• EasyJet Pestle Analysis 2018
• Porters Five Forces of EasyJet 2018

Introduction

In this report, we analyze EasyJet using SWOT to gain an in-depth understanding of the company's strengths and weaknesses. We also make a summary analysis of the current threats emanating from its industry environment in the UK and EU including Brexit, unfavorable currency movements, rising labour costs and many others. The analysis then examines the external environment for positive key drivers of change in the airline industry, which may become sources of future competitive advantage.

2.0 EasyJet Swot Analysis 2018

2.1 Strengths

2.1.1 EasyJet enjoys strong financial strength

• With a capitalization of 5 billion, EasyJet’s strong revenue has become one of its major strengths (Annual report 2017). EasyJet has experienced a positive operating environment due to its strong network, customer proposition and growth in its market due to bankruptcies of Monarch, Air Berlin and Alitalia (Rovnick 2018; Masadique 2018). Due to rival bankruptcies and Ryanair cancellations, the Luton based airline saw a significant growth in the last months of 2017 giving it a strong financial start for the year 2018 (Morris 2018; Masadique 2018) . The strong finance has helped the airline to acquire part of Air Berlin, making it the biggest airline in that city as well as helping EasyJet expand its presence in major air ports (Morris 2018).

2.1.2 Strong brand name

• A strong brand name is its other core strength that has helped it create customer royalty and growth. EasyJet is the second biggest airline in UK and 8th globally (Morris 2018). EasyJet airline also the biggest airline in the German capital, with 18 number one spots in key markets by share of seats, EasyJet has become one of the biggest airlines in Europe (Annual Report 2017; Centre of Aviation 2018). According to Fleming (2018), EasyJet is the most considered airline after British Airlines and ranks first for value of money, 14 points ahead of BA and 19 ahead of Ryanair.

2.2 Weaknesses

• A major weakness of EasyJet is its minimal global presence. The Airline heavily concentrates on the European short-haul market primarily in Western and Northern Europe and has not taken advantage of other emerging markets in Eastern and Central Europe or Asia.

2.3 Opportunities

2.3.1 Increase in short breaks

• Increased number of short breaks taken by UK consumers is a great opportunity for low cost airlines like EasyJet. According to Mintel (2018), the total number of short breaks taken by UK customers increased by 6.5% in 2017 to approximately 46.4 million trips, with domestic 1-3 day breaks increasing to their highest in volume and value, and at least 38.5 short breaks taken in 2017, the highest number ever recorded (Mintel 2018). The use of air trips has grown by 78% since 2013; this is a great opportunity for budget airlines like EasyJet with customers seeking to minimize the value of the falling pound (Mintel 2018; Morris 2018).

2.4 Threats

2.4.1 High cost of labour

• The cost of airline labour for the global airline industry is a major weakness as well as being a threat. According to Bryan (2018), the biggest challenge of airlines in 2018 is the high cost of labor. Labour cost have surpassed fuel costs for airlines in 2016 at 22% against 21% of fuel, this is forecast to increase this year to 30.9% against 20.5% affecting the margins of airlines like EasyJet (Bryan 2018). This combined with global shortage of workers and scarcity of qualified pilots will negatively impact low cost airlines like EasyJet.

2.4.2 Brexit and EasyJet

• One of the biggest threats for EasyJet is Brexit. In 2017, EasyJet saw a decline in its profits due to the Brexit, losing more than £100 million pounds due to inflation (Topham 2017; Powley 2017a; Vincent 2017). The airline’s profits fell from 10.86% to 7.64% (Orbis 2017). The decline in profit margins comes after a full year of Brexit uncertainty which has resulted to bankruptcy of some airlines (Powley 2017a). 

2.4.3 Intense competition and the commoditization of air travel

• Another threat is more competition. Airline travel is increasingly becoming commoditized and a race to the bottom survival race, which has resulted in a downward spiral of flight fares making the sector less profitable and resulting in numerous airlines failing (Powley 2017). All major airlines including flagship carriers such as British Airways, KLM, Lufthansa, Air France and Delta have all started implementing no-frills very cheap flights with options such as no baggage or inflight meals (The Economist 2017; Buckley 2018). As a result, low cost airlines like EasyJet have experienced a decline in profits.

