors that may influence their decision-making processes. As shown in Figure 1 below, Mathimaran and Kumar (2017) identify some of these factors.

In the airline industry, retention may be influenced by elements such as huge workloads, poor work-life balance (WLB), unfavourable recognition and reward systems and inefficient communication and feedback systems (Sirgy & Lee 2018; Soundarapandiyan & Ganesh 2015; Carlson 2015). Nevertheless, after adopting literature review as their preferred research approach, factors identified by Sirgy and Lee (2018) constitute important concerns in any human resource department, irrespective of an organisation’s industry of operation. This research strategy allows authors to assess varied views regarding a single element.

However, it may lead to biased conclusions based on the number of studies consulted. According to Nizam and Kam (2018), companies establish human resource management departments to facilitate the recruitment of the most productive workers, remunerate them accordingly and resolve employee-employer and employer-employee conflicts. These efforts involve ensuring the existence of customised work-life balance structures and communication and feedback systems.

Staff Retention at easyJet

Key texts regarding the company under investigation, including data from its website, will be used to examine the issue of staff retention. easyJet bases its organisational culture on the issue of promoting employees’ continuous performance and engagement. Consequently, it can use them to achieve its goal of providing optimal customer services as a primary means of building long-term relationships. The article, easyJet plc (2017), which was accessed from key texts appropriate for this subject, relies on the company’s reports as its research approach. This strategy is advantageous because scholars have the opportunity of accessing first-hand data. However, company-related information may be misstated to satisfy the interests of specific stakeholders.

In the effort to remain positive and friendly to employees, easyJet’s managerial strategies aimed at ensuring effective chains of consistent and continuous communication regarding key issues that touch on employees (easyJet plc 2017). This situation explains its low rate of absenteeism. For example, in 2012, work attendance stood at 95 percent before improving to 96 percent in 2013 (easyJet plc 2017).

This company has maintained low employee turnover levels due to its effective human resource management practices. For example, in 2012, turnover stood at 7.5%, which reduced to 6.5% in 2013 (easyJet plc 2017). However, as argued in the section on staff retention and its influencing factors, the available literature from earlier mentioned information sources indicates other approaches that can be deployed to improve easyJet plc’s staff retention levels.

Work-Life Balance

A growing body of literature investigates strategies for improving retention capacities among workers. For example, Gözükara and Çolakoğlu (2016) use a qualitative research approach to identify communication, motivation, delegation and safe working environments as important factors that influence employee retention levels. Amid the importance of these aspects, Nizam and Kam (2018) argue that work-life balance strategies are rarely addressed when examining the issue of improving employee retention levels.

Hence, the adoption of customised work-life initiatives as a way of retaining employees provides an additional perspective on how easyJet can augment its performance, thanks to the existence of experienced personnel. According to Gözükara and Çolakoğlu (2016), supervisors in some organisations are not aware of the crucial role they can play in boosting organisational productivity. Consequently, their improved commitment and reduced work absenteeism levels are valuable.

Quoting research published in 2009, Dizaho, Salleh and Abdullah (2017) argue that 69% of the total absenteeism in organisations occurs when employees skip work to attend to their personal needs other than sickness. This observation raises an important scholarly question regarding the need for investigating the primary causes of absenteeism, despite being low at 4% in 2013 at easyJet. Studying staff retention improvement from the WLB perspective using the qualitative data approach is advantageous.

It paves the way for organisations to offer room for employees to take care of their personal needs. Yue, Domagalski and Zanglein (2017) support this approach by noting that absenteeism correlates negatively with organisational productivity. Absenteeism is important in establishing the link between work-life balance and retention because it encompasses a short-term form of employees’ retention problems.

In the effort to lower work-life balance conflicts, organisations introduce policies for improving employees’ working experiences by balancing their personal lives and job demands (Dominus 2016). Such guidelines allow them to enjoy memorable experiences outside the work environment by engaging in other constructive programmes. These activities include increasing workers’ educational skills, participating in social events and leisure, among others (Bansal & Agarwal 2017; Prakash 2018).

According to Pandita and Singhal (2017), employees may leave their jobs to address personal matters, for instance, maternity demands, seeking opportunities for upward career progression and taking breaks from monotonous works. Hence, where an organisation does not provide room for workers to attend to these issues, they are likely to consider quitting. Guided by these concerns, easyJet can implement flexible job policies such as allowing teleworking, video-conferencing, offering part-time jobs and reducing working hours (Jowit 2016). However, work-life balance approaches for retaining employees may be disadvantageous due to scholarly disagreements regarding the definition of non-work aspects that help to lower turnover and absenteeism.

Communication and Feedback

Maintaining a highly committed workforce does not only concern HR departments but also CEOs, especially those who are keen to acquire profitable business lines (Bari, Fanchen & Baloch 2016). Hence, business leaders need to devise appropriate strategies for ensuring effective communication, which, in turn, boosts staff retention levels (Gutierez 2014). Bhardwaj, Sharma and Deepshikha (2017) and Cox (2014) advise such CEOs to listen to employees’ concerns and provide the appropriate feedback that captures the desire to implement suggestions raised.

This strategy helps workers to feel valued and hence their minimal turnover plans. This counsel complies with approaches deployed by easyJet in its communication approaches. Figure 2 shows different ways in which an organisation can classify its communication approaches. easyJet ensures both vertical and horizontal communication as the strategy for providing a positive and friendly working environment.

