Study Of Easyjet And The Airline Industry Tourism Essay

Study Of cleanjet And The Airline Industry Tourism Essay clear resiny Airline is integrity of lead inexpensive British get offline established in 1995. Easy putting surface has seen a rapid expansion, operating domestic and international service on viosterol drive shipway between Europe, North Africa and Asia. Its successful st straddlegies based on low-cost, no frills model which derive from the a concept that pick ups for short-haul stress transportation is wrong elastic. That means if the price of plane fines ar being reduced, more(prenominal) people willing fly.MicroeconomicsMajor determinants of demandThe demand for a particular cracking or service depends on a variety of factors. Key influences include the price of substitutes speci each(prenominal)y goods that be close substitutes, and the price of complements, the levels of consumer income, consumers expectation.()The availability of alternative modes of transportation for air locomotion atomic number 18 increasing, in particular ownership of automobile and the railway tuition. These close substitutes might be a threat a number of traditional air lane companies, dominating short journey sector (less than 3 hours). However, it is extremely difficult for rail transport to challenge a low-cost airline company like easyjet. For example, Euro stars cheapest tatters to capital of France is 149, whereas Easy Jets prices start from 17.99Airline costs per passenger, and rail fares, from BarcelonaPrice ElasticityAs demand law, when other factors on demand remain unchanged, a higher(prenominal)er(prenominal) price for a product will lead to a cut down quantity demanded. The price elasticity of demand measures the responsiveness, or sensitivity, of the demand for a good to changes in its price when other influences on demand are held constant. It is defined as the theatrical role change in quantity demanded resulting from a given dower change in price.For example, if a 1% increase in pr ice leads to a 1.5% drop in quantity demanded, the own-price elasticity of demand is 1.5. In this case, since the percentage fall in demand is greater than the percentage rise in price, total spending on the good will decline, and the demand for it is said to be elastic. If, on the other hand, a 1% price rise causes a smaller percentage decline in the quantity demanded, the own-price elasticity will be less than one, and demand is said to be inelastic.(.)The demand for air travel should be distinguished among markets for personal line of credit and leisure travel long-haul and short-haul travel and international and long-haul travel. Accordingly, to quiz the sensitivity of the demand for air travel to its price, separate estimates of the own-price elasticity of demand are gathered for each of these distinct markets.Since the alternative modes of transportation for long outdistance are not widely available, it is considered that the demand for air transport will be less elastic fo r long-haul flights than for short-haul flights. More everywhere, international travel tends to be spread over more time than domestic travel due to ball-shapedization, so that the plane ticket is more expensive than domestic tickets. globalization makes international travel especially business travel less sensitive to changes in ticket prices. On the other hand,travelers for leisure are more likely to postpone trips to specific locations in response to higher fares, or to shop around and looking for more affordable fares. Therefore, it is concluded that the demand for air transport for leisure travel will be more elastic than business travel.Price Elasticity of Supply and DemandThe relationship between demand and price of traveling by air can be both elastic and inelastic. To a large extent it depends on the type of customers traveling. For example a family planning a vacation that requires air travel, if the price of an airline ticket is extremely high, they are more likely decid e to delay the trip until the prices are lower. This shows that leisure air travel is considered elastic. However, if a business customer look ats to travel across the country by the next day, they will need a plane ticket regardless of the ticket price. For business travel, the price of airline would be considered inelastic because it is a necessity. The current market for business travel has a big part in the give and demand within the airline industry. More so in the economic downturn with the price of crude rapidly increasing, the cost of an airline ticket is then has risen and the demand for leisure travel has fallen. In addition, another reason for the decline in demand is that after 9/11 there has been outgrowth concern over in-flight safety. Another factor that influences the price of an airline ticket is the date that it is purchased. If there is anemergency, the customer may need to book a ticket on the day of travel or even purchases a ticket close to the departure t ime. The fact that there are still many unsold tickets is disregarded and the price will be higher.http//www.associatedcontent.com/article/1013568/the_economys_affect_on_the_airline.html?cat=27elastic.gif http//www.fin.gc.ca/consultresp/Airtravel/airtravstdy_1-eng.aspMarket structure of Airline industryThere are many factors wedged on the recent poor financial performance of traditional airlines, including the effects of 9/11, the global economic recession, the increasing growth of low cost airlines that make under a different business model, and the recent surge in burn down prices. As described below, several(prenominal) simultaneous factors are transforming the global airline industry. The growth of low-cost airlines The increasing growth of the market serving of low-cost, low cost fares during the last few years is one of the most significant trends in the industry, and has presented a considerable threat to the viability of