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RARITY

One of the main rarities of easyJet is a strong price cost control as well as strong passenger growth. The main asset of any airline companies is the aircraft, as soon as easyJet owns 279 aircraft and have 29 bases across Europe, it gives the company a strong competitive advantage compared to other airline companies (easyJet, 2017).

INIMITABILITY
The main future inimitability of the company will possibly be the electric passenger airplanes. Also, it could be considered that technological breakthrough of easyJet is stepped ahead from other airlines companies because they already started to create new aircraft and signed the contract with ‘’Wright Electric’’ (Sustain case, 2018).

ORGANISATION

The EasyJet is perfectly organised and use their resources efficiently in order to provide a competitive advantage. An excellent customer relations management capability helping company to grew customers loyalty and airline revenue.

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2.3 Conclusion and Recommendations

The EasyJet have all chances to become the best airline company in the future. The company constantly expanding, and their revenue, as well as capacity, is growing. In theory, the company such as EasyJet do not have special resources that could be inimitable but not everyone can repeat the success of the company. The company’s sustainable competitive advantages are assets such as aircraft, bases across Europe, strong price power, providing best conditions and excellent customer treatment, strong relationships with stakeholders and strong brand name. In order to achieve this advantages, other airline companies will have to spend a lot of time, money, hold a strong position in the market and have an excellent business strategy and still may not achieve even 20% of EasyJet success. As the main tool of airline low-cost industry is price, EasyJet should find ways to reduce prices in nearly future, that will help the company to increase the number of new customers. The expansion of routes will allow the company to increase their market share. It is important to note that the company soon can change the future of the aircraft industry by providing new electric passenger airplanes, that subsequently will help to reduce dependence on oil and minimise environmental impact and promote sustainable aviation.

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Part 2.                           Competitive Business strategy of EasyJet 

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Part 2.                           Competitive Business strategy of EasyJet 

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2.0 Overview of EasyJet

The EasyJet is a low-cost European airline company headquartered at London Luton Airport. The company makes travel affordable and operational efficiency on point-to-point routes. It was established in November 1995 providing flights from London Luton to Glasgow and Edinburgh. In the beginning stage of the company, EasyJet was famous for their slogan “Making flying as affordable as a pair of jeans £29 one way” which become a good marketing tool for EasyJet promotion. Today the company is one of the leaders in its niche and was awarded as the Best Low-Cost Airlane of 2018. EasyJet plc is listed on the London stock exchange and is part of the FTSE 100 index. The market capitalisation of the company is £4 billion and a net cash position of £213 million at 30 September 2016 (easyJet Plc, 2018). In 2003 the annual income of EasyJet was less than £50 million but in 2013 company managed to increase their income to £478 million per year (Ferdman, 2013). Please see chart below:

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2.1 VRIO Analysis

The VRIO framework is a strategic analysis tool for the evaluation of a company’s tangible and intangible resources along with capabilities that give them a long-term competitive advantage. This business process looks at the internal and external objectives and evaluation dimensions such as Value, Rareness, Imitability and organisational support (Management Mania, 2016).
VALUE

Tangible resources

Financial Resources:

After the bankruptcy of AirBeriln, easyJet bought parts of their company assets and that will make easyJet the largest airline in Germany's capital (Morris, 2018). According to easyJet results, the company’s revenue grew by 19.5% at the end of 31 March 2018. The company have a good business model and strategy which helped them to increase their net cash position from £353m at March 2017 to £665m in March 2018. The strong financial base is one of the main EasyJet’s key resources that helps to invest and manage its low-cost business model (easyJet Plc, 2018). Also, the capacity of EasyJet grew since last year by 8.8% and company increased their passenger amount by 2.2 million (Marketplace, 2018).

Industrial resources:

The easyJet provide three types of airplanes and owns 279 aircraft. Also, it has 29 bases across Europe. The company employs more than 12,000 people, including 3,291 pilots and 7,547 cabin crew members (easyJet, 2017).

