Evaluating the contemporary business environment

Evaluating the contemporary business environment

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Introduction

EasyJet is a multinational airline that was established in March 1995 by Sir Stelios Haji-loannou. It has more than 1000 routes nationally or internationally, it is connected with more than thirty countries all across the world. The headquarters of EasyJet is at London Luton Airport. This airline is sharing many stakeholders but due to pandemic, the whole strategy of EasyJet has been disturbed because many people stop traveling in or out of the country and due to this covid-19 it announces its first annual fall in the last twenty-five years. As there is a lockdown in more than 20 countries it is connected to, it decided to reduce the schedule up to 20 % in November 2020. Due to this, the traffic in the air reduces to 50 % in starting and up to 90%in April 2020. Airlines are not flying and burning €295 million per month and it can be least for not more than 8 months. So, to improve the situation various new strategies have been made by the consultant to analyze the current business environment. The topic covered in this report is the market structure of the UK within which EasyJet operates, economic factors that affect the business of EasyJet, impacts of Brexit, the impact of Covid -19 on the business. In the end, concluded with the impact of Covid and how it affected the business strategies in the crisis to overcome the loss.

Task 1 Explain the market structure in the UK within which EasyJet operates?

The easy jet is a low-cost carrier that was established by the entrepreneur of Greek named “Steliou-Haji-loannou” in the year 1995. There are many airlines in Europe but the concept of low cost makes this company reach its height. The report will focus on the company named EasyJet which boom in the market in the year 2000 (Saindaas, 2017). In the year 2000, EasyJet comes into the market of share, and at present approx. 30% of its shares are of the owner others all are sold out (Law & Breznik, 2018). Because of the increase in the prices of all things the EasyJet provides a low-cost business model that helps it to grow at a very fast rate the market strategy followed EasyJet is provided airline tickets at a low-price as compared to other airlines with eliminating some of the services and comfort. But it provides all kind of services like short-haul, point-to-point routes and medium hauls at very minimum cost. Earlier oligopoly has been used but in the new market, the policy says the new market policy of nice craves out which was followed by the airline EasyJet. The high entry fee may guarantee the other things but humans tend to find attracted them towards the cheapest thing so having the LCC stagey makes the more profitable. In the high level of competition, the profit margin for LCC is less return value but the turnaround is maximum because small profit when gets integrated it maximizes the profit ultimately (Morlotti, et.al, 208).

Figure 1:- Growth of EasyJet in the last decade

The internet has increased the transparency among the prices of all the airlines so, it is easy for an individual to find out which airline is more comfortable for it and which airline is cost saving for them they will go to that. The agent commission also gets deducted because of the use of the internet so this makes more it more at fewer prices. Due to LCC, the number of passengers in the flights of EasyJet is increased which increase the traffic of EasyJet. They have more than 400 routes within Europe. Much time it also provides an offer to its customer.

The price of related or the substitute goods are also mattered a lot to the passengers so these have been deceased at some percent. These are some things in the market strategy of EasyJet which makes it in the lead in airlines. This also helps it to survive for More than 8 months in the situation of the covid-19 too. The growing structure of the low-cost carrier increasing the market shares which improves its serving quality (Cui, et.al, 2020). It is a challenging task for the traditional network to grow themselves with the same strategy as having older and competitor the LCC airlines.

In the Covid situation too these kinds of airlines can service for a more duration of time because they have more turnaround before the pandemic and after the pandemic to passengers are attracted towards the services which work on the low-cost carrier with the safe travel. But after the covid-19 situation, the market structure of every airline gets changed accordingly.

Task 2 what are the economic factors within the UK that affect the business of EasyJet?

Economic factors are those factors that affect the economy of any organization it includes all the expenditures and the economy of that organization. These don’t have a direct relationship with the business but have an effect on business may be in present as well in the future to, it includes like rate of interest, tax rates, governmental activities, policies, law, wages and many more. There are two kind of economy microeconomic (which include the factor which includes the choices of an individual) and the macroeconomic factors include which was influential natural, fiscal or geopolitical which affect the economy of the whole nation (Dosi & Roventini, 2019)

The factors which affect the EasyJet airlines are mentioned below: -

1. Economic growth rate:- It depends on the various factor of the income and the expenditure in the particular airline, EasyJet works on a Low-cost carrier’s strategy which leads its economic growth rate at a slow rate but when we look at its turnover we can found that it has more percentage of turnover than the other traditional airlines.

2. Labour cost and their productivity: - The cost of every employee must depend on their work productivity. The management must be taken care of every work, immediate disqualification must be there to save the economy of the airline.

3. Skill workforce in the leisure & travel industry: - When the airline has a more skilled workforce then it for sure that they have to pay them more amount, and EasyJet is a group of 15,000 + skilled workforce. Which makes it pay high and reduce their profit so, the skilled and unskilled must be taken care of by the human resource management team of the airlines.