Bari, Fanchen and Baloch (2016) investigated communication and retention in terms of outcomes such as organising regular meetings with staff, offering consistent reviews of their performance, encouraging commitment to professional development and learning and engaging in periodic interviews. This approach to analysing the role of communication in enhancing staff retention is advantageous since it reveals important critical concerns that lead to turnover intentions identified by Mathimaran and Kumar (2017).

However, Bari, Fanchen and Baloch’s (2016) approach is disadvantageous since it does not provide a toolkit on how different industries can apply customised communication strategies to retain their employees. Moreover, it does not clarify whether variations are observable based on the outcomes of the stated four approaches when applied to different organisations. Despite this challenge, Murray and Fluker (2017) and Robins (2018) present communication as an important aspect of enhancing staff retention and, consequently, organisational success.

Conclusion and Recommendations

Mentorship programmes, employee compensations, recognition and reward systems, work-life balance, training and development, communication and feedback and supporting teamwork constitute some of the important approaches to studying staff retention. easyJet’s values, as stated in its mission, underline the importance of communication and reward systems in enhancing employee retention levels. The outcome of these strategies is evident in the low turnover and absenteeism recorded in this company.

To support this achievement, this company should explore additional approaches to staff retention, such as implementing work-life balance and communication feedback mechanisms that are tailor-made to satisfy employees’ unique needs. This recommendation not only supports easyJet’s idea of employee retention improvement but also has additional advantages, including reducing absenteeism, increasing work commitment, minimising turnover intentions and boosting the capacity to recruit and maintain an outstanding pool of workers.

Reference List

Bansal, N & Agarwal, UA 2017, ‘Exploring work-life balance among Indian dual working parents: a qualitative study’, Journal of Management Research, vol. 17, no. 2, pp. 99-111.

Bari, MW, Fanchen, M & Baloch, MA 2016, ‘Management practices and performance of mergers and acquisitions in Pakistan: mediating role of psychological contract’, Springer Plus, vol. 5, no. 1, pp. 1-16.

Bhardwaj, S, Sharma, V & Deepshikha, B 2017, ‘A study on managerial communication in multicultural workplace’, Journal of Management Research, vol. 9, no.1, pp. 60-65.

Carlson, JS 2015, ‘Factors influencing retention among part-time clinical nursing faculty’, Nursing Education, vol. 36, no.1, pp. 42-45.

Cox, A 2014, ‘Increasing purposeful communication in workplace: two school-district models’, Delta Kappa Gamma Bulletin, vol. 80, no. 3, pp. 34-38.

Dharmadhikari, S 2013, ‘Cost optimisation through internal talent retention strategies: an analytical study’, CLEAR International Journal of Research in Commerce & Management, vol. 4, no. 12, pp. 37-41.

Dizaho, EK, Salleh, R & Abdullah, A 2017, ‘Achieving work life balance through flexible work schedules and arrangements’, Global Business and Management Research, vol. 9, no. 1, pp. 455-465.

Dominus, S 2016, ‘Rethinking the work-life equation’, The New York Times. Web.

easyJet plc 2017, Corporate responsibility. Web.

Gözükara, İ & Çolakoğlu, N 2016, ‘Mediating effect of work family conflict on the relationship between job autonomy and job satisfaction’, Social and Behavioural Sciences, vol. 22, no. 9, pp. 253-266.

Gutierez, A 2014, Effective communication in the workplace: learn how to communicate effectively, CreateSpace Independent Publishing Platform, Scotts Valley, CA.

Jowit, J 2016, ‘Work-life balance: flexible working can make you ill, experts say’, The Guardian. Web.

Mandina, SP & Karisambudzi, J 2016, ‘Customer retention strategies: a panacea to reducing attrition in Zimbabwean airline’, Journal of Marketing Development & Competitiveness, vol. 10, no. 2, pp. 91-110.

Mathimaran, B & Kumar, A 2017, ‘Employee retention strategies-an empirical research’, Global Journal of Management and Business Research: E-Marketing, vol. 17, no. 1, pp. 16-22.

Murray, MC & Fluker, J 2017, ‘Transforming communications in the workplace: the impact of UC on perceived productivity in a multi-national corporation’, Interdisciplinary Journal of Information, Knowledge and Management, vol. 12, pp. 175-187.

Mwasaru, H & Kazungu, KW 2015, ‘Effects of employee retention on organisational competitiveness advantages in the hotel industry in Mombasa County’, CLEAR International Journal of Research in Commerce & Management, vol. 6, no. 3, pp. 1-4.

Nizam, I & Kam, C 2018, ‘The determinants of work-life balance in the event industry of Malaysia’, International Journal of Management, Accounting, & Economics, vol. 5, no. 3, pp. 141-168.

Pandita, S & Singhal, R 2017, ‘The influence of employees engagement on the work-life balance of employees in the IT sector’, IUP Journal of Organisational Behaviour, vol. 16, no. 1, pp. 38-57.

Prakash, V 2018, ‘Work-life balance: perceptions of the non-work domain’, Sage Journal, vol. 2, no. 1, pp. 1-11.

Robins, A 2018, 13 ways to improve communication at work, weblog. Web.

Sirgy, MJ & Lee, D 2018, ‘Work life balance: an integrative review’, Applied Research in Quality of Life, vol. 13, no. 1, pp. 229-254.

Soundarapandiyan, K & Ganesh, M 2015, ‘Employment retention strategy with reference to Chennai based ITES industry–an empirical study’, Global Management Review, vol. 9, no. 2, pp. 1-13.

Uitzinger, D, Chrysler-Fox, P & Adèle, T 2018, ‘Perceptions of human resource professional of challenges to and strategies for retaining managers’, Acta Commercii, vol. 18, no. 1, pp. 1-10.

