BUSINESS

EasyJet Case Study

EasyJet Case Study

Introduction

Easy jet is a Luton based airline which is one of the latest add-ons to the airline industry. Though they took their first flight in 1995 but were never deprived of their experience shortage in the airline industry. This is not an assumption but proven by the corporate figures turnover of £ 263 million and pre-tax profits of £ 22 million also shows that they are not struggling to keep up their success (www.easyjet.com). The company is heading towards strength to strength with the consistent increase in the number of passengers of impressive figures of 5.6 million passengers by the year of 2000. Being “the web's favourite airline” is the claim of EasyJet which is proven by their statistics.

Discussion

The five force of Michael Porter's model will be used to analyse the industrial structure of EasyJet in detail. It will help to identify which of the following forces are relevant to each other and the industry and to what extent. The intensity of competition, attractiveness and profitability of the industry will also be considered through this analysis (Porter, 1980).

The threat of new entrants

The new entrant's threats are cancelled out to some extent due to the high capital requirements. The airline was started with £5 million loan and two leased aircrafts but it also required investment of £50 million heaved up by the debt and equity in the second year to increase the pace of expansion and to buy four new planes.

In contrast to the rest of the Europe, the low-cost market of UK is quite mature due to which EasyJet has acquired a comfortable position as the biggest operator. Despite of this success, expanding into the new European markets may become a difficult task as already recognized cash sturdy firms are building up their own low-cost processes such as the holiday firm TUI.

For new carriers the shortage of landing and take-offs slots has made it crucial to find appropriate airports.

In order to join the low-cost market, a loss leader is also required.

The power of suppliers

The aviation fuel cost is connected to the price of oil and being an individual airline company, EasyJet does not possess any power to adjust this.

The airline industry is concentrated by the airplane manufacturers as Boeing and Airbus is providing most of the commercial planes and EasyJet is operating only one type of aircrafts until now. However, its deals with the airbus suggests that favourable concurrence and agreements can be still be attained. On the other hand remaining dependent to only one manufacturer for spare parts may also pose a risk.

Expansion is necessary for the EasyJet as the more expansion will make it able to exert more power over its suppliers.

The Power of Buyers

Power of buyers and particularly the low-cost market is the relatively strong with the airline industry. This is because the customers often seek for the better price, especially with the reliance offered by the low-cost airlines through internet sales.

Price inconsistency can be easily be discovered and ...