EasyJet is a British airline that is situated in London Luton Airport. Its main features include having a low-cost model that is convenient for the passengers. It was founded in 1995 and currently provides services to about 820 routes. They are considered as a low-cost carrier (LCC) (Corporate.easyjet.com. 2017). They provide affordable flights which are convenient with good quality service. A single European Union (EU) aviation market that was introduced in the 1990s allowed easy travel among countries. Britain’s exit from the EU has disrupted this arrangement. Doubts have started on whether UK based carriers will be able to fly into continental Europe and whether Foreign flights will be allowed to fly into the British airports. The EU has ordered major airlines like EasyJet to shift their headquarters to an EU member state or sell off their shares to European nationals if they want to continue flying in Europe. In this case study we will be considering Paris, France. The reasons and risks that go into for selecting France will be provided based on various forms and methods of analysis.
Macro Analysis (PESTLE)
Political: Britain’s exit from the EU has initiated access to many new markets within the EU (The Guardian 2017). This can be a favourable time for the French aviation industry. A raise in airport charges and taxes will be preferred as well. Easy Jet is expecting a full-year tax profits to fall by 28% (Elderman 2016). Therefore, Easy Jet, the second-biggest low cost carrier is thus warned. In one word, it can be implied that Brexit has brought the political instability that is causing turmoil for the airlines. The airline industry has been facing the continuous threats due to the increasing rate of the profit falls.
Economic: The ongoing recession prompts people to choose low cost airlines which are a plus point for EasyJet. Worldwide globalization ensures long-term air travel. Paris is the second most important location for the headquarters of the world’s 500 biggest companies. The GDP of France is 2.422 trillion USD as of 2015. The overall earnings of the nation from imports are around $557 billion dollars and exports are $506 billion dollars. In fact, it is estimated by Carolyn McCall, the CEO of Easy Jet that the company seems to hit £105m this year. Airline needs to invest more on fuels by paying the amount in dollar. Due to the effects of Brexit, the profit of the company would take a larger-than-expected £105m hit (Rodionova 2017). The budget or the economy is expected to be fluctuating much significantly.
Social: It is notable that the airline companies in UK are warned by the EU officials to relocate the headquarters to the EU. The airline industry otherwise need to sell shares or and avoid seeing routes within the continental Europe axed after the consequences of Brexit. In fact, the airlines like Easy Jet need to sell off the shares after Brexit to receive the permission of flying between the cities like Rome and Berlin. The passengers from these areas may face the significant difficulties if the airline industry does not consider such condition. Therefore, the Brexit has the impactful consequences on the social factors.
Technology: France is not known for their technological aspects; however, EasyJet plans to develop new-fuel efficient engines and airframes which will have to be designed in their headquarters. France has been aggressive in pursuing clean technology within the country.
Environment: A less industry based outlook of France has resulted in a decrease in air and water pollution. The transport infrastructure has continued emissions in that aspect. However, there is a reduction in energy consumption and carbon emission due to lighter aircraft interiors.
Legal: Matters relating to taxation and human resources are major legal issues that need to be taken into consideration. Business tax and property tax are allotted according to the area in which the headquarters is located.
Bargaining Power of Buyers (Moderate)
There is a variety of airlines to choose from, so customers tend to be a bit picky and price sensitive. Providing certain types of discounts on early purchases of tickets can be a way of standing out, and generating more sales (Malighetti, Paleari and Redondi 2015). Therefore, Easy Jet has the moderate chance of gaining the attention of the passengers due to the low cost carriers. The passengers would get attracted towards the low prices that will be beneficial for the company to make more profits.
Bargaining Power of Suppliers (High)
There are only two companies that have a hold on the aircraft manufacturing industry: Airbus and Boeing. The cost training pilots to get accustomed to a particular type of aircraft is high, as is the cost of the entire aircraft maintenance system, so EasyJet will have to ensure that they choose the right type of aircraft (Haucap et al 2013). The high power of the suppliers may create the significant impact in the competitive ground. EasyJet needs to select the suppliers carefully to cope with such demands of the suppliers.
Threats of New Entrants (Low)
Entering the airline industry is very difficult as it has a capital-intensive approach to things. High-costing airlines generally have a good brand name so customers would prefer them over new entrants. The low-costing airlines like EasyJet have a niche market which is already difficult to penetrate because of its fleet size and sales volume (Borenstein and Rose 2014). The low threats to the market entry are providing the company more opportunities to develop the competitive edge.
Threats of Substitutes (Low)
France has good transportation systems in place especially their train service. It is efficient, comfortable and punctual in nature and is one of the most common methods of getting around. It helps connect large cities with small towns. Their price offers are pretty good too but as it is time-consuming, it would be considered a weak substitute to low-cost flights. Easy Jet is the second largest low cost carrier in UK. The high demand of the airline services is quite beneficial for the company to secure the competitive position.
Rivalry among Competitors (Moderate to High)
The airline industry in whole is very competitive. This competition remains the same for a long duration of time. Every airline is recognized by their brand identities such as for EasyJet it would be their low-cost flights. This segment does see competition from other low cost airlines like Ryanair. However, it is necessary to understand the potential threats posed by the competitors in UK. Accordingly, the strategic decisions are needed to be made in order to gain the future benefits.