Yue, H, Domagalski, T & Zanglein, J 2017, ‘A qualimetric approach to work-life balance’, Tamara Journal for Critical Organisation Inquiry, vol. 15 no. 3/4, pp. 237-348.

Company description

Easyjet is a public limited company that was founded in 1995 within the aviation industry. Its headquarters are located at Luton, United Kingdom. The firms operation mainly involves provision of short and medium airline services. The firm has a human resource base of 5,674 employees of whom 3,372 are full time employees. The firm serves an approximately 100 countries which are located in 30 different countries.

Business strategy

According to SWOT analysis of Easyjet (Anon., 2009), the firm has adopted an efficient business model which entails keeping the costs of operation as low as possible. Through this model, the firm has been able to offer low fares to its customers thus remaining competitive within the aviation industry.

SWOT analysis of the firm

Strengths

• The firm offers a quality services to its customers at a competitive price. The firm has incorporated the current electronic commerce technology to ensure that the customers are satisfied (‘Driving more efficient business’, 2008, p.2). Incorporation of electronic commerce enables the customers to book for their tickets online thus eliminating distribution cost (Ian, 2002, Para. 4).
• Efficiency of operation. EasyJet offers efficient air travel services with turnaround duration of thirty minutes or less. This has made the airline more reliable to its customers.
• In addition, the firm has developed a strong employee culture which enables the firm to assist the customers with various travel services. The employee culture is maintained in its flights and on the ground. This results into increased customer satisfaction.
• The firm has a strong, proactive and innovative management team which is a continuation of the leadership of its ex-CEO and ex-chairman.
• The firm has also developed a strong brand name within UK market. This has been achieved by the management investing heavily in promotion through public relation and advertising. The management of the firm has been advertising the firm in major airline programs in UK. This has enabled the firm to create a superior brand profile. By adopting the term ‘easy’ as its brand name, the firm has been able to effectively position itself as a firm that delivers value for customer’s money (‘ Bird’s eye view ’, 2007, p.4).
• The firm has also incorporated the concept of corporate social responsibility by addressing issues of global warming and greenhouse effect. The management of the firm has kept these issues as top priority in formulating its future strategies. This has been achieved through purchasing of new fleet that emits minimum amount of carbon dioxide (‘Birds eye view’, 2007, P.4).
• The firm serves many cities within Europe. This enables the firm to be considered as an efficient airline travel firm by business people.
• The firm has an EasyJet Academy which ensures that the firm has sufficient and qualified personnel.
• Distinctive livery. The management of the firm has developed a distinctive livery for their fleet that enables the firm’s aircrafts to be effectively distinguished from that of the competing firms.

Weaknesses

• Difficulty in shaping its pricing policy in some of its routes which are less profitable. The domestic industry is very competitive. Easyjet faces intense competition from other firms such as Ryan Air Jet 2 and BMI Baby. These firms can shape the price in these routes as they try to compete.
• Increased competition can result into the firm’s business model becoming blurred.
• The firm is sensitive to increment in taxes to the aviation industry by the government or other charges by the airport authority.
• The firm has not developed an effective strategy for developing customer loyalty.
• The buyer power within a low cost carrier market is relatively high. This makes the customer to have excessive bargaining power.
• The airline’s brand name ‘easyjet’ is owned by Sir Stelios. This means that it does not have control over the performance of other products that are associated with the brand name ‘easyjet’.

Opportunities

• The firm can increase its market share by considering alternative routes. This can be implemented by considering other major cities in Europe as its travel destination. One of the routes that the management should consider is travelling from Dublin to UK. This is a potential travel route since it’s used by a large number of travelers going to watch football matches in UK.
• The firm can increase its profitability from increased growth of leisure and business passengers in a period of the next five years (Keith & Dave, 1999, p.4).
• The expansion of European Union has resulted into more markets being opened up. This will benefit the low cost carrier. The airline will be considered effective to jobseekers due to its low fares. This in return will promote economic growth (Keith& Dave, 1999, p. 4).
• There is a high probability of increase in the rate of immigration in European countries due to the increased instability within the Middle East over the past few years.
• The firm can increase its level of profit through the Easyjet Academy. This is due to the fact that it can train aviation courses to other parties other than its personnel.
• The firm does not have flights to various travel destinations in the Scandinavian countries. Currently, there is an increase in the rate of immigration into these countries especially into Helsinki and Stockholm (‘Bird’s eye view’, 2007, p. 7).
• Currently there is an increase in entrepreneurial activities within the European Union. More entrepreneurs are travelling into these countries to seek investment opportunities.
• The firm can attain economies of scale in its operation through incorporation of the concept of consolidation. This will enable the firm to minimize its cost and set its fares more effectively (‘Driving a more efficient business’, 2008, p.2).

Threats

• Increase in the level of terrorism and other catastrophic loss can result into a reduction in air travel. In addition, occurrence of natural catastrophes and terrorism can result into destruction of infrastructure that supports the aviation industry.
• Increase in cost of operation as a result of increase in the amount of taxes charged by the government.
• Fluctuation of the US currency can result into increase in the costs that are denominated using the dollar such as the fuel purchasing, maintenance and reserve cost.
• Increased adoption of the low cost carrier concept by the traditional airlines. This could blur the image of low cost carriers.
• Increased apprehension in relation to the travel industry due to threats of war and other pandemics.
• The firm is more vulnerable to fluctuation in the price of fuel compared to other competitors such as Ryan Air and Jet2. This is due to its adoption of hedging policy in the purchase of fuel.

