An Analysis of EasyJet: Market Structure, Economic Factors, and COVID-19 Impact

Market Structure

This report is examining the economy and the factor of the UK’s economy which impact business. This report has covered the market structure in which the EasyJet industry is operating. EasyJet is one of the low-cost airlines of the UK which has global representation through its huge networks (easyJet, 2021). The report has also covered all the economic factors impacting the business of the organization EasyJet. The report has also outlined the impact of Brexit on the industry functioning and in the operation of EasyJet. At lastly the report has discussed the global issue covid-19 and its impact on the performance of EasyJet.

The easy jet airline is a British international low-priced airline group that has 1000 paths in more than 30 countries through its associate airlines. Easy jet was drifted in the stock market in the year 2020 (Routes Online, 2021). Their mission report is "To deliver our clients with harmless, good worth, point-to-point in-flight facilities. To effect and to propose a reliable and unfailing creation and charges. Easy jet is performing well since its origination and has become the foremost European low-priced carrier. Easy jet airline delivers services on short and medium distances routes, functioning mainly in Europe on over 400 routes. Presently the market structure in the UK in which easy jet operates is Oligopoly (Young Economist, 2020). This market structure is contemplating to be an imperfect competition, in which a restricted number of airlines influencing the industry. Oligopolistic organizations can moreover strive hard and end up emulating perfect intrants, leading to less revenue and driving prices down or collaborate and conspire to act like monopoly businesses and thrive in aggressive up the amounts and receive reliable revenues. Several choices such as charges and publicity are contingent on the choices of the other companies, consequently, the activities of each firm are inter-reliant. Generally, there are high barricades to enter the market, the purpose being is if it was informal to enter then other firms would step in racing the incomes and would cut down the market share for the leading companies (Geraskin and Chkhartishvili, 2017).

Deeply publicity and reservation of landing slots are one of the scarce high barriers in the business. EasyJet exploited competitiveness and has overcome hindrances by distinguishing the facility from deep-rooted businesses like British Airways who have greater market share in the marketplace. Contributing to lesser cabin staff and a lot less legroom was one of Ryanair’s strategies to carry the amount down. It has trapped the consideration of the fliers who were not purchasing tickets when the amount was higher. And that permitted EasyJet to upsurge its market share, besides, this rivalry also concentrated British Airways' amount to safeguard that extra clients visit with them and select them over low-priced carriers. EasyJet is a strong-growing firm with robust income development and a reliable business tactic to attain cost competencies in a market where numerous haulers are trailing more than furthermost years. The promotion tactic of easyJet contains the prices which are projected in one way with a single and secure value that is established for all the seats on a certain trip at any agreed point of time with no set limitations (Vincent, 2019). The amounts of these seats though incline to alter in agreement with the days that the reservations of these flights are made accessible till the date of leaving. In the period of attention, easyJet's entire income offered a movement of nonstop progress. But, due to the coronavirus epidemic in 2020, the entire income fell to 3 billion British pounds, a reduction of 3.3 billion British pounds related to the first year noted. The easy jet has a continuous rising profit till the year 2019 but fallen down in the year 2020 due to Covid impact is in 2019 the profit was 6385 million GBP which has reduced to 3009 million GBP in the year 2020 (Mhalla, 2020).

Economic Factors Affecting EasyJet

The airline businesses play a vital role in the international economy. It makes important contributions towards international business. EasyJet has called a modified funding bundle for the carrier industry as it cautioned it was on course to be extra than £800m in the red this year, EasyJet first yearly loss in its 25-year past. Easy has expected that it will be faced a pre-tax loss of between £815m and £845m for the year to 30 September 2020 (Partridge, 2020). EasyJet chief executive officer Johan Lundgren has mentioned that the aviation business continuously facing the threat which is the most from all the past and asked for help from the state government. EasyJet derived into this disaster in a very strong place thanks to its robust balance sheet and constant profitability. The year 2020 was the first year in their history which has suffered loss during the whole year. During slow growth in the European airline due to the impact of coronavirus pandemic, EasyJet had to take the decision which company has fired 30% of its workers and also lead to shut down its some centers in the UK which include Stansted, Southend, and Newcastle airfields (Corporate, 2019).