4. Unemployment rate: - when we take the unemployment in EasyJet, after the pandemic situation flights remain on the ground and there is no income at any cost so, companies are deciding to remove the employee. EasyJet has decided to reduce it one third. This brings unemployment to two-third of employees. Hence it improves the unemployment rate in the countries.

5. Infrastructure: - The variation in the infrastructure or the changes in the strategizes may lead to a fall down in the economy of the organization but there are chances to up that and gain profit. The change in the market structure brings the change in the economy of an airline industry it depends on the business ideology or the methodology.

6. Host country currency and the exchange rates: -the airlines which have international routes may bring currency of other country and when the exchange has been done which may have greater value or less value than the host country and the rates of a particular currency may changes it may be up or down. So, this brings changes in the economy of EasyJet or many other organizations.

7. Country economic structure: - It helps in stabling the economic structure of the country by vacillating the transportation to the tourism and increasing the employment in the country which ultimately leads to the growth of the country.

8. Inflation rate: - The inflation rate is the currency rate which means, every currency has a different value as compared to the standard value so, this rate depends on the currency of the particular country where the flight of EasyJet is reporting. The rate of currency gets up and down every day according to the Sensex so, it also disturbs the economy of EasyJet.

9. Discretionary rate:- This means there is no fixed price of any things, this will depend on the particular purpose, it depends on the demand of tickets on the particular rates, crude oils rates, interest rates, etc, and this all combines to create the up-downs in the discretionary rate (Stamolampros & Korfiatis, 2019).

10. Business cycle stage: - There are many stages in every business which are interconnected so, change in one factor may lead to change in another factor too, so these small changes in every step lead to huge change which has an impact on the economy of the airline or any organization. Minimum the change, less the effect on the economy of EasyJet.

11. Prices of related goods:- The prices of related goods like boarding with car bookings, many airlines provide these types of related services to comfort their passenger which depends on the passenger to the passenger as well as on the agent commission percent in the particular route gets fluctuated so, it also affect the fluctuation of economy.

12. Income: - It affects the economy directly; it depends on the demand for the airline in particular routes if the routes are having higher demand then there are chances to increase the rates of the particular route at a particular date. As the luxury increase the rate also increases so, the income can be directly related to the economy of the organization.

13. Fiscal policy: - In this, the higher rates of interest rates affect the airlines in the demand because every bank knows the airlines need the more amount of loans so, they provide the loan at higher prices which directly affect the retail price index of the airlines. EasyJet gets affected by the fiscal policies because it pays the duty tax on the carriers on the air.

14. Crude oil: - Increase in the prices of oil may affect the economy of the airline. To stop the over-use of crude oil or in the shortage case, the oil companies increase the prices of oil which ultimately results in the high prices on the tickets of transporting services, this fluctuation in prices of crude oil, directly affect the economy of EasyJet.

Task 3 what are the likely impacts of Brexit on the business operations of the company?

Brexit is the word formed from the two words Britain exit, which means the departure of the UK from Europe. In the year 2016, the voting has been done in which 51.9% of people agree to the decision of leaving the country (Sampson, 2017). Due to which many things get changed, all the marketing strategies have been modified to make the new business structure for the new UK. When these two countries get separated all the sectors of business have been affected by this (Tulkki, 2019).

Figure 2:- Impact of Brexit on EasyJet

In this report, we are discussing the impact of this Brexit on the airline like EasyJet.

1. Air Service Agreement for Disruption: - The UK has regulated all its rules according to the law of the EU framework. Because of this, the trade between two countries gets affected all across the world. With Brexit, the air service agreement comes for renegotiation. The UK has to be together with the basic connectivity with the EU till every nation of the country in the world.

2. Airline revenues get declined: - Many corporate have fear of investing their money in the airlines when Brexit comes and shows its effect. Earlier many numbers of passengers went from the UK nowadays the number of passengers has been reduced to 5 million only. EasyJet experience poor passengers after the Brexit has been taken place because the tickets and the visas also become more expensive.

3. Control over the board and management of the passenger has increased: - Before the Brexit, things go easy and happen easily but post-Brexit the UK government has decided to make a rule for tighter border management by putting various customs in the market. EasyJet can expect the delay in increasing the visas or the passport is the become the logistic challenge for the airlines. EEA nationals are used to reduce the waiting time by the use of the ‘third lane’ solution and it is uncertain about the resource that is either it is effective or just put for the increasing the burden.

4. Movements of goods are restricted: - After the Brexit happens the movement of goods is also becoming slow down because of check process at every border is more complicated now. So, the market must handle even those routes which do not carry any goods just flew for carrying the passenger.

5. As Brexit has announced the EasyJet has lowered its fares without taking afraid of the fuel prices and it is moving with a negative of 4% in last year. In six months of this, they have fallen by around ten percent in their airline shares.

