Easyjet Vs Ryanair Case Study

1. How is the strategy of Ryanair similar to or different from EasyJet? Make sure to support your answer with numbers wherever possible. 

Ryanair and EasyJet are both competing in the market segment designated as ‘Low Cost Carriers’ (LCCs) with the aim to reduce costs as much as possible, and therefore offer a cheap, basic service proposition to its customers. Ryanair had 78% the available air miles of British Airways in YE2014 (78bn vs 100bn respectively) but only 34% of the costs (€4.8bn vs €12.8bn respectively) (Exhibit 8).

Porter’s generic strategies would indicate that Ryanair and EasyJet are playing with a Cost Leadership strategy vs the Benefit Leadership strategy that is inherent in the Full Service Carriers (FSCs) proposition. This is evident in the Brand Scores in Exhibit 9 that indicates Ryanair and EasyJet are more focused on Low Cost (61 and 75 respectively) than Customer Care (55 and 55 respectively) with British Airways more focused on Customer Care than Low Cost (64 for Customer Care and 53 for Low Cost)

Both Ryanair and EasyJet are providing frequent short haul flights from point to point thus average sector lengths remain relatively low, EasyJet at 688 miles over the last 5 years versus Ryanair’s average 688 (See Appendix 1). This helps to keep their costs down by not needing to serve food or beverages, reduce cleaning costs and staff requirements.

Another similarity is that both firms have limited the types of planes they employ with Ryanair only using the Boeing 737 and EasyJet using mostly Airbus A319s and some A320s. This helps them drive economies of scale benefits through lower maintenance costs and training time for staff as all processes are uniform and improve turnaround times and is evident in Exhibit 6 where Average Delays for Ryanair and EasyJet are similar at 9.3mins and 9.9mins. Scale benefits are clearly important and both firms have grown quickly in an effort to achieve the lower costs. We can see in Appendix 1 that Costs per Available Seat Mile have reduced by 2.8 cents for Ryanair from 2001 to 2014 whilst passengers have grown at 19.5% per annum, and by 2.2 cents for EasyJet whilst passengers have grown at 18.5% per annum.

However, whilst both companies are following a Cost Leadership strategy, they have made some fundamental differences in choices as how best to serve their customers. Ryanair has made a decision to focus on providing routes from and to secondary or regional airports that are close to key destinations and major cities thereby reducing costs as airports had lower fees and are less congested. EasyJet has chosen to operate from primary airports, and develop a higher quality service than Ryanair who have focused on eliminating as much cost as possible, thus will struggle to get its costs as low as Ryanair and we can see that Ryanair’s 5 year average cost per available seat mile is 3.8 cents lower than EasyJet’s (5.3c vs 9.1c respectively).  The use of less crowded airports results in Ryanair keeping its average delays slightly lower than EasyJet with delays > 1 hour only 2.4% of the time against EasyJet’s 3.4%.