In the present scenario the major economic factor which has affected all the industry covering the aviation industry of the UK such as EasyJet and other airlines. The Covid-19 Virus has changed all features of contemporary life, and the aviation business has practiced an enormous variability of significances as an outcome. As Covid-19 has a blowout and established into an international pandemic, there have been important economic wounded and unlucky social costs, which have put many businesses within this sector under the extensive burden. The aviation business has suffered some of the nastiest consequences of the virus, as so many surfaces within the business have been stopped and altered, to constrain the blowout of the virus as much as probable (Albers and Rundshagen, 2020). The worldwide airline industry challenged penetrating influence as an outcome of the marketplace forces of supply and demand. The alteration in demand is one of the furthermost vital aspects which affected the airline industry. The early variable which can change the demand curve is revenue. In simple meaning, if the travelers have the high revenue, apparently customer can choose airlines instead of traveling in trains and buses. As an outcome, their demand for book plane tickets will increase. Though the year 2020 has been an international economic disaster, revenue has been reduced considerably which carries in the weakening in demand of clients (Airlines UK, 2020).

Also, competitors impacting the organization, as easyJet is suffering from the crisis of global issue Covid-19 at the same time when the government allowed the opening of airlines traveling in the UK it is affected by a competitor as due to heavy loss now easy jet can not drop too many prices, therefore, competitors strategies and big aviation industries affected EasyJet with their strategies. The major competitor in the UK marketplace in the airline industry include Flybe, Pegasus Airlines, Ryanair, Wizz Air, and many others in the list (Barrows, 2019). The next economic factor which has a foremost impact on the airline industry is fluctuations in Fuel prices as fuel expenditure is considered as approximately 25 – 30 % of airlines total expenditure, therefore any variation in cost will correspondingly impact the financial position of the airline industry. As in the year 2019 in the first six months EasyJet faced losses to £275m also company has mentioned that they are forced to provide booking in less-priced also. In that year EasyJet wounded to approximately £275m due to higher fuel prices and Gatwick drone chaos (Kristjanpoller and Concha, 2016). Also, the influence of weaker GBP post Brexit will put pressure on fare prices of the airline industry. Foreign exchange also an economic factor that affects the business of EasyJet in the UK marketplace. For instance, we can take the example as EasyJet suffered a loss due to the weak pound value and discount on fares in the year 2016. The UK’s low-priced EasyJet business is facing influences due to Brexit uncertainty (KPMG, 2016).

EasyJet also affecting by the problematic and undefined economic and operating environment which is due to the Brexit vote and terrorist attacks in Europe. The EasyJet faced the Brussels attacks, Egyptair smashes, air traffic regulator airstrikes, airstrip terminations at Gatwick, and severe weather foremost to 1,221 withdrawals had hit its performance and reputations. At this period EasyJet evaluated that they have faced interruption costs of £20 million in the quarter. Disturbed travelers were assigned seats that generally would have been vended near to departure at a higher amount. Hence loss has been suffered by the EasyJet airlines and also has loss of customer confidence due to the influence of the UK’s vote to dispensation the European Union, leading to an extra affluent euro. The airline industry generates a feasible transportation network across the international workplace and helps drive economic development.  Though, the business faces simple economic pressures.  Precisely, increasing fuel prices pose a huge problem.  All stakeholders from workers to separate airlines to customers are sense the effects of increasing charges.  With the recent economic recession due to covid-19 experts forecast that the worth of oil will remain to an upsurge in up-coming years, which means that the air travel business will have to make alterations to its present tactic to battle expanding charges (Graham, 2019).

‘Brexit’ is the term specified to the United Kingdom’s leaving from the European Union. It is an amalgamation of ‘Britain’ and ‘exit’. All industry is pretentious by Brexit due to the probable economic influences (condensed investment and depression) and workforce matters (migrated workers and expert employee scarcities) (Pettifor, 2017). Some businesses will be wedged more than others such as monetary services but it is those that trade globally that will see the utmost change. Businesses with mainland European suppliers or clients will be influenced, while trade with non-EU nations will be pretentious by losing entree to the EU's present free trade preparations and any duties obstructions. All shares of the economy, and each sector in which the UK works, are likely to practice the effects of Brexit. Brexit-related worries alone have already led to time-wasting business investments in the carrier industry (Dobruszkes, 2019). EasyJet can suppose the hazard of additional income drops once Brexit comes as a result. In the worst-case situation, a lid on the number of airlifts in the UK could lead to mass traveler ticket withdrawals—up to five million, according to one business assembly. Whatsoever the consequence of Brexit, many carriers have even now started taking steps to make sure they are prepared to alleviate the significances. In the awaken of Brexit declarations, EasyJet is one airline that has agonized sharp losses.