EasyJet’s internal environment using the Value Chain Framework
Inbound Logistics: They provide low-cost services which are lesser than their competitors. They are trying to be fuel efficient, cut costs by bringing a reduction in the weights of seats and furniture. Easy Jet is running the operational functionalities over 60 million passengers. This airline carrier has been securing the competitive position by providing the lower price of the airline tickets. In fact, the company is spending over £1251million on fuel to provide the remarkable services to the passengers.
Operations: They have proper functioning ticket counters in every location, and they provide high-level training to their crew members to ensure the well-being of its crew and the passengers, both in the air and on the ground. They have a buy on board feature which allows passengers to buy electronics, accessories, food and magazines (Bouarfa, Blom and Curran 2016). The crew members are managing the records of 500 flights and helping the passengers when they are in needs. The efficient safety services are creating the significant impacts on the passengers due to which the airline company has the potential scope to achieve the competitive advantage. The passengers can even buy the food as per their interests while boarding. The mediums of entertainments are also available.
Outbound Logistics: All passengers are allowed only one hand bag or bag that they can carry with them inside the cabin. Special preference is given to passengers traveling with EasyJet Plus or Flexi fare cards. They are allowed to carry one small bag as well. They tend to provide rental car services. The passengers can avail the facility of carrying their bags including the cabin bags. Easy Jet even provides the rental car services from airport to the different destinations. The availability of the luxurious car services and hotel information is quite attractive for the passengers.
Marketing and Sales: They promote their brand through catchy slogans like ‘Come on lets fly’, and ‘The web’s favourite airline’ and most recently ‘This is Generation EasyJet’. They have taken up environmental friendly initiatives as part of their corporate social responsibility. They also have ties with UNICEF (Corporate.easyjet.com. 2017). The promotion of the official websites is quite fruitful for the passengers. The passengers can use the different information as per their wish through the available search engine facilities. The price of the carrier is considerably lower that has created the positive word of mouth and ensured more sales in upcoming years. The effective and attractive advertising process is also quite remarkable for gaining the attention of the passengers and increases the market sale.
Service: They provide sales through the internet and the telephone and there are no reimbursements for missed flights. Seats are selected on a first-come-first basis. Their target groups tend to exclude the elderly and disabled people and are generally inclusive of Travelers, and Entrepreneurs (Baker 2014). EasyJet has undertaken the hands-on approaches to satisfy the needs of the customers. The credit card payments are accepted. There is no pre-assigned seating. The first come and first serve basis is followed. The travelers, managers, entrepreneurs, and the managers of small firms are the basic target customers.
Procurement: When it comes to aircrafts, Airbus and Boeing are considered the most essential suppliers and for IT services, they consider Microsoft. They have created a system through which they measure a supplier’s performance and make sure that they are involved with the company in a pro-active manner.
Technology Development: EasyJet has improved their online ways of transactions and nowadays, over 95% of their business is done online. They have developed a service called Right Now Service which helps customers with their enquiries and also encourages them to provide feedback regarding the service received (Corporate.easyjet.com. 2017). The constant improvements in the existing technologies and bringing the new technologies are much commendable. Such initiatives are much beneficial for the company to attract more passengers and achieve the greater performance.
Human Resource Management: EasyJet has a job application section in their website though which they hire employees and encourage diversity among employees. They provide training programs, and mentoring to ensure that the employees work together to accomplish company goals.
Firm Infrastructure: They are a well-reputed airline and their Unique Selling Point (USP) is their low-cost model.
Strengths
Their strength lies in their USP of low-costing fares. They use a single aircraft which allows them to purchase in bulk. Their presence is mainly online, so this helps in speedy and flexible management (Elkhani, Soltani and Jamshidi 2014). They have fast turnaround times as compared to their competitors and they tend to operate high-demand routes of the EU. Therefore, during the brexit, the company would get the chance to operate much competitively.
Weaknesses
The only method of applying is online, so this could be a weakness as they would miss out on other segments of the society such as the people who are not good at technical stuff, or who do not have the internet. They do not have any frill services which include things like complimentary food and drinks, entertainment systems on board and the lack of business class seats. This weakness may affect in securing the competitive edge in UK market. The EU referendum has the clear impact on these services that are needed to be improved.
Opportunities
The Brexit has opened up new markets within the EU that helps EasyJet. Travellers are more cost-conscious now, so they will prefer low-cost airlines. Every company goes through lean and peak seasons, hence EasyJet should lease out their aircrafts during their lean season (Dey 2015). The business segment of France can be catered to and become a primary focus for them. There is a need for business travel (Dileep and Mathew 2017). Easyjet can create routes that are directed at business travelers in France. As trains are one of the primary modes of travel, EasyJet with its low-cost model can compete with those modes. The duration of travel would be far less through the airlines. It depends on the company how to utilize the opportunities since the effects of Brexit remains constant. The low cost facilities have the remarkable scope for the company to attract more passengers. Utilizing the opportunities would provide the facilities to operate in the EU market.
