UK Brexit's Impact On EasyJet's Innovation & Creativity: Key Essay.

Key Implications of UK Brexit on EasyJet from the Perspective of Innovation and Creativity

What is the Contemporary Issues in Management ?

EasyJet, UK’s largest airline, has shown a constant growth in its revenue year after year because of their focused business model. Throughout the last 10 years, they have remained strong and their short-haul market has experienced an overall 25% growth during this period. EasyJet also held an approximate 8% of the European short haul market, better than many legacy carriers did. EasyJet has remained well positioned to carry on its market position strengthening attempts. The first half of 2016 has been great for EasyJet, facing a 8% growth in capacity (Mediacentre.EasyJet.com 2016). However, they reported a half-yearly loss (£24 million) after fall in pound value, compared to their £7 million profit at the same time in 2015 (BBC News 2016). EasyJet, like its direct rivals in the sector has experienced a loss of its stock market value after the Brexit event. The financial year for the aviation industry already was tumultuous, and the sharp fall in profits for EasyJet added greatly to it – around 28%. Although most of it was due to certain unexpected external events like the Brussels attack, Brexit contributed a great influence in the sterling fall (Calder 2016). EasyJet’s per seat revenue decreased by 8.3% and is showing no signs of improvement. Fuel for the airline, that gets denominated in dollars, has become more expensive. Moreover, EasyJet felt the need to acquire an airline operator certificate for continuing its operations within non-UK EU. They also considered shifting their headquarters from Luton, UK to any other nation in EU (Pratley 2016).

Following the shocking decision of UK to leave EU, the budget airline is reportedly engaged in several rounds of discussions with the regulators from EU member states over the certain possibilities of movies its headquarters overseas. The study conducted by Pynnöniemi and Salonius-Pasternak (2016) also confirms that the company is recently in the talks with concerning the relocation of its headquarters away from UK. However, the spokesperson of EasyJet has mentioned that the company still has no plans for shifting its headquarters from London right away. Although, it did validate that the company has already applied for obtaining air operator’s certificate from the European country so that it can conduct its airline operations smoothly (Piercy 2016). As part of the process, the company had already engaged in numerous informal discussions with the European aviation regulators over the establishment of an air operator certificate (AOC).  The application of the AOC would provide advantage to EasyJet to build its legal air base in another country while gaining the authority to operate airline services comprehensively. On the other hand, Crossley (2016) suggests that the following event of UK’s vote for Brexit has dramatically made movements in the exchange rates forcing fuels to be denominated in dollars. Such incident thereby is causing the major cost of airline industry to become more expensive. Apparently, the Brexit related issues affect core areas of the company essentially, including the regulatory and strategic perspectives (Vitaliev 2016). From the context of regulations, the airline service providers like EasyJet and Ryanair are the parts of common aviation area allowing the companies to operate from any EU airports. Therefore, in case of disruption to the automatic flying rights, the company would face significant challenges regarding the renovation of its entire business model. Alternatively, from the context of strategic reformation, the company needs to focus extensively on the use of innovation and creativity. As part of the innovative and creative requirement of the strategy, the company after the Brexit event is liable or accountable for adopting best working practices in and outside the organization for eradicating the appalling impacts such economic change.

Impact of Brexit on EasyJet's Cost Structure and Customer Base

On the other hand, the preliminary discussion suggests that currently the organization is drastically experiencing an increase in the entire cost structure by £40m in just four weeks as a result of the value drop of UK’s currency (Sisson 2016). More clearly, the significant drop of pound’s initial value after Brexit had led the fuel prices to become more expensive, as the airline operator pays such cost in US dollars. On the other hand, the study conducted by Emerson (2016) reveals that increasing cost of living has deterred a large number of British holidaymakers from travelling abroad. Consequently, the company has exploited to a wide range of issues in maintaining its profitability while reducing cost optimally. Furthermore, extreme weather condition, terrorist attacks, and air traffic control strikes are jointly attributed for a drop in customer base by almost 8% resulting in hampering the overall revenue of the firm. These are the vital facts regarding the major issues faced by the company post-Brexit. Such scenario creates some exceptional benefits to the company in addition to increasing the number of issues. As confirmed by the chief executive of EasyJet, it is reported that the individual drop in revenues was beneficial to customers, as the passengers can avail cheaper flight ticket even in the midst of a tough economic condition (Jones 2016).

The study of Bartolini et al. (2016) significantly indicates that the specific impact of Brexit has also affected the confidence among the airline customers insisting them to avoid airline travels considerably. The consumer perception in this situation is based on the expensive nature of airline travels during the special occasions or holidays. In order to respond according to the needs and perceptions of target population, the company requires coming up with innovative and creative business model and associated aviation strategies. It is essential for the strategic reformation to consist certain approaches and policies having the ability to attract customers and developing a favourable approach towards the utilisation of airline services and facilities (Bartolini, Gropas and Triandafyllidou 2016). At the same time, the result of investigation conducted by Woo (2016) importantly points out that the implementation of innovation or creativity should not only be integrated in attracting customers, but also it must need to focus on staffing and workforce planning division. The company faces a considerable amount of challenge regarding staffing and placement of organizational staffs resulting from the Brexit event. The internal executive panel had experienced multiple difficulties regarding the placement or movement of any employee in response to the future relocation of headquarters (Woo 2016).