Reference list

Air Scoop.2007. Bird’s eye view: Easyjet SWOT analysis. Web.

Business Teacher. 2009. Easyjet SWOT analysis. Web.

Ian, C. 2002. EasyJet fueled. (On-line). Glasgow, Scotland: Buckinghamshire Business School. Web.

Keith, J.& Dave, H.1999. The contribution of aviation industry to the UK economy.

Oxford: Oxford Economic Forecasting. Web.

Linked Incorporation. 2009. Easyjet. Web.

Sun Microsystems Incorporation. 2008. Driving more efficient business: get economies of scale with recent technology innovation. Web.

Introduction

This report is intended to investigate and assess the investment credibility and advantage of Easyjet Plc. To evaluate the report, Easyjet’s strategic movement has been compared with Ryanair and British Airways; therefore, the main aspirations of key stakeholders, mission and vision of Easyjet will be considered. This report also intended to assess the Easyjet’s strategy, the external and internal environments, current strength, weakness, opportunities and threats, corporate social responsibility, organisational structures, financial data, competitors, ratio analysis to develop important evidence, which will be used to determine whether investment in the Easyjet’s equity is suggested.

Significant of Pension Funds

This report has been prepared for a client of the financial analysts company who is a Pension Funds. The objectives of Pension Funds intended to prospective investment that would be of most magnitude to the client. The basic intention of a pension fund is to invest and administer the subscriptions of the members of pension system in accordance with the general investment strategy. The liable strategy is to expand the pension funds and invest them in such secured schemes without losing real value. In most recent time there are great significant of stock market downturn and caused millions dollar loses by the pension fund. Thus, the major two trend of pension fund is to investing in non volatile issues with stable growth and regularity in dividend payment rather than high capital gain.

Overview of EasyJet

In 1995, a British based airline EasyJet Airline Company Limited started its expedition with two leased flights from Boeing. Recently, the company operates almost 100 directions airports in 21 European and American. The easyjet convoy consist of 75 own Boeing 737-700 aircraft including 84 leased crafts with 380 rotes. In 2008, the company has generated pre-tax profits of £123m with a £12.9 million of costs coupled with the amalgamation of GB Airways. It has been evidenced to both the flexibility and quality of the easyJet business model with its human resource has sustained to construct high growth in a tremendously challenging year of 2008 where the others were seriously shocked with recessionary impact.

Financial analysis of Easy jet

Before attempt to compare its financial condition, it should mention its own financial condition of 2008. From the annual report, 2008 of “easy Jet” findings at financial aspects has shown in following table. In this table, almost all financial factors have been integrated-

The above diagram has demonstrates that Easyjet’s revenue is increasing day to day, for example in 2008 its revenue was £ 2363 million, therefore, stockholders, and investors will be interested to invest in this recessionary period though its share price has decreasing.

Financial Comparison among Easyjet, British Airways and Ryanairs for 2008

Easy jet

Easy jet is the pioneer of European airlines industry network. It’s the second largest air company in Europe operates their network across more than 21 European countries. Their slogan is to afford care and convenience at a low cost with the aid of strong and experienced management team where engaged 6,107 employees put into practice the slogan of easy Jet. In September 2008, they launched 91 new routes around the world.

Though last fiscal year return on equity down by 6 percent but their total revenue increased by 31.5 percent (£2,363 million) in addition of 43.7 million new consumers (17.3 %). Another significant side, they deal with almost 25,260.12 million clients and out of them, more than half are out of UK. Easy jet holds their yearly growth rate 12.6 % efficiently.

British Airways

To facilitate most extensive international scheduled airline British Airways commence their business at Heathrow as their prime location. At this time, they work for vision London 2012. During fiscal year 2008, BA enlarges their income before tax 30.8 % that amounted £ 883 million indicates significant financial strengths. Their recent yearly revenue is £ 616 million and the growth rate is 12.6 %.

Ryanair

Another renowned European air transport provider Ryanair last year has initiated their business in the course of 201 new routes including three prime locations of UK- Bournemouth, Birmingham and Belfast and regarding this, they bought 30 new aircrafts. On behalf of their annual report 2008- their post tax profit margin is 18 percent, at the end of 2008 their reserve is € 2.2 billion. A significant record is that their revenue enlarged at € 481 million, 5,262 skilled and experienced employees work hard and soul to hold the par barrel price at € 130.

Assessing Performance & Corrective Adjustments

EasyJet: For future developments of the company, EasyJet always compare its competitive strengths with other major operations. From the investors presentation the following table has been presented:

In the above chart, the points are representing 1 is worst and 5 is best. Except values for money, Easyjet has clearly ahead in all other sectors. Its management efficiencies have surpassed all other major airlines. While British Airways was receiving fare on an international intra-European route of 180-200, Easyjet was fixed at 130 routs and now it has introduced 91 new routes; therefore, here is no gap between its competitors. From this chart, it can be said that still Easyjet holds the strong position in market.

Ryanair: It holds the highest position as its average point is 3.9. In order to ensure the quality and standards of Ryanair, a team of service audit manager has been formed to audit at least 650 flights, 8 destinations, and Ryanair is operating 74 aircrafts in 127 routs and has a confirmed order of B7C7. This audit team also inspects other six major competitors to set up the bench mark. A total of 14 stations are audited per year and close scrutiny is conducted over the passengers’ satisfaction. Corrective steps are taken always if any mistakes are found of opportunities. The gigantic equipments are relocated to other place, as opportunities are more.