Task 4 Analyse the impact COVID-19 is likely to have on the business of the company

Due to this deadly covid-19, the world economy serves a lot. Many of the counties negatively reach their GDP. In that situation of a pandemic number of countries as banned flights from other countries and does not allow any outsiders in their country national flights are also not flying. Due to this airline are facing lot many problems. European airline named as EasyJet which has lost many shares but due to pandemic, they decided to cut off their workforce from 15,000 to its third. According to them, it takes three years to be normal once again or to come at the level. They restarted their services on 15 June, but these are limited by all the new guidelines that must be followed. EasyJet is not only serving from this but the CEO said that this is the worst crisis for the company because there is a lot much uncertainty is going to face during this pandemic. By the Covid -19, many airlines lose more than 50% of turnover. Because the number of passengers has reduced to its minimum from 2020 to 2019. If the situation of social distancing remains the same then the same condition can be more worsen than the present (Ponomarev, 2020). The airlines are not even reaching their break-even-points.

When the first ban was announced in the air, traffic reduces up to 48 to 61% you can analyze it from the figure that EasyJet its passenger from 7.7 million to 3.9 million which is an approx. reduction in the 49.5 % in March 2020.

Figure 3:- Evolution of traffic on EasyJet

The airlines are remains on the ground no flew is taking place in 2020 it becomes 50 % and the month of April it reaches 90%. Due to which many the maintenance or the fixed cost for the airlines are burning every month. When we talk about EasyJet it is burning €295 million per month in this pandemic. So, the CEO of EasyJet says that the company can hold this pandemic up to 8 months only which shows that the company doesn’t have that much potential to fight the crisis (Albers & Rundshagen, 2020).

There are many changes we can see in the airlines after the period of covid-19 these are: -

1. Low demand: - Due to Covid -19 the demand of airlines is reduced but the quality of this has been improved after this period.

2. Enhanced security measures: - Due to covid-19 the security has been improved everywhere, the temperature check, and pre-boarding as well as post boarding checks.

3. End of giant planes: - As the number of passengers decreases in the pandemic duration a large number of planes remains on the ground only and a little number of planes flew which even decreases the few of giant planes.

4. End of 1^st class; - In the pandemic the business class has been increased to 15-20%. Due to pandemic the demand for the improved condition of travelling without increasing the number of a passenger due to which the people prefer to opt for the business class rather than the first class.

5. Low-cost highs: - In the pandemic, the airlines which are having low-cost has improved and required themselves more than the traditional flights or airline.

Conclusion

From this report, we can conclude that the airline named EasyJet works on the strategies of low-cost carriers, this strategy fails many traditional flights as all the passenger can see the prices and can compare this on the internet easily, so get attracted to this and confirm their booking nationally or internationally from any of the 1000 routes cover by EasyJet. EasyJet work on LCC with a greater number of the customer the which brings them higher turnover at the end of the year. Many economic factors must deal properly with the higher economic growth rate. Due to having the LCC as their strategy, this brings them low fall in the pandemic too, it can remain on the ground for eight more months while traditional airlines are less than as compared to it. But due to covid-19, they had just limited the routes as well as the number of employees to its one third. Having the LCC as their marketing strategy brings their shares to be sold out at higher rates in the year 2000. So, having a low-cost carrier is more beneficial than other market structures.

Referencing

Albers, S. and Rundshagen, V., 2020. European airlines? strategic responses to the COVID-19 pandemic (January-May, 2020). Journal of air transport management, 87, p.101863.

Cui, Q., Lin, J.L. and Jin, Z.Y., 2020. Evaluating airline efficiency under “Carbon Neutral Growth from 2020” strategy through a Network Interval Slack-Based Measure. Energy, 193, p.116734.

Dosi, G. and Roventini, A., 2019. More is different... and complex! the case for agent-based macroeconomics. Journal of Evolutionary Economics, 29(1), pp.1-37.

Law, K.M. and Breznik, K., 2018. What do airline mission statements reveal about value and strategy?. Journal of Air Transport Management, 70, pp.36-44.

Morlotti, C., Cattaneo, M., Malighetti, P. and Redondi, R., 2017. Multi-dimensional price elasticity for leisure and business destinations in the low-cost air transport market: Evidence from easyJet. Tourism Management, 61, pp.23-34.

Ponomarev, D., 2020. Consolidation of airlines in Europe: potential acquisition of Norwegian by EasyJet (Doctoral dissertation).

Sampson, T., 2017. Brexit: the economics of international disintegration. Journal of Economic perspectives, 31(4), pp.163-84.

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Stamolampros, P. and Korfiatis, N., 2019. Airline service quality and economic factors: An ARDL approach on US airlines. Journal of Air Transport Management, 77, pp.24-31.

Tulkki, J., 2019. The possible effects of Brexit to airline operations.