Intangible Resources
Human Resources:
The easyJet have one of the top customer relations management capability in the airline industry which become a forceful asset for customers loyalty and growing its revenue (easyJet, 2017). The success of the company mainly based on providing best conditions and great customer treatment what distinguishes them from competitors. Within ten years the company managed to increase the volume of airline’s traffic figures from 44.6 million in 2008 and 81.6 million in 2017 (Morrison, 2018).

Relationships with stakeholders:
EasyJet managed to create strong relationships with their stakeholders including customers, suppliers, airports operators, traffic control and national government. This has helped the company to keep customer loyalty, its strong relations with suppliers, to grow their revenue and maintain its low-cost business model (easyJet, 2017).

Brand name:
The easyJet become second biggest UK airline and eighth largest in the world (Morrison, 2018). According to SKYTRAX, the company certified with the 4-star low-cost airline rating for their onboard product quality and staff service whenever the Ryanair have only 3-star (SKYTRAX, 2018). Also, the company is a third world best low-cost airline in 2018 (Whitehead, 2018).

Technology:

EasyJet increasing their use of data and implementing a wider digital strategy to be able to continue to make travel easy and affordable in the longer term. The 18.3 million of consumers managed to download easyJet app by 2017 (easyJet, 2017). The main technological breakthrough of the easyJet will be electric passenger airplanes. These new planes will help the company to minimise its environmental impact and promote sustainable aviation. EasyJet has already signed a contract with US start-up ‘’Wright Electric’’. This innovation will give a huge competitive advantage over other airlines (Sustain case, 2018).

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1.4  Conclusion and Recommendations

It was state that airline industry including low-cost airlines is extremely competitive business. The industry have low threat of new entrance because it requires a large of capital investments. Also, any new regulations regarding to greenhouse gases and other pollutions can ruin the future of some airline companies. However, the low-cost airline industry is growing which showing a good sign for new business entrances. Also, the new business entrances into airline industry need to take into consideration that during 1999-2007 twenty-three low-cost airline companies went bankrupt and six companies had to merge with other airline companies (Van de Voorde, 2007). In the future new and existing low-cost airline companies should mainly be focusing on reducing greenhouse gases and pollutions coming from airplanes by introducing biofuels and electric propulsion airplanes. Therefore, the airplane companies will reduce dependence on oil prices, influence of government restrictions, provide the competitive advantage and possibility to reduce ticket prices.

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Appendix 1.

Bargaining Power of Suppliers | HIGH | There are only two main manufacturers of European low-cost airplanes: Boeing and Airbus. This duopoly allowed these manufacturers charging high prices for the aircrafts. The switching to other manufacturers will be highly costly for European low-cost airlines, that can also affect the tickets prices (Aviation Knowledge, 2010).In 2018 fuel price is 36.5% higher than it was in 2017 which predicts negative aspect of future oil prices. This means that fuel suppliers are able to increase their prices (Bellamy, 2018).

Bargaining Power of Buyers | HIGH | The low-cost airline industry contains 2 categories of buyers which are single flyers and travel agencies or online portals. Most travellers prefer to use sites or apps that compare rates across all carriers to choose the most preferable. Also, different companies offer the reward programs and more direct flights at low prices which allowed customers to switch carriers even more quicker and easier (DePersio, 2018).The low-cost carriers have low customer and brand loyalty. Any competitor that offer better rate will get biggest amount of customers. The switching cost for the buyers is really low. All the low-cost airlines are providing the flyers with greater facilities and working towards to reduce their operating expenses. This making the bargaining power of buyers high (Field, 2017).