British Airways: From the chart, it can be found that it is in medium position because the average point is three. In 2008, BA earned more than £8.7billion in revenue, 3.1% up on the previous year and among them 86.2% of this revenue came from passengers, while 7.0% from cargo and only 6.8% from other activities; moreover, it had 245 aircraft in service and it carried 805,000 tonnes of cargo to destinations in Europe, and all over the world.

Comparison among Easy jet, British Airways and Ryanair (5 years trend 2004 – 2008)

Concerning annul report and financial statement comparison among the chosen company “Easy jet” and two rivals –“ British Airways and Ryanair” is outlined bellow using a set of comparison tools. Amount used in this comparison griped from five years trend (2004 – 2008) available in the annual report and financial statement 2008.

Ratio Analysis

Make decision for an investment, tools of ratio analysis pull out its hand in identifying profitability, relation between current earnings and fluctuation of share price, amount of dividend, management of asset employment, competence of the company using current assets to pick up current liabilities and interest payment.

Sector Ratio Analysis: Specialty of a company evaluated through sector ratio analysis. Chosen company and its rival’s sector analysis have as a featured in following table-

Year-on-year Comparison of Easy jet’s Performance: Comparing performance of “Easy jet” by the side of its rivals is assessed in terms of profitability of the company. Calculation of profitability anchored in examination of financial data through out the last five years (2004 – 2008) of these three companies are discuss in following table-

Cash Flow Ratios: Cash flow ratios are the modes of evaluating competitive location of three air ways- Easy jet, British Airways, Ryanair. Calculation of the cash flow ratios are showed in following table. This comparison make possible anyone’s decision whether to invest or not and analysis existing financial array of a company.

Financial analysis

Recently the acquisition with GB airways and Global financial crisis has an adverse impact on Easyjet as stakeholder is not seeing any prospect and this is one of the major causes for price decreasing.

The Chart is representing the structure of Easyjet’s share price over the year (March 2008 to March 2009). It indicates the profitability and financial activities performance is decreasing, though September 2009 the activity was increasing. Shareholders aspiration includes enhancing the Easyjet environment for maximizing profitability and success.

In the figure showed the financial strength for last five years and from this figure it can be said that though, return on equity has decreased more than 31%, and share price fall in stock market but Easyjet still have financial strength to recover from share price in recession.

From the share price chart of these three companies, it can be said that in recession all are in down turns and in 2007 the market share price was in highest but now all are decreasing. In recession, tourism sector has seriously fall down, and share price is decreasing therefore, pension fund can be effective for risk management of the Easyjet.

SWOT analysis of EasyJet Plc

Environmental or PEST analysis of EasyJet

The Easyjet’s environmental condition is required to analyse by PEST¹ analysis, to decide whether this pension fund will be effective for the Easyjet or not –

Political factors

Political situation always changes the business environment, increase or decreases the risk such as oil price has decreased for political chaos, which has adverse affect on the Easyjet’s operations. Easyjet Plc is bound to follow the rule sets by the ETS². In addition, recently UK has signed-up the in the single European currency, which have direct impact on its business for example Easyjet will face the changes of exchange rate. In order to face the challenges of Global financial downturn, it can consider the pension fund as an opportunity to raise share price.

Economic factors

From the annual report 2008 of Easyjet, it can be found that Easyjet in 37 number position among the top fifty EU airlines, which demonstrates its position and market segments. The annual report 2008 also mentions that its total revenue is increasing for example – in 2008, Easyjet’s total revenue was £2,362.8 million and in 2007 was £1,797.2 million but for recession, it may reduce this year. However, its operating profit has decreasing which may influence to take more loans from financial institutions, therefore, pension fund may play vital role.

Socio-cultural factors

Cultural, society, people, religion, friend etc have changes with the economic conditions as a result, their behaviour, attitude, and demand has a direct relationship with the business. Moreover, in Europe, America, there are lived people from different culture, race and religion and among them 40% are minorities of the total population may affect Easyjet’s business. It always gives the priority of employee’s safety and health; therefore, it has established the Safety Review Board. EasyJet employed 6,107 persons, and in 2009, more than 1,000 new employees have joined in easyJet either from GB Airways or from easy Tech and they have more flexible and efficient learning experience.

Technological factor

EasyJet’s strategy is to grow its fleet using the latest technology aircraft, while retiring older-aircraft typically within eight to ten years of delivery, therefore, from 2002, IT director had improved and delivered a series of programmes for technological-innovation, considerably enhancing the systems architecture and major business procedures. Easyjet invest largest money to imply the latest technology aircraft at the same time as retiring older aircrafts typically within seven-to-ten years of delivery. Since 2000, it is committed to decrease emissions of CO2 up to 22 percent within 2011.

Corporate governance of Easyjet

Nowadays many large organizations have been collapsed for not to follow the measures designed for expense of remuneration paid to the directors’ guided in the Companies Act, therefore, in current recessionary period maintained of corporate governance is essential ingredient for Easyjet Plc.

Role of the board

The Board comprised eight NED³ (including the Chairman) and other two Executive Directors and the Board is responsible conforming guidelines, previous plan approval and investment as well as divestment strategies. Hence, the corporate, audit, personnel committee, governance and nomination committee conducts the operations and self- evaluation for refining the strategies as well as to ensure long-term interests of the stockholders.

Independence of Directors

According to the various report and the London Stock exchange a majority of the directors and NED should be independent of the company, in addition, a committee configuration must be place in order to advance the responsibility of the selection of the executives, the salary of the directors as well as the audit procedure. Easyjet corporate responsibility offer to follow the rules of LSE, which mentioned that NED would be independent and they provide five situations when a director would be accountable for their activities.

