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Table of Contents

Financial Analysis for Ryanair and Easyjet - Part 2

1972

Chapter 1. Background of the Companies Understudy

1.1 Ryanair

Ryanair is the most favorite airline of the world. Every day there are more than 1,500 flights of Ryanair around the world. The company has its routes in 168 destinations in 28 countries of the world (Ryanair, 2012b). Ryanair is a low cost airline and with the increasing demand of low cost airlines, Ryanair has been able to capitalize on many opportunities that have been provided. Moreover, Ryanair has been expanding its services and number of flights and it is expected to further increase in the years to come. There are more than 8500 employees of Ryanair working in different countries (Ryanair, 2012b).

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Ryanair expects to carry more than 80 million passengers annually (Ryanair, 2012a). The number of passengers of the airline has been increasing over the years. The annual report of the company shows the traffic of the airline that has been increasing over the years. A drastic increase in the traffic of the airline has been reported over the last five years and graphically it has been presented below (Ryanair, 2012a).

(Ryanair, 2012a)

Moreover, the number of fleets of the company has also been increasing at a rapid pace. The following graph shows the increasing number of fleets of Ryanair even though the overall world economy was suffering from recession.

(Ryanair, 2012a)

Ryanair has not only improved in terms of the traffic and not only in terms of fleets, but the company has also improved its overall revenues that it has generated. The revenues of the company have been increasing. Particularly, in the last two years the revenues have increased at a considerable pace. The following graph shows the revenues of the company since 2008:

(Ryanair, 2012a)

The profitability of the company was hurt as the overall world economy was suffering from recession. However as the economy has started recovering from recession, therefore the profitability of Ryanair has again started to improve. Particularly in the last three years, the profits of the company have been increasing at a rapid pace.

(Ryanair, 2012a)

The following image shows the key statistics of Ryanair and it shows the change in some of the important statistical figures of the company from the year 2011 to 2012. It has been found that the scheduled passengers of the company have increased by 5% and from a figure of 72.1 million the scheduled passengers have increased up to 75.8 million. Thus it is showing the increasing popularity and increasing number of satisfied passengers of Ryanair. Fleet at the end of the period of Ryanair has also shown an increase. This statistics has increased by 8% from 2011 to 2012. The average number of employees of Ryanair has also increased in the year 2012 by 5%. On an average the number of employees of Ryanair were 8,063 employees and it has increased in the year 2012 to 8,438 thus it is indicating that the airline is expanding and thus more opportunities for jobs are being created. The other important statistics of the company is the number of passengers of the company per average number of employees and the ratio has only increased by 1% showing that the company is maintaining the number of employees per passenger so that the passengers are able to have similar kind of service from the company. Thus by keeping almost the same ratio of passengers per average number of employees, the management highlights the importance of offering high quality services to employees and the same time maintaining this quality of service.

(Ryanair, 2012a)

After the key statistics of Ryanair, some of the important financial figures are also discussed in this overview section of Ryanair. Financial figures are the most important measures to analyze how the company is performing and therefore discussing summarized financial information of the company is critical whenever the performance of the company is being discussed. There has been an increase of 19% in the operating revenues of the company from 2011 to 2012. The revenues of the company have jumped from €3,629.5 million to €4,324.9 million. Thus an increase of 19% in a year shows the performance of the airline. In addition to this, the net profit after tax of Ryanair has increased by almost 50% thus it is showing that the airline not only is taking steps to increase its revenues but it is also focusing on reducing its costs in order to improve its profitability. The earnings per share of the company have also showed improvements like the net profit after tax and the EPS of the company have increased by 51% in 2012. EPS of Ryanair has increased from 25.21 euro cent to 34.10 euro cent. Thus the improving earnings per share of the company reveals that the company is trying hard to make sure that the investment made by the shareholders are yielding good returns.

(Ryanair, 2012a)

One of the most attractive features of Ryanair that encourages passengers to fly with this airline is the low fare that the airline offers. The airline has been offering the lowest fares to the passengers. Moreover, according to the company’s annual report (2012), Ryanair offers the lowest price in the market, in every route and this has been the most attractive feature of the airline because of which it is able to attract large number of passengers. Although the cost of travelling is one of the important features of the airline, however Ryanair offers other features and facilities as well to the passengers and therefore it is able to satisfy its customers. IATA Airlines 2011 have ranked top 50 Airlines of the world and among these airlines; Ryanair has been ranked as the top most airline in terms of international scheduled passengers.

(Ryanair, 2012a)

As discussed above that the price of the airline is not the only feature that is able to satisfy its customers. The most important features of Ryanair are as follows:

  1. Punctuality of the airline: the flights of the airlines are 91% on time which has been increased by 6%.
  2. The least number of bags lost.
  3. The Fewest complaints
  4. Quick response on the complaints of passengers
  5. The Youngest fleet

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Ryanair is the cleanest and Greenest airline (Ryanair, 2012a).