Threat of New Entry | LOW | Despite that there are no proprietary products or services involved, and switching costs is extremely low, the airline industry has a low threat of new entrants. The current low-cost airline companies have a large cost advantage because this industry requires a large amount of capital investments and a strong customer, to be able survive the first couple of years and not incur losses. Existing companies can use their high capital to supplant new companies by lowering prices or operating at a capital loss. Also, the companies that planning to enter the industry need to become licensed and this procedure can last about a year (Loris, 2014).The low-cost carriers generally use one type of planes which are less expensive than full-service carriers use (Manuell, 2017). According to the Boeing and Airbus price list of 2018, even the cheapest airplane will cost the new entry company $77.4 million. Also, some of the airlines getting almost 10-40% discount which gives a huge advantage for existing airlines companies (News in Flight, 2018).Higher fuel prices reduce the chances of a new company to become profitable in a first years and increases the risk of bankruptcy (Shane, 2018).The airline functional cost is extremely high because its includes aircraft operating cost, aircraft servicing cost, traffic service costs, passengers service costs, reservation and sales costs plus other additional costs, which means that handling this type of business is really expensive (ICAO, 2017).
Threat of Substitutes | MEDIUM | There are substitutes in the low-cost airline industry such as train, bus, boat or car. Some transportation may be more or less costly than airplane but it’s also important to consider the route time. Also, to choose the most suitable transportation the consumers should consider the factors like country, distance, comfort and price (Airline Industry Analysis, no date). For example, the train (Eurostar) ticket from London to Paris on November 1st cost £101.00 and takes 2h16m journey. The train departs from central London and arrives in centre of Paris (Eurostar, 2018). The airplane (EasyJet) ticket on November 1st cost £75.00 and takes 2h10m journey. However, the airplane departs from London Southend which is around 1h 30m away from central London and it is arriving in Paris Charles de Gaulle which is around 40 minutes away from centre of Paris (EasyJet, 2018). It turns out that the first option will be less expensive, more comfort and take less time, whenever second option takes more time and include additional transportation cost. Despite the example above, airplanes are the fastest form of transportation available today and especially low-cost carriers which become less costly and more suitable for long-short journeys (Airline Industry Analysis, no date).
Competitive Rivalry | HIGH | The rivalry in the low-cost airline industry includes full-service and low-cost carriers. Inside the low-cost carriers, airlines mainly using price wars trying to provide better price with highly customers benefits. Leaving the industry is difficult because of long-term loan agreements force companies to stay in business, and any changes in credit conditions will lead to serious losses for the company. The market share inside the low-cost carriers constantly changing due to fact that switching costs are low, none of the airlines can realistically hold a significant market share. The aim of the competitive rivalry is the threat of sales losses because one of the competitors could provide better prices. Also, the slight decline in prices and different kind of deals on full-service carriers can become a big threat for low-cost airlines. Certain plane manufactures have been making eco-friendly planes which will change the bargaining power of suppliers and increase the rivalry in the low-cost airline in the future. Another change is that websites such as lastminute.com allowed to book airplane tickets from their website which makes purchasing flights faster and easier. The main asset of the low-cost carriers is to be able manage their capital during the recession periods, follow the trends and set their prices correctly (Loris, 2014).

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1.3 Porter’s Five Forces analysis
The Porter’s Five Forces is a tool which helping to analyse the competition of a business. The framework helping to identify microenvironmental factors to determine the intensity of competition and analyse if attractiveness or unattractiveness of the industry in terms of its profitability (The Economic Times, 2018).

According to Porter’s Five Forces Framework it was state that European low-cost airline industry is an unattractive industry. The bargaining power of suppliers is high because European low-cost airlines use only two manufacturers (Boing and Airbus). The switching cost is very costly, and duopoly allow manufacturers to charging high prices for aircrafts (Aviation Knowledge, 2010). Also, business very dependents on fuel prices and any increases in the price impact the company’s profitability (Bellamy, 2018).

Because low-cost carriers are highly competitive industry bargaining power of buyers is also high. The low-cost carriers have low costumer and brand loyalty. Any competitor that offer better rate will get biggest number of customers which means that the switching cost for the buyers are really low (Field, 2017).

The industry requires a large amount of capital investments and strong costumer to be able to survive first couple of years, that’s why it has a low threat of new entrants. As the industry is sensitive to economic changes opening this kind of business become too risky (Loris, 2014). The airplanes still the fastest form of transportation available today and especially low-cost carriers which become less costly and more suitable for short-long journeys. Threat of substitutes is medium because the transpiration is depending on factors such as country, distance, comfort and price (Airline Industry Analysis, no date).