Threats
Increase in airport charges is a threat for EasyJet. Unless they are able to negotiate with airport authorities, an increase in the fees can be harmful. Environmental factors like recession can hamper the operations, and reduce the overall number of flights. Labour unions and employee strikes can further cause problems for the company. Air France is their main competitors in France, so they will have to provide better packages and payment schemes to attract more consumers (Bottasso et al 2015). The policies under the EU referendum may create the significant impact on the price of the airline tickets. The company thus needs to pay the closer attention towards such facilities for ensuring growth.
Critically evaluating whether EasyJet can continue with its current vision and mission statements in France.
EasyJet’s mission is to provide customers with good quality services which are safe and are of good value as well. They aim at offering reliable product that is consistent in nature and its low-cost fares are appealing towards customers. They want high frequency of flights between major European airports so France in this regard would be the ideal choice (Corporate.easyjet.com. 2017). This would be the perfect convergence point for all European related travel. The vision of EasyJet is to be the best low-fare airline in the world and they want to continue achieving this by implementing their 5 core principles, Safety, Pioneering, One team, Passion, Integrity and Simplicity. When their headquarters will be moved to France they can be assured that they would be able to deliver on their mission and vision statement. Air France will be their major competitor and would form hindrances, but overall, they can deliver better results in France (Corporate.easyjet.com. 2017)
Providing frill services, catering to the elderly, disabled and technically-challenged section of the society can bring in more customers and widen their market segment in France (Widmann and Perez de la Cruz 2016). France’s aviation industry is one of the primary sources of employment so by hiring people who are fluent in French and are accustomed to the cultures and traditions of the country would be helpful for retaining customers as well as creating a new market. Investing in recruitment and other training programs can help facilitate further diversity within the organization (Eaton 2017).
EasyJet would be considered the strongest in their most profitable market, so as France considers EasyJet as their first choice when it comes to Low-cost carriers, they will continue to have a loyal customer base in France. France has one of the world’s largest aviation manufacturing sectors, so that would help in creating aircrafts (Iata.org. 2017). France also uses green technology and that would be helpful to consider when selecting a location. The carbon emission from airplanes has reduced for EasyJet, so collaboration with an environmental program for further CSR activity would help them in the long run (Corporate.easyjet.com. 2017). The aviation segment contributes about 61.8 billion Euros (3.2%) to the French GDP (Iata.org. 2017). The main intention for EasyJet to be introduced in France would be to focus on both domestic and pan-European Flights (Easyjet.com. 2017). This could be done by creating routes within France that have a high demand. This would help increase regional popularity for EasyJet, and would make travel convenient for French residents, exchange students and immigrants. EasyJet currently has a number one position in Nice and Nantes, and number two positions in Paris, Lyon, Toulouse and Bordeaux. Overall France seems to be the perfect choice (Corporate.easyjet.com. 2017). With this advancement in the aviation and IT sectors of the country, better Customer relationship management (CRM) and improved e-commerce systems will have to be put in place to reach better leaves of customer satisfaction.
Product: EasyJet provides light weight aircrafts that are bought in bulk and are easier to maintain. There has been a considerable amount of reduction in carbon emission since they became more fuel-efficient.
Price: Their flights are cost-effective. People preferring higher luxury quality airlines would have to look elsewhere. EasyJet has a ‘first come first serve’ approach to ticket sales. The prices go up as the date of departure draws nearer (Cattaneo et al 2016).
Place: France has a wide range of transportation in the form of trains, airplanes, and ferries. For EasyJet to stand out, first of all they would have to locate their headquarters in the hub of Paris. Trains are the main mode of transport for both short and long distances. They will have to compete with the (Easyjet.com. 2017).
Promotion: A huge number of their sales happen online through their customer service networks. Close to 95% of their flight seats are sol online. Electronic tickets are their main source for providing seats.
EasyJet needs to increase their overall fleet size which can result in maintenance costs that will help them to negotiate with the suppliers. The aircraft suppliers Airbus and Boeing, and IT supplier Microsoft would help them evaluate their current conditions and how they should proceed with their operations. They would have to consider an increase in their load factors as well. An increase has already been seen this year, but they would have to maintain to form a proper customer base in France. Some of the risks that they would need to consider are the language barriers, cost-cuts due to change in operations/staffing. EasyJet has already had major losses in its first half of 2017 (Financial times 2017). This was their worst performance in the first-half for as long as six years. Moving to another country will have its own challenges when it comes to expenses. The exchange rate of currencies will be a major factor to consider. Other risks to consider are commercial risks, change in rules and regulations, government policies.
Conclusion
Through this report it is clear that while France is a good choice, they need to improve on their own services to gain customer loyalty in France and make them the primary choice over their competitors. Their low-cost structure is effective and to continue maintaining their brand image, they need remain in a niche market. In the UK, they are considered to be a good quality service airline provider, but to make such a reputation stand out in another country; they will have to merge with well-known and reputed companies in France. This will help improve their goodwill.
References
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Dey, K., 2015. SWOT Analysis of the EasyJet Airline Company
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