(Ryanair, 2012a)

The above image shows that Ryanair is the most efficient airline in the world in terms of emission of Carbon dioxide.

1.2 easyJet

easyJet Airline is one of the leading low cost airlines of the world. The airline has its headquartered in London at the Luton Airport. easyJet is the largest airline in United Kingdom as it carriers the highest number of passengers among all the airlines of United Kingdom. easyJet not only operates domestically but it operates and offers flights in other countries as well. The airline flies to more than 600 routes in 30 different countries of the world. There are almost 8,500 employees employed at easyJet in different parts of the world. The number of passengers carried by easyJet in the year 2012 was more than 59 million passengers. easyJet has reported the second highest passengers in terms of low cost airline in Europe; the first among these airlines is the Ryanair.

In terms of performance, easyJet has been showing improvements over the past few years. Ryanair though has been showing a drastic increase in the number of passengers however easyJet does not have such a steep growth but still the company has been able to increase the number of passengers at a constant growing rate. The following image shows the number of passengers since 2008:

(easyJet, 2012)

The above image reflects the number of passengers that have travelled with easyJet. The number of passengers of easyJet in the year 2008 was 43.7 million however this number has growth rate of 33.6% in last five years. With the increasing growth of the company and with the management constantly striving to ensure customer satisfaction, the number of passengers of the airline can further increase in the years to come.

The airline has not only been increasing in terms of passengers, but the revenues of the airline have been increasing at a constant pace. Not only this, the airline has been able to increase the revenue that it generates from each passenger. The following image shows the revenue per seat that easyJet has generated over the last five years. The revenue per seat has increased by 5.9% in the last year. Moreover, if revenue per seat has been analyzed since 2008 then a constant increase can be identified.

(easyJet, 2012)

United Kingdom has been the most important place for easyJet. The company generates the most revenue from this part of the world. Other important regions from where easyJet generates revenues are; other European countries, United States. The following graph shows the revenues that easyJet earns from different parts of the world. Moreover, the graph clearly indicates that almost 44% of the passengers from United Kingdom travel with easyJet.

(easyJet, 2012)

However it does not mean that the passengers are originated from United Kingdom. In the year 2012, 56% of the customers were not originated from United Kingdom.

easyJet is ranked as the number #1 or number #2 airlines in different airports. Moreover, the company has been increasingly focusing to increase this number so that there are more airports where the airline is ranked as the best. The following graph shows the number of airports where easyJet is ranked as either the best or the second best airline. Moreover, this number of airports has been increased and it has grown from 16 airports in 2008 to 21 airports in the year 2012.

(easyJet, 2012)

In addition to this, another important statistics regarding easyJet is that it is present on almost half of the top 100 routes of the world. The following graph shows that among top 100 routes of the world, easyJet is present on 49 routes which is the highest number among all other major airlines of the world. The next best airline is Ryanair which is present in 38 routes out of 100.

(easyJet, 2012)

The management is focusing on improving the customer satisfaction level of passengers over the last several years. The management has taken different steps along with offering incentives and rewards to employees so that they could better satisfy the passengers. The customer satisfaction level of the airline has improved over the last two years as it fell down in 2011 and 2010. The customer satisfaction level of the airline, though, has remained high over the years. The following graph shows the customer satisfaction level of the airline since 2008 and it can be seen that this ratio has decreased in 2011 and 2010 though it has started improving again after the management has started focusing on the issue.

(easyJet, 2012)

One of the main reasons that have lead to customers not being satisfied in the airline industry is the arrival and departure of flights on time. Therefore the management has been concentrating on making sure that the time is managed properly. The following graph shows the performance of the airline in terms of time and its performance in this regard since 2008:

(easyJet, 2012)

The time performance of easyJet was 75% in the year 2008 then it increased to 80% however it decreased in 2010. Thus it has also resulted in reducing the customer satisfaction level which has decreased from 85% to 73% in the same time period. Then the time performance increased up to 79% in 2011 and it resulted in increasing the customer satisfaction level from 73% to 79%. Then in the year 2012, the airline reported much better management of time and it jumped to 88% and the result of this was that the customer satisfaction level further increased up to 82%.

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Another important factor that leads to customer satisfaction is the risk. The airline has taken several steps to reduce the risk over the last five years. Composite risk value of easyJet has decreased in the past years as shown in the graph below, thus it is a positive sign for the airline.

(easyJet, 2012)

In order to be a successful organization, human resource is the most important asset of the company. easyJet has been focusing on retaining its employees. The employee turnover of easyJet has been reduced and it is one of the positives of the company in the last few years and it has certainly helped the company in improving its profitability. Thus staff turnover of easyJet in the year 2008 was 12% however this has decreased to 7.5% in the year 2012. Thus it shows that the management is able to come up with better strategies to retain its employees.

(easyJet, 2012)

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