The Need for Innovative Strategies to Remain Profitable

The study of Sisson (2016) reflects that the greater focus by the UK government in a mean to elevate the positions of start-ups within the country following the event of Brexit might produce some promising opportunities for the new firms, but from the overall perspective, it slowed down the progress of existing firms like EasyJet. In this case, the UK government’s continuous efforts are based on creating new and modified trading relationships with the rest of the world with the aim of improving and expanding the domestic market. Nonetheless, the certain break in profitability and hard operational time of the airline industry can be categorised as a temporary issue. From the long-term perspective, it could pose multiple advantages for the chosen company, as it becomes easier to negotiate with the other countries in the world due to exclusion of the rules and regulation of European Nation (Pynnöniemi and Salonius-Pasternak 2016). Capitalising the proposed opportunities by the airline carrier depends mostly on its ability to bring and reflect innovation through offering services and formulating strategies. Citing the reference of Jones (2016), the innovators of EasyJet must need to start looking for the efficient ways for setting up multiple shops at the different locations of Europe. It is worth to mention that the company should not only shape up its approaches for trading with a large and single market, but also it must need to explore additional benefits from the other parts of the world. The scenario would fundamentally drive the organization to fulfil the diverse requirement of the modern day business environment highly influenced by the emerging technologies (Gray 2016).

With the help of the discussion formed throughout the section, the most anticipated impact was observed in the UK air passenger market, which was reduced by 3 to 5% in the upcoming years. Therefore, the growth of air passenger is expected to be reduced by 1 to 1.05% each year by 2020. On the other hand, the contrary effect of the weaker sterling has caused the air traffic to become relatively mute. Such scenario significantly stimulates the inbound demand over the air travel to the greater extent in UK through the application of weaker exchange rate. However, the same condition deters the outbound trips. Considering the overall fact, EasyJet must need to offset the negative impacts from the outbound travel in addition to handling the minority of traffic in the inbound accounting (Emerson 2016). Strategic implementation and innovative integrative would be sufficiently required by the organization for facilitating such process. Additionally, it must also need to mention that the uncertainty around the future regulatory environment is likely to multiply the downgrading economic impacts. EasyJet in this case must need to observe more protracted approach for agreeing the new terms and conditions influenced by both the regulatory bodies of UK and EU. The involvement of creative approach is necessary to deal with the process.

Innovation and Creativity in Staffing and Workforce Planning

Culture is all of its forms can be considered as cross border as it makes an essential contribution to the economy of United Kingdom (Tielmann and Schiereck 2016). Brexit has a great impact on the business operations of EasyJet. However, the management of the concerned company is lobbying the government of UK and the Europe Union for ensuring the continuation of fully deregulated and liberal aviation market within Europe and UK (EasyJet.com 2016). The cross-cultural management includes the management of the work teams in a way, which consider the various differences in the preferences, practices and cultures of the customers in an international and domestic business context of an organisation. However, after Brexit the management of EasyJet has learned to adapt and modify their business approaches in order to provide a tough competition other existing competitor companies in the aviation industry of UK. The system and methods of the intercultural interactions have been developed with engaging more people for accessing a wide market with the help of new and modern technologies. Vrbaski (2016) has mentioned that many business operators involve the cross-cultural management as an essential part of training. On the other hand, EasyJet employs cross-cultural management in order to enhance their international business, human resources and organisational behaviour. After Brexit, EasyJet understands how the national culture can affect the entire management practices. The management of this company identifies both the differences and similarities across the cultures within several organisational contexts and management practices.