network of traditional carriers. The response of th e traditional network airlines to the growing low cost airlines challenge will be vital to determining the future structure of the airline industry, both in the United States and in Europe.Competitive analysisThe most obvious competitive advantages Easy Jet had are delivering low-cost and maximizing margins. easyJet keeps costs low by cutting off the unnecessary costs and frills which is in traditional airlines. This is done in several major(ip) ways firstly, easy jet take advantage of the Internet to reduce distribution costs and then increase the example of the substantial assets and maximize utilization of each aircraft and therefore, significantly reduces the unit costSecondly, Easy Jet launched paperless operation and ticketless travel which means passengers receive an email containing their travel details and qualification reference instead of get a paper ticket when they book online. This lower the cost of issuing, distributing, processing and reconciling millions of tick ets each year. At the akin time, Easy jet simplified its work practice by delivery the concept of paperless operation and a well designed information system offers management and administrative job carried out through its IT systems of company. The no-frill service on board is another reason for Easy Jet to keep cost low, because everybody always complain roughly nutrition on board so why bother to provide food if people dont want it? Cutting off free catering on-board abate cost and unnecessary bureaucracy and management. It is also an important differentiator between easyJet and other airlines and a potent reflection of our low-cost approach. Passengers can purchase food on-board if they need it . ironically, Easy jet have won awards for our catering service. The new concept of a simple service model also reflects a more general need about eliminating other unnecessary, costly services. pre-assigned seats, interline connections with other airlines and cargo/freight carriage a re the characteristics of traditional airline result in high complex to manage cost.Moreover, easyJet use airports effectively by flying to main destination airports throughout Europe with high frequency and obtain efficiencies through rapid turnaround times. By cutting off turnarounds time to 30 minutes and below, easyJet can gain extra turnaround rates on the high-frequency routes, thus, maximizing utilization rates of its aircraft. Easy Jet made an agreement with airports about progressive landing charges.the operationeasyJet currently has operating various bases throughout the UK and mainland Europe. It is a really European operation and was one of the few airlines to take advantage of the reforms protracted by the single European aviation market.Manage costFuel cost is one of the biggest and volatile single cost for Easy Jet therefore fuel efficiency is very important to Easy Jet. In 2009, Easy jet salvage 1.2%of fuel they burn through the value of fuel efficiency and new fl ight planning system. Easy Jet have aimed a 3% improvement in fuel burn, which will deliver 20million by 2012. It is crucial for Easy Jet to manage cost effectively so that it can continue to offer competitive fares profitably. Easy jet plans to make at least 190million of cost decline by the end of 2012, which will allow Easy Jet to starting time lumpary pressures and produce 1 per seat benefit to the bottom line. The crew efficiency will be improved by 10% through route and crew optimal tools and a new roster system.Marco-economicTransport economics in general, especially air transport has been viewed as the laboratory of economic activity. well-fixed transport derived by booming economy, as an increasing economic activity, expanding industrial production and booming trade relation will inevitably lead to an ever-greater need for transport. A decline of the same parameters will reflect on a decreasing demand for transport. Within the transport industry, air transport seems to be more sensitive to such economic environs. In the face of recent financial crisis that affected world economic growth and international trade, airline industry are affected by this crisis.The EUs air transport system has been considered as a very important factor of the Unions economy. In the meanwhile, it is quite sensitive to economic environment and economic development in other industry. In 2008, the worldwide financial downturn had increasingly resulted in a global economic crisis. At the same time, the impacts of this crisis for air transport sector reflected on obvious decline of air travel demand because of less transported passengers and goods, reduction of supply through reduction of frequency, and lower company profits.Figure3 gross domestic product Yearly Growth from 1990-2008Inflation and Oil Price ImpactThe inflation rate in Europe was 0.90% in February of 2010. Inflation rate reflected on a general rise in prices measured against a standard level of purchasing powe r. The effective measures of Inflation are the CPI which measures consumer prices, and the GDP that measures inflation in the whole of the domestic economy. Oil prices are pushing up inflation across Europe. And oil price really matters to the health of global economy. The global economic downturn in 2000-2001 resulted from higher oil price since 1999, and global GDP growth have reduced. heightser oil price are contributing to high level of cost and unemployment and accelerating budget-deficit problem. The impact of high oil price on oil-importing countries varies mainly depending on the degree to which they are net importers and the oil intensity of their economies.. European countries are highly dependent on oil imports, which would suffer most in the short term, their GDP went down by 0.5% and inflation increasing by 0.5% in 2005. The United States suffered with GDP declining by 0.3%,mainly because its domestic