Ticket Price Comparison of Ryanair & Easyjet in the European Market Ron D’Alli
Embry-Riddle Aeronautical University
The European Airline industry’s growth dramatically changed after deregulation phased into the European market. Prior to deregulation, bilateral agreements between host countries in Europe existed, and typically each country had a national airline (Airline Operations & Management, 2014). The industry stagnated and costs were very high for air travel. Deregulation in Europe was phased in beginning in 1987, and concluded in 1993 (Airline Operations &Management, 2014). After deregulation, airlines were able to operate routes without restrictions, and pricing for tickets was not controlled. Similar to the U.S., a proliferation of failures and bankruptcies occurred.
A new breed of air carriers developed out of deregulation and became known as Low Cost Carriers (LCCs). Two airlines emerged in the LCC war in Europe, Ryanair (RYAAY), and Easyjet (EZJ). Both airlines adopted the business model of Southwest Airlines in the U.S., and focused on cost reductions. Southwest flies point-point versus a hub, and utilizes much greater efficiency and turnaround time at the airport thus maximizing aircraft utilization. Both Easyjet and Ryanair operate a younger fleet than Southwest, average age of about 5.5 years compared to 11.7 years for Southwest, ideally resulting in lower operating costs with newer more fuel efficient aircraft (AirlineFleets, 2014). Easyjet’s operations differ from Ryanair in a few key areas. Easyjet flies to mostly primary airports, where Ryanair flies to secondary airports to further cut costs (Easyjet/Ryanair, 2014). Easyjet also offers a “flexi fare” for mostly business travelers that allows for specified changes to a ticket without additional fees. (Easyjet, 2014). Ryanair has perfected the art of ancillary charges, and everything from checked luggage, reserved seats, beverages, snacks, priority boarding, comes with an additional cost (Ryanair, 2014).
Ryanair and Easyjet are engaged in a low cost travel war in the European market, and currently, Ryanair holds the number one market share with H1 reported sales revenue of 650 million Euros followed by Easyjet with H1 reported sales revenue of 589 million Euros (yahoo Finance, 2014). Both airlines fly to the same cities, but as mentioned previously, Ryanair services secondary airports. From a cost perspective, Ryanair would need to offer a ticket price low enough to encourage customers to spend additional time and effort to travel to non primary airports which can add one or more additional hours of ground travel time.
To determine which airline is more competitive, a cost analysis would need to be performed to answer the basic research question, “How do Ryanair and Easyjet prices compare”? In researching the answer to the above question, five markets will be studied. 1) Munich, Germany 2) Plama, Spain 3) Rome/Naples, Italy 4) Prague 5) Denmark. Three of the airports selected, Munich, Palma, and Prague are serviced by both airlines, resulting in a much more accurate result, where Rome and Denmark will incur additional fees, since Ryanair only flies to secondary airports in these markets.
The basic assumption/hypothesis prior to conducting the price analysis is Ryanair should have significantly lower prices in these five markets compared to Easyjet. In conducting the analysis, the same travel dates and length of travel will be used. The travel period studied will have an outbound departure of October 13, with a return of October 17, with one passenger traveling. Both Ryanair and Easyjet charge for most services and in the analysis, the following parameters will be followed. 1) No additional insurance will be purchase 2) Reserved seating will be selected (additional cost) 3) one checked 20kg bag (additional cost) 4) Purchase will be paid for with a debit card (lower fee than credit card). To rationalize the analysis as much as...
References: Cook, C. & Billig,B.. (2014). Airline operations and management. Embry-Riddle Aeronautical University
Ryanair. (2014). About us. Retrieved from www.ryanair.com/en/about/fleet/
Ryanair. (2014). Airfare research. Retrieved from www.ryanair.com
Yahoo Finance. (2014). Ryanair h1 results. Retrieved form www.yahoo.com/finance
Easyjet, (2014). Company. Retrieved from www.easyjet.com
Easyjet. (2014). Airfare research. Retrieved form www.easyjet.com
Reuters. (2014). Easyjet profit forecast disappoints market, shares fall. Retrieved from http://uk.reuters.com/article/2014/uk-easyjet-resutls-id
Airline Fleets. (2014). Fleet age of easyjet. Retrieved form www.airlines.net/ageflottel/easyjet
Airline Fleets. (2014). Fleet age of southwest. Retrieved form www.airlines.net/ageflottel/easyjet
Airline Fleets. (2014). Fleet age of ryanair. Retrieved form www.airlines.net/ageflottel/easyjet
Please join StudyMode to read the full document