Remuneration of Employees

Remuneration is the payment made to an individual for the services that he or she provided to the organisation. Director’s remuneration is a most energetic issue in the today’s business world. Easyjet should be designed for attracting and deriving the talent human resource for successful strategic implementation that focuses on base rate of pay, competitive compensation package over time, balance of gifts etc.

Potential Warnings to Investors

At the end of 2007, as well as in USA economic recession has a collision in major countries of the world. Concerning this, an investor has to aware of investing in any project of a company.

Economic down turn and high inflation rate discouraged the economic dependency on USA and move through China because of their low cost facilities. NBER⁴ reported in 2008 that percentage of trading activities of Australia and European countries shift through China dramatically, there also recruited Canada and Japan.

With the stepping up of China and the impact of depression most export – import areas are covered by China and partnership ratio of US vs. Europe has decreased. At present, China covered almost 23 percent of US foreign trade activities, and in Canada, this percentage is about 18. On behalf of pension fund, investing in one of these three airlines surrounds a high risk rather than any of China and Japan.

Future Cash Requirement

In order to establish new routes current working capital of easy Jet, British Airways and Ryanair are £ 505.2 million, £ 713 million and € 1.03 million respectively. Both of easy Jet and British Airways have the growth of 12.6 percent.

Annual reserve increased in 18 percent by £ 6 million of easy Jet where as this ratio is 8.74 percent and 30.50 percent for British Airways and Ryanair respectively. Aim of British Airways is to reduce their fuel costs at 20 percent and with in 2011 easy Jet determined to reserve £ 100 million. All of these three companies send a part of their earnings in environment segment as part of their corporate social responsibility.

Free Cash Flow Valuation

Free cash flow valuation is another approach that presents income statement and the balance sheet at an instance. Through out this approach it is easier for an investor will take investment decision because of the availability of per share data, retain earnings, total current assets and liabilities, interest and tax payments.

Here the common formula will be used to calculating Income statement as following table-

Income statement of Easy jet, British Airways and Ryanair For the year ended, 2008.

Common formula used in calculating Balance sheet as following table-

NB: Owners’ equity = (Common stock + Retain earnings)

Balance sheet of Easy jet, British Airways and Ryanair For the year ended, 2008.

Explanation of “costs of goods sold and inventory”-

• Being a service company easy Jet needs to provide values necessary in traveling. On behalf of this arrangement, they ought to stock sufficient fuel, seat arrangement, fix-up flight schedules and network development, launch new routes etc. In short, factors those are involved in operating activities are the factors of cost of goods sold. As service company EasyJet’s cost of goods sold in income statement is £ 631.78 (in million) and this can be denote as the cost in arranging any fight in a year.
• “Figure 1102.6 which is PPE for non-current asset, as Inventory”- non-current asset of a company is varied with the change of time and with the change of customer demand. On the other hand, inventory is the stock of raw martial to operate business activities and make available product and services to the consumer. All of the aforesaid is the reason behind of figure- 1,102.6, which is PPE for non-current asset as “Inventory”.

Residual income valuation

With the aid of income statement and balance sheet residual income valuation of easy Jet is presented as bellow-

Calculation of “Net present value (NPV)” of easy Jet is given in following table-

Price Valuation

In Stock Market, these three companies price valuation shows following figure-

Aforesaid figure of these companies shows a strong stock market price valuation of British Airways. This figure also makes safe an investor’s venture.

Calculation of discounted cash flow for next 5 years for the company easy Jet:

Along with the question paper here also integrated an excel file. Based on a valuation model there provide a set of valuation factors since (2006 – 2010). Among these valuation factors cash flow before tax, tax rate, discounted factors, risk-free return, beta, market rate etc. are plotted for the aforementioned year and as for 2008 and 2009.

For NPV calculation, cash flow after tax (CFAT) is essential. On the other hand, calculation of CFAT requires cash flow before tax (CFBT) and tax rate or amount of tax. Therefore, amount of CFAT is as bellow-

Here,

PV = Present value

FV = Face value or CFAT

i = Interest rate or discount factor = 24%= 0.24

n = Number of year

Strategic analysis of Easyjet Plc

Strategic analysis is the application of organizational tools those are engaged decision-making, policy analysis, production, sales as well as advertising. In case of “easy Jet”, strategic analysis regard as four levels of the strategy, internal and external environment analysis. A diagnostic form of “easy Jet’s” strategic analysis is discuss as follows –

• The acquisition with GB Airways at the begging of year 2008, strengths their financial resources and enhances its business opportunity as they have mutual interest of resources and capabilities from designing to distribution.
• Easyjet’s services restrain low cost and highly efficient but have a strong financial existence.
• It wants to build them as a superior air network in Europe,
• Their utmost focus on customer demand and consequently they earned a strong customer position.
• Another point that makes “easy Jet” less defective is their network development.
• Not only build a strong network in aircraft industry nut also holds an efficient network performance.
• In winter, limit margin dilution for margin enhancement. To do this they continuous improve their revenue stream.
• Easyjet has established more than 60 head office around the world to reach their vision to reserve £ 100 million within 2011.
• The relationship with Airbus makes them efficient in fleet and ownership costs at low level.
• In 2008, they hold their average fuel price at $1,070 and for this when fuel price increase in 50% that had not any impact on per seat revenue at all,
• Through strengthened exchange rate of euro in 2008, “easy Jet” earned 11% greater than in 2007 in exchange of pound (£).