The market share of low-cost carriers constantly changing due to fact that switching cost are low, none of the airlines can realistically hold a significant market share. The aim of the competitive rivalry is the threat of sales losses because one of the competitors could provide better prices, that’s why industry have highly competitive rivalry (Loris, 2014). Please see full Porter's Five Forces Framework in Appendix 1.

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1.2 PESTLE - Macro Environmental Analysis
The global aviation industry including low-cost carriers operates in a highly regulated environment which suppresses any early tendencies towards monopolistic behaviour by the airlines, this makes airline industry highly competitive. Also, the industry works in conditions where passenger’s safety is a preeminent importance and any violations may lead to fines or company closure. The industry is really sensitive to any economic changes so the fluctuations in the price of oil can be economically harmful to some companies. For example, recession, economic crisis or wars are strongly affecting fuel prices which could lead to airlines unprofitability, bankruptcy or closure (MSG, 2018). Despite that, the airline industry is growing, worldwide air passenger numbers increasing, and industry is able to raise their profits every year (PTI, 2017).

The main problem of air transport industry is high level of pollution coming from airplanes which makes aviation industry unsustainable in its current form. Also, important to consider aircraft noise which affecting the local community, and aircraft emissions affecting on climate change (Eurocontrol, 2018). But the industry is growing and uses of technology extensively in its operations. The airlines already use websites and online apps, so the next stage of technology progress would be reducing of greenhouse gases by providing biofuels and electric propulsion for the airplanes (Zhang, 2017).

The new political regulations or changes could also affect the airline industry. For example, Brexit may negatively affect the European low-cost aviation industry if both UK and EU will not come to an amicable decision (Whyte, 2018). As the social factors low-cost airline industry should mainly be focused on the brand image. For example, the scandal that happened with Ryanair because of cancelled flight force the company to cut their prices. However, the consumers still kept flying with Ryanair but the scandal brought negative social impact on the company (Moore, 2017). The legal factors are one of special importance in the context of airlines industry which includes passenger’s safety and other rules and regulations. Because of that, airlines are responsible for plane crashes or any other type of disaster (Adamkasi, 2016).

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Despite the fact that Ryanair managed to sell the higher amount of seats, company has the smallest percentage of growth since last year. But SunExpress airline managed to make a strong breakthrough and increase seat capacity growth by 64% since last year. Please see the full diagram below:

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Part 1.                                   European low-cost Airline Industry

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Part 1.                                   European low-cost Airline Industry

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1.0 The industry
The low-cost airline industry showing a huge growth over the last two decades. The industry is focusing on reducing the airline cost by charging clients for the services like a seat reservation or checked-in baggage. While Traditional Scheduled full-service airlines using the first city airports, the low-cost airlines mainly using the second airports because they have lower taxes. Also, lower-cost airlines using the single aircraft type which have lower expenses on maintenance and repairs but usually have on thirteen seats more than traditional scheduled airlines. The Low-cost aviation is the 2ndmarket segment in Europe (Eurocontrol, 2017).
The Europe has number of low-cost airlines, some of the largest and most established being Ryanair, EasyJet, Norwegian, Vueling and Wizzair. These airlines providing air travel within Europe by dramatically cutting fares. Over the past 10 years’ number of European low-cost airplane seats has grown by 124%, starting from 224.29 million seats in 2009 to over 501.83 million this year. According to OAG schedules the low-cost carriers should have a 50% of market share by 2027, that predicts a good growth for the industry (AnnaAreo, 2018).
The Ryanair become a leader of selling the airplane seats this year. The company managed to sell more than 100 million seats, the second position is taken by EasyJet with 98.44 million seats sold this year. Please see the full diagram below:

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The purpose of this case study presentation is to review the European low-cost airline industry and critically evaluate the structure and nature of the competition within an industry and its attractiveness.  To see how industry adapting to the changes and what kind of strategic opportunities available within the industry. By using the Porters 5 Forces framework it would be able to critically evaluate the structure and identify the competitiveness and drivers of profitability within the European low-cost airline industry.

The second part of study presentation will provide an overview of “easyJet” including their capabilities, key organisational resources and financial matrix. It will look at the sustainable competitive advantage of the organisation in its market place and provide appropriate recommendations.