2.4.4 New air passenger duty

• A new Air Passenger Duty (APD) was introduced in 2017 by the UK government aimed at people flying out of UK. Ranging between £78 and £450, it represents the highest aviation tax in the whole world, further raising UK airline operations that are already the most expensive in the world (O Shea 2018).

2.4.5 Unfavorable currency movements

• Brexit has already had significant economic consequences for most airlines including EasyJet. Other than the possibility of increased operating costs due to the fallout from Brexit, unfavorable currency movements due to the continued weakening pound have already seen EasyJet record additional costs of £101million in 2017 (Topham 2017; Williams-Grut 2017).

References

Annual Report (2017) “Annual report and accounts 2017” [online] at http://www.annualreports.com/HostedData/AnnualReports/PDF/LSE_EZJ_2017.pdf

Bryan Victoria (2018) “Higher wages, fuel prices, turn up cost pressure on airlines” Reuters [online] at https://www.reuters.com/article/us-airlines-wages-inflation-analysis/higher-wages-fuel-prices-turn-up-cost-pressure-on-airlines-idUSKCN1FY292 [Accessed on 18^th July 2018]

Center Of Aviation (2018) “Germany Aviation market: Air Berlin goes, LCCs grow, Lufthansa thrives” [Online] at https://centreforaviation.com/analysis/reports/germany-aviation-market-airberlin-goes-lccs-grow-lufthansa-thrives-410377 [Accessed on 19^th July 2018].

Fleming Molly (2018) “EasyJet CEO: ‘We want to be the most data driven airline in the world” Market Week [Online] at https://www.marketingweek.com/2018/05/15/easyjet-ceo-data-driven-airline/ [Accessed on 19^th July 2018].

Massadique Shafi (2018) “EasyJet revenue spikes as passengers flock to airline” The Independent [Online] at https://www.independent.co.uk/news/business/news/easyjet-ryanair-revenue-latest-passenger-increase-a8173716.html [Accessed on 18^th July 2017]

Mintel (2018) “Short and city breaks -UK- July 2018” Mintel Reports

Morris Hugh (2018) “How EasyJet is quietly looking to rise above its rivals” The Telegraph [Online] at https://www.telegraph.co.uk/travel/travel-truths/easyjet-quiet-rise-growth-ryanair/ [Accessed on 18^th July 2017]

O’Shea Ronan J (2018) “Air passenger duty tax: Why is the rate changing and what does it mean for British travelers” The Independent [Online] at https://www.independent.co.uk/travel/news-and-advice/air-passenger-duty-tax-rates-change-why-when-flight-prices-long-haul-british-travellers-a8279286.html [Accessed on 18^th July 2017]

Powley Tanya (2017a) “EasyJet’s losses widen on sterling weakness” Financial times [Online] at https://www.ft.com/content/23b94648-3a08-11e7-ac89-b01cc67cfeec [Accessed on 18^th July 2017]

Powley Tanya (2017b) “EasyJet warns of tough market from rising competition” Financial Times [Online] at https://www.ft.com/content/43e36540-6d2d-11e7-b9c7-15af748b60d0 [Accessed on 18^th July 2017]

Rovnick Naomi (2018) “EasyJet revenues boosted by struggles of rival airlines” Financial Times [Online] at https://www.ft.com/content/f8d70cf2-000f-11e8-9650-9c0ad2d7c5b5 [Accessed on 18^th July 2018].

Topham Gwyn (2017) “EasyJet profits plunge despite record passenger numbers” The Guardian [Online] at https://www.theguardian.com/business/2017/nov/21/easyjet-profits-passenger-numbers-weak-pound [Accessed on 18^th July 2017]

Vincent Mathew (2017) “EasyJet sends right signals, but investors say talk to the hand” Financial Times [Online] at https://www.ft.com/content/872e3124-3a40-11e7-821a-6027b8a20f23 [Accessed on 18^thJuly 2018].

Williams-Grut Oscar (2017) “Brexit is going to cost easyJet £3million this year” Business Insider [online] at http://uk.businessinsider.com/brexit-easyjet-relocation-cost-2017-5?IR=T [Accessed on 18 July 2018].

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