Easyjet’s strategy regarding diversification

The strategy for diversification of EasyJet consist several factors and the important factors can be illustrated from the following figure:

• According to the first option of the graph whether diversification is based narrowly industries or broadly industries. EasyJet is based on airline service. Besides firming on airlines, it builds up associated business like food, traveling, tourism. The business is some how related as associated businesses are interrelated.
• As EasyJet diversifies into business with associated products, similar operating characteristic, common distribution channels or customers, or some other synergetic factors, it gains competitive advantage. Ryanair acquires fleet of several other aircrafts not acquires the whole company.

• The scope of the airline is in both domestic and internationalized. Major operations are conducted in Europe base countries. On the other hand, EasyJet is considering operating it flights in South Asia as large number of workers can be carried.
• Currently EasyJet has no intention to have acquisition another. It is trying to increase its operation in developed country like Bangladesh, Sri lanka and Maldives
• & (6) As the product line is similar, it is tough to change. However, EasyJet is building its complementary services like hotel advantages, tourism facilities. Therefore, EasyJet will have an opportunistic option to increase this kind of business via sponsorship.

Strategic analysis of Ryanair

Ryanair pursues low cost strategy. While British Airways was receiving fare on an international intra-European route of 180-200, Ryanair was fixed at 50-80. Therefore, it is a huge gap between two airlines. From the following graph, this can be clarified:

Therefore, to survive in the market with low cost Ryanair pursues several strategies. These are given below:

• Ryanair uses no hub, therefore, the takeoff costs, additional customer expenses and meal costs as reduced,
• As it is using point-to-point the, time to go to destination, is reduced. The fuel, administrative and engine maintenance costs are declined,
• Secondary airports are used due to congestion in major airports as well as to save reachable time of the airports of customers. This policy is very popular to the customers,
• The airline advertises to convince its customer to believe that its plane is more time saver than using Buses, Trains and it is affordable.

Therefore, these are the external strategies are used to operate their activities. As the cost control method is implemented effectively the overall procedures has been conglomerated successfully.

Strategic analysis of British Airways

BA strategies are totally different to pursue its customers. Their main principle of British Airways has underlying in service and quality. The major undertaking strategies are given below.

• British Airways aimed to expand its service throughout the world and hence increase its seat capacity with large aircrafts. Therefore, it is getting the advantages of economic of scale and reduced the cost,
• E-ticket system is a competitive advantage for British Airways. British Airways wants all ticket should be sold via online. Therefore, customer can avail the advantages from anywhere in the world and administrative costs are reduced.
• Customer service is a distinctive competence for British Airways. It has established with 43000 square feet in area with capability to manage 300 call centers in India, which is best ever known.
• Market segmentation is another strong strategy to pursue. British Airways segmented its market into students, tourists, corporate and business group with state of art technology.
• To expand its brand recognition British Airways is creating its Brand awareness like in sports.
• Besides, transferring passengers, British Airways wants to boost its revenue by extending its business line with sky cargo. In the fiscal year, British Airways has transferred 947000 tonnes of cargo.

Future prospects of Easy jet: Future prospects of Easy jet centered on following areas-

• Boosts their financial strengths and efficiency in the course of low cost strategy, for instance, recent easy Jet’s financial capability grows 18%,
• Another focusing point is network development. They have continuing project to launch 100 new routes.
• With the addition of new routes, they also attentive in network performance.
• Increase gross margin or profit is an additional significant side. In 2008, their annual savings is almost £ 6 million and with in 2011 their target is to enlarge it in £ 100 million.

Make decision whether to invest or not

Ratio analysis of these three companies shows that compare to Easy jet and Ryanair British Airways holds a strong financial atmosphere. This aroma also has found in their sector analysis ratios, yearly performance comparison, cash flow valuation, cash flow ratios, profitability ratios, stock price valuation and in long-term income fluctuation.

Regarding all of aforesaid, it is better for a pension client investing in British Airways. In future, this investment would bring suitable output as their constraint. Another significant sight to mention that compare to other companies British Airways continues a flexible and sound share site.

Recommendation

In this economic down turn and high inflation period in operating business activities companies need to follow numerous common principles. With the aid of these, they could enable themselves to face recent economic ruins and easily shift their strategy whether call for. Common proposals for air companies are-

• It holds the flight prices resonance so that it would be possible to keep potential consumers.
• Reduce the carbon dioxide corrosion in air. Make their services environment responsive.
• Easyjet Plc can reduce expanses to overcome the global financial crisis and it should not cut the job of their employees.
• Easyjet has large contribution on economy; as a result, it should spend more money for advertising, promotion and R & D.
• Consider consumers’ demand first and pay attention in market segmentation that should reflect on both income level and age limit.
• Easyjet is powerful and aware safeguarding of brand name to sustain and develop current market share and operation.
• It should fix the wage and price of air ticket considering to the oil price and global economy.
• Easyjet should advertise to increase interest on travel within national and international place.
• It has focused on inter-organizational resource allocation and network development to facilitate easier communication.
• Make the journey safe and comfortable for all class of consumers.

Conclusion

As par requirement of the paper, investment analysis of Easy jet on behalf of a pension fund has integrated here along with comparison of two rivals- “British Airways and Ryan air”. Make a decision whether to invest or not this paper includes- brief description of ratio analysis, sector ratio analysis, yearly performance comparison, cash flow ratios, potential warnings to investors, cash requirement in future, valuation of free cash flow, valuation in residual income and valuation in pricing.