EasyJet's articles of association previously comprise requirements to allow it to take essential act to safeguard that it endures gratifying the EU possession and regulator obligation, including by constraining the voting rights of non-EU residents and/or convincing them to trade their shares to EU citizens. The budgeted airline EasyJet is well prepared for Brexit impact but revenues may be affected (Cassar, 2017). The dark cloud of Brexit still arises great over Europe's tourism business, despite the interruption to Britain's removal from the EU. Whereas Brexit leftovers are unsettled and vagueness continues, easyJet is the latest carrier to suffer its ill winds. The low-priced carrier has forwarded a record loss of £275 million in the March 2019 economic quarter and has delivered a Brexit threatening.

Upcoming travelers are keeping their wallets and pockets locked in the face of a probable no-deal Brexit. They are concerned about the nonappearance of a long-term post-Brexit air services contract among the UK and the EU and doubt over security procedures and boundary administration. Johan Lundgren, the chief executive officer of easyJet’s answerable “macroeconomic hesitation and many unrequited queries nearby Brexit”. The business which was before based in the UK has been shifting the registering of several airplanes to European support. EasyJet Europe is constructed in Austria and presently has 129 aircraft. EasyJet has delivered a Brexit warning currently after it forwarded a loss before tax of £272m in its 6 monthly results, related to a loss of £68m the similar time last year. It says Brexit, raised fuel prices. Brexit is an enormous risk to the carrier industry but with the doubt only ongoing, easyJet cannot afford to reside on it therefore EasyJet is planning for Brexit (Mallinson, 2019).

When the COVID-19 disaster-hit air transportation, the entire aviation business was affected. The alteration in the behavior of travelers succeeding the COVID-19 disaster travel limitations and the resultant economic crisis have caused a dramatic decrease in the demand for carrier facilities (Iacus et al, 2020). In figure 1 the revenue of EasyJet can be noticed that the company is attaining continuous profit since its establishment which is rising with the succeeding years but in 2020 the company EasyJet has suffered the loss in its history of past 25 years. In 2019 EasyJet has earned a decent revenue which is 6385 million GBP which is a drop-down in the year 2020 to 3009 million GBP. The loss company has faced is all due to the impact of the Covid-19 pandemic situation in which the government has put lockdown and banned transportation from one country to another which led to the shut down of many businesses (Mazareanu, 2020).

Figure 1 - (Source: Mazareanu, 2020)

The COVID-19 epidemic, and the following nationwide lockdowns and isolation limitations, have triggered disturbance and injury to many businesses across the world. This is mainly true for the carrier and travel business, which saw traveler statistics drop to record depressions, almost instantaneous, as governments shut down boundaries and cautioned in contradiction of all but important trips. Air travel was one of the first businesses to be suggestively affected, as national governments shut global borders to avoid non-essential traveling. Many travelers and business travelers saw pre-registered flights get annulled. The full influence of Coronavirus on the carrier business is starting to arise, as European budget airline EasyJet exposed that they have suffered this much loss at the first time in their whole past performances. Also, the impact of the Covid-19 epidemic has forced EasyJet to drop 30% of its employees which is approximately 4500 workers. The coronavirus has carried carriers across the world to their knees, and driving them to make tens of thousands of work cuts as they make for a travel marketplace which would take around 3-4 years for recovery (The Guardian, 2021).

EasyJet's Chief Executive Johan Lundgren mentioned in a statement that it was a tough time for the carrier and he was constructing hard choices. He said that EasyJet wants to certify that we arise from the epidemic an even more competitive industrial than earlier so that easyJet can flourish in the upcoming. EasyJet said it would decrease its airplane swift to around 302 planes, near 51 aircraft lesser than it had been scheduling for the end of 2021 preceding COVID-19. It assumes to be flying around 30 percent of its volume far ahead in this year. There are tryi8ng to manage the cost and try to bringing some improved deals to attract customers more and more (Economic Times, 2020).

Conclusion 

This report has highlighted the present scenario of the united kingdom’s economy and its aviation industry. The report has identified the economic factors affecting the business of EasyJet such as the rise of fuel prices and fluctuation of demand and supply and its impact on EasyJet. The report has also studied the market structure in which EasyJet is operating which is an Oligopoly. The report has briefly evaluated the impacts of Brexit and the Covid- 19 epidemic on the UK’s aviation industries and especially on the Working of EasyJet in the UK. The report has finally concluded that both Brexit and Covid-19 epidemic has impacted the organization EasyJet drastically and the organization is trying to come up with both issues by their strategic planning.

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