production meets a bigger part of share of its oil needs. Japans GDP decreased 0.4%, with its low oil intensity compensating for its almost high dependence on imported oil.The problem of fuel rates/ cost is one of many factors all airline companies faced with. The price of a barrel of oil has been a huge impact on airliner and global airline industry. According to the statistics, the cost of fuel has been made up by 31% of the total cost of business of airline companies. The aviation industry is always sensitive to the change of fuel price. In the economic recession, the number of the passenger would scare away if airline company rise the ticket price, despite of the situation of fuel price surge. Therefore, the only ways for airline company to minify the loss because of the higher oil price are strengthening management, cutting cost and efficiency improving, instead of simply rear the price.Another financial risk exposure in the airline industry is interest rate. Interest rate risk is important to airline companies in foothold of the cost of debt finance. Higher financial leverage ratios are dominant in the aviation industry because of its capital intensive nature and high cost of equity. High earnings volatility made cost of equity increase. Equity can be less attractive due to lower price earnings ratios put in the airline industry. In the meanwhile, cost of debit is closely related to the interest rate changes. Therefore, the impact of interest rates on general business could be large consequential effect. Moreover, high interest rates result in higher cost of distress, this is especially for the airline industry.Legislation Impact cardinal of the most difficult balancing acts that airline companies faced is the challenge of balanceing global warming and remaining competitive position in marketplace. The airline industry is trustworthy for 2% of the worlds man-made carbon emissions and 6% of the Uks. It has already achieved a great deal in keeping emissions down,and it is continuing to take its responsibilities serious ly through industry-wide initiatives, in-depth research, roadmaps, not to mention new airframe and engine technology.In 2005,the temper impacts of aviation have finally landed on european political agenda.because the air travel is the worst climate choice of all transport modes, per passenger kilometer of aircraft emits tree times more than cars. Per tonne kilometer of freight, aircroft measured about an modulate of magnitude worsened than lorries. the UK Climate Change Act, passed last November called into question how quickly the industry could deploy into new aircraft and fleets the technological advancements it was claiming were going to help it deliver a percentage reduction in CO2 emissions. Airline companies must act quickly to lower its own CO2 emissins to meet goverment regulation,many people argued that the climate change policies will destory the development of aviation industry. However, the study shows that climate change legislation could be designed in a sustainable way.Survival of the Easy Jets cheap ModelLow-cost airline model has proven to be successful, and has been copied by the many airline company worldwide. Low-cost airline model is based on strict union to several major principles point to point flight, maximization of flying hours, short-haul, use of secondary airports, no-frill, and no delay, which result in low cost, low fares and high demand and capacity utilization. ( Macario et.al.2007) Although the air transport market is heavily impacted by the economic crisis, in turn, economic recession provides a potential opportunity to low-cost airline company. Easy Jet announced a profit increase in 2009. Low cost airline companies are increasing their market share compared to traditional airline.Potential strategies for Easy JetFirstly, Easy Jet should build stronger air transport network. Although Easy Jet has a leading presence on Europes top 100 routes, it still needs to strengthen its positions in the key market and focus on the r outes customers find the most attractive, at convenient times. Easy Jet needs to continually manage schedule quality and fine-tune its network. Which means it will offer customers the opportunity to arrive when they want and when they want. It will allow Easy Jet get increasing market share of flight and have higher load factors than its competitors. Increasing frequency and stability on major routes with launching new the route mix offer more choice to its customers based on market research. For instance, Easy Jet launched flight with daily think flight from several cities in UK to many European cities. As the demand declines through the summer months, it should manage its schedule and move assets to leisure routes in order to maximize its capacities. In addition, unnecessary cost created by overnight stops could be avoided by base management, in order to improve efficiency and maximize revenue.Secondly, it is important to listen to customer and understand their need and then desi gn schedule and service to match. the relative effective way to get close to its customers is to cod all customer data, which provides a fast and intelligent view on trends in customers travelling habits. With these customer databases, it allows marketing department tailor marketing emails correspond to individual customer purchasing patterns and preferences.Moreover, build increasing customer experience to appeal business travelers. Departure time is vital for customer and ensuring customers arrive at their destination on time is a key to delivery of a winning customer proposition. In a recession economic environment, Easy Jet has potential opportunity to increase share of the business travel market due to many corporate tend to low cost air travel company to cut business cost.http//hubpages.com/hub/rise-in-fuel-prices-airline-industryHow a rise in fuel prices affect the airline industry