Concerning all of above and the global economic recession, a pension client would get valuable investing in British Airways because of their high profitability, retain earnings, inventory turn over, both income before and after taxes and interest rates as mentioned above. Though there have an economic downturn and its affect almost all major countries around the world but with the support of suitable strategies British Airways effectively faced this crisis. Analyzing all of the financial data of the three airlines investment decision would better respectively as- British Airways, Easy jet and at last Ryanair. British Airways has broader possibility of recessionary impact. Thus investing in non volatile issues of Easyjet with stable growth and regularity in dividend payment would be wiser.

References

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Footnotes

1. Political, Economic, Socio- cultural and Technological environment.
2. Emissions Trading Scheme.
3. Non Executive Directors.
4. National Bureau of Economic Research.

Introduction

The purpose of this report is to define key problems and critical issues of easyJet, discuss McKinsey’s 7S framework, analyse driving forces, external environment and the position of the company comparing with competitors.

Key Problems and Critical Issues

This company has to consider both internal and external problems, for instance, the management of this company faced challenges to control internal management system and implement a strategic plan like motivate the employees, changed the status from private to public, use subcontractors, maintain a relationship with directors and customers.

However, a reporter Sunday Times investigated availability of its low fares and stated that easyJet theoretically asked low price, but practically the customers have to pay more while the price of the services depends on many factors including time factors (earlier flight was much more expensive), taxation policy, unrealistic decision of the management and so on.

SWOT Analysis

Table 1: SWOT analysis of easyJet

Source: Self-generated

McKinsey Seven 7S Framework for easyJet

• Strategy: The core organizational strategy of the company is to offer highly competitive fares and sustain in the market by competing with existing and new carriers;
• Systems: the management system has considered both manual and technological factors; however, easyJet is fully equipped with IT facilities;
• Shared Values: It consists of three essential elements culture, believes and values; easyJet has organized several programs like workshops, and simulations to explain its objectives and develop a good relationship with employees and other shareholders;
• Skills: To develop the employee’s performance, it arranged training while it has many young and relatively inexperienced employees;
• Style: Stelios was a charismatic leader who struggled to shape the business though he followed the autocratic leadership style to implement major decision;
• Staffs: Retention of the employees is the problem while competitors recruit the employees of easyJet providing a higher salary, for instance, British Airways hired away its lawyer providing £500,000 per year;
• Structure: easyJet follows a comparatively complicated organizational structure where CEO controlled managers of all departments along with subcontractors, outside vendors.

Driving Forces

It is notable that although there are certain deficiencies among the workforce of easyJet, its internal-forces are still quite impressive because of expertise and proficiency of the top management and the CEO (although the CEO is somewhat authoritarian and does not bother much about directors’ advises); so, the forthcoming position of easyJet could be optimistic; however, the external forces are analysed below:

• Bargaining Power of Suppliers: the key suppliers like Boeing and Airbus have moderate to high bargaining powers
• Bargaining Power of Customers: the customers in this industry respond greatly to raising fares as their switching costs are relatively low
• New Entrants: the barriers to enter the market are vast amounts of capital investments and strict laws, which makes it tough for new entrants to start-up and sustain
• Threat of Substitutes: there are high threats of substitutes
• Competitive Rivalry: there are strong rivalry from other low-cost carriers

Analysis of Statute Vs Competition:

To protect the flag carriers and national businesses, most countries enacted laws to prevent competition; nevertheless, in 1992, the EU passed legislation to deregulate the industry, which meant that all businesses faced extreme rivalry.

Enactment of such statute became a huge problem for luxurious and expensive flag carriers like British Airways, because people now had a choice to travel by low-cost carriers like easyJet, go, or Ryanair; consequently the competition in the industry became very intense; conversely, low-cost carriers from different European nations started competing by offering economical prices to attract customers.

Environmental Scanning

Political Factors

Governmental policies like unfriendly taxation or enactment of unfair autocratic laws may pose problems for the players; however, the EU ensures that such actions are prevented and the member states are compliant with the EU-laws.

Economic Factors

The industry is recovering after the global financial crisis and new opportunities are generated for low-cost carriers like easyJet and Ryanair

Socio-Cultural Factors

The market players of the industry have incorporated their own corporate social responsibility guidelines in order to make sure that they are conducting ethical businesses and contributing to communities.

Technological Factor

The aviation industry is heavily reliant on the uses of technology and so the market players need to keep up with technological advancements in operations and new aircraft models.

Environmental Factor

The European aviation industry needs to strictly comply with all the environmental laws and make sure that the emission of CFCs is lower; moreover, companies like easyJet need to use fuel-efficient engines.

Legal Factors

Legislation plays a major role in the industry; in the 1990s, the European airline industry was greatly regulated, and individual nations wanted to protect their flag carriers; however, in 1992, the EU passed law to deregulate the industry, which meant that all airline businesses were open to competition; as a result, easyJet now experiences free market competition.

Where Is Easy Jet Today

Whilst 60 out of 80 carriers (which were established in the same decade) are already bankrupted, easyJet is still in a leading position in the industry; moreover, today, deregulation provided easyJet access to new routes, strengthening its position financially, for example, it has about 100 scheduled flights each day using a fleet of 20 Boeing 737s and serving 26 destination.

Evaluation of Range of Alternative Courses of Action

Table 2: Strategic Alternatives

Source: Self-generated

Recommendation and Conclusion

After evaluating the alternative courses of action, it could be said that the best recommendation for the company would be to implement the alternative of adopting a situational approach of leadership so that the business can better perform in certain areas, as suggested in the above evaluations. However, easyJet should remain cautious in undertaking strategies and in decision-making to make sure that there is an active revenue generation even during the Eurozone crisis.

Works Cited

Branson, Richard. The Web’s Favourite Airline. 2000, International Institute for Management, Switzerland