The cultural management practices of EasyJet increases the business effectiveness in the global perspective. According to Bouoiyour and Selmi (2016), the cross-cultural management of an organisation helps to gain a perfect understanding of the other cultures. The cross-cultural management has a large impact on the globalisation. The managers and the employees of EasyJet deal with the people from various cultures on constant basis. The withdrawal of the United Kingdom from the European Union is famous as Brexit and it clearly influences the cross-cultural management of EasyJet in immense manner. As EasyJet operates its business activities in various locations across the world, therefore, the management has to maintain a perfect cross-cultural management practice. However, after Brexit, the management of EasyJet makes the contingency planning and had an informal discussion with a number of the aviation regulator of Europe. The airline industry of Britain has soared over last two decades under the Single European Sky System of European Union. Unless the British negotiators manage the security of the preferential conditions, there are very few chances of controlling the present cross-cultural issues in the aviation industry (Farrell 2016). However, EasyJet will lose this present status once the country leaves the European Union. Brexit has large impact on the cross-cultural management and it fails to control the cultural differences in perfect manner. The management often fails to take potential decisions related to the employees from different cultures and backgrounds. Brexit influences the Foreign Direct Investment (FDI), licensing, collaborative ventures and franchising of EasyJet. According to McFarlane (2016), the foreign direct investment establishes a perfect presence in the foreign market by investing securing ownership and capital. However, the collaborative venture involves the abroad investment. The previous cross-cultural management practices help the higher authority of EasyJet to control and manage the future of the employees from various cultural backgrounds. There were even perfect processes of the knowledge transfer within these employees and these processes have been proved as an essential medium of cross-cultural management. The cross-cultural management of EasyJet refers to the initiatives of the organisation for increasing the understanding of different groups (EasyJet.com 2016). Even it helps to improve the potential communication for enhancing the entire marketing efforts in order to reach out both the clients and customers in the traditional market. After Brexit, the actual methods of the cross-culture are not intended to strengthen the fundamental interaction in between the employees and clients from different cultural backgrounds in this competitive business world. As EasyJet operates international business in international market, therefore, the management should control and manage the cross-cultural management. Just after Brexit, EasyJet fails to maintain its traditional way of cross-cultural management and there is a downturn in the sales revenue of the company. The deregulation of the aviation industry has provided a fantastic benefit to the consumer (Miller 2016). Even after Brexit, it has been said that EasyJet will relocate its headquarters away from UK in other locations. The arguments involve that Brexit can be proved as a backlash against the globalisation. Brexit has provided a shock to the management of EasyJet and it damages the traditional cross-cultural management practices of the company. However, the higher authority of EasyJet has clarified that relocating of the headquarters from UK is nothing but a vague rumour.

Potential Long-Term Benefits for EasyJet

EasyJet has always focused on their economic profit, but they have put equal concentration on gaining their customers’ trust. They have put emotional and social values on the forefront in their mission to become the leading airline carrier. The temporary migrant workers in EasyJet, who were enjoying equal pay and other benefits under Agency Workers Regulation, faced the uncertainty of securing their jobs, even after going through their qualifying tests. Moreover, the foreign workers working there would be requiring work visas as their membership at EU has been removed. The migrant worker numbers in the aviation industry itself has been reduced to a sustainable standard, with EasyJet following the same practice (BBC News 2016). UK has always practiced market liberalization, providing access and airspace reform to foreign businesses, which are not a part of the EU, and Brexit has dented the progress of aviation businesses, in turn reducing profit margins for EasyJet and other British carriers. Museums and theaters, along with airlines further faced a negative impact of Brexit with the reduction in tourists due to implementation of strict immigration laws. It even negatively influenced the economy and social environment. UK has always supported diversity at their workplace, neighborhood and society as a whole. That is why they have operated over popular tourist spots in different countries, employed people coming from different cultural backgrounds and provided them equal benefits. Brexit and the terror attacks in Brussels, Nice, Paris and Sharm el-Sheikh has made the demand of trips to this region ebb. The open mind attitude of EasyJet and its support towards advancing diverse talents from all corners of the world to improve competitive advantage of the company went into a backseat because of Brexit. Brexit put a barrier on the flexible aviation regulations that EasyJet followed, including their policies and procedures. Interactions between employees at EasyJet faced a dent, as the communication ease they built including the immigrant workers was on a downfall (Vrbaski 2016). As understood, the open and flexible work environment and business practice at EasyJet experienced a setback because of Brexit. The diverse work culture EasyJet has been following from the beginning of its time has been put on a pedestal and dealt out a backlash because of the lease Brexit has put on the country’s economy. As Charles Grant has said, “Brexit is a momentous event in the history of Europe and from now on the narrative will be one of disintegration not integration” (Elliott 2016).

Conclusion

Conclusion:

Most of the large companies have intended to maintain a perfect relationships with the companies, customers and employees in order to maintain an adequate cross-cultural management. The UK air market is solely dominated by the outbound traffic with the help of traffic accounting. The management of EasyJet has decided to improve its existing and traditional cross-cultural management policies after Brexit. The changed policies have potentiality to improve the issues related to the cross-cultural management of EasyJet. However, there are huge contradictions whether the United Kingdom will need to negotiate the new bilateral to depend on the basic nature of the future arrangements with the European Union. Even the aviation industry of UK should amend the agreements of air services. In the staffing and selection process, there should be new policies for EasyJet, which will mitigate the issues EasyJet recently follows. Before Brexit, the creativity and innovation have played a pivotal role in the continuous success of EasyJet. However, after Brexit, the entire business system of the company has been influenced. Therefore, there are hardly any chances to implement creativity and innovation in the business operations and policies of EasyJet. Maybe in near future all of the potential threats will create an adequate space for the opportunity and immense success of the company.

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