Easyjet Airline Company 10
Report on the Analysis, Evaluation and Expansion of Easyjet Airline Company into the Indian Market
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Table of Contents
1.0 Introduction
1.1 EasyJet Airline Company Limited
2.0 Indian Airline Industry
2.1.0 EasyJet to Expanding into the Indian Market
2.1.1 Price strategy
2.1.2 Promotion strategy
3.0 Opportunities of Expanding into the Indian Market
3.1 Estimated Growth
3.2 Privatization and increased air movements
3.3 An Increase in Passenger Traffic Market
3.4 The Cargo Traffic Market
4.0 Threats of Expanding into the Indian Market
4.1 The threat that come as a result of substitutes
4.2 Threat from new entrants into the market
4.3 Threat from power of suppliers
4.4 Competition among existing airline companies
5.0 Conclusion
1.0 Introduction
Air transport is and continues to one of the largest industry globally (Mark M 2006, p. 30). As a major economic sector, it helps in promoting the growth of the economy, trade within nations, tourism and international investment. Therefore, the airline is great player and contributor towards globalization in the world.
In the last ten years, the growth experienced in the air travel industry was more than 7 percent per annum. This can be attributed to an increase in travelling of individuals for both leisure purposes and business grew strongly worldwide. As a result of an increase in passengers who are travelling for leisure, large aircraft like the Boeing 747 have become more convenient as well as affordable for them (Mark M 2006, p. 30). The growth and expansion of economic sectors such as tourism has led an increase in the development of infrastructure and resorts as a way to attract more tourists from Europe and North America.
On the other hand, business travelling has also increased as a result of companies engaging in international investments and hence this has led to an expansion of business activities such as supply, production chains as well as customers from different places around the world. From an economic perspective the profitability of airline companies is related to both economic growth and trade. The world economic recession experienced in recent years and which seems to continue in continents such as Europe has led airline companies to rethink the manner in which they are doing business (Mark M 2006, p. 5). This is in order to ensure their survival and prosperity within high competitive industry that is constantly being faced by emerging economic challenges.
1.1 Easyjet Airline Company Limited
In particular this report takes a closer look at one of the major airline companies in the United Kingdom and in Europe (Mayer F 2003, p. 10). With its headquarters in London Luton Airport EasyJet Airline, the company has a huge capacity in terms of the number of passengers carried, operations within the domestic and the international. EasyJet plc which is the parent company is listed in the London Stock Exchange.
Easyjet Airline Company experienced quick growth and expansion since established in 1995 as part of the Easy Group conglomerate (Mayer F 2003, p. 10). This expansion has been as a result of business strategic factors such as taking advantage of low cost air travel which has been in great demand. Another factor is acquisitions (Mayer F 2003, p. 10). The airline has subsidiary airline the EasyJet Switzerland and has a fleet of over 200 aircraft.
Early marketing strategy was based on making flying as affordable as a pair of jeans and urged travelers to cut out the travel agent (Shaw, S 2011). This is a similar approach that EasyJet airline company. With an emphasis on advertising which comprised very the airline's telephone booking number painted in bright orange on the side of its aircraft for the potential clients.
The Strategic and Competitive Position of in both the UK and the European Airline Industry
The strategic objective of EasyJet airline is to establish itself firmly as a leading low-fares scheduled passenger airline within Europe. The strategy has been designed to achieve the following key driving forces for the company;
· The presence of Low fares
· To provide customer service that is of optimum quality
· Provide regular flights for short distances or short-haul routes
· Ensure that operating costs are maintained down, address efficiently issues of aircraft equipment, productivity of personnel, airport access fees and cost to customer service.
· Use the internet in facilitating the expansion of the company
· Maintain high commitment to safety and quality maintenance
EasyJet airline has been operating under a policy of offering the lowest fares available compared to any carrier both in the United Kingdom and Europe. This has given the company a competitive advantage over its major competitors in Europe and the United Kingdom.
The strategy of utilizing the small regional airports has also played a crucial goal in the growth of the company (Khurana K 2009, p. 99). This has led to a reduction in the costs incurred on entry to the airport and also these small regional airports are less congested in terms of traffic which in most cases results to delays for passengers. By providing, short-haul flights the company is not required to provide services similar to the ones provided for passengers on longer flights such as meals.
The strategy of cost cutting to a minimum is and continues to be a key factor in making the success of the operations of EasyJet airline (Mayer F 2003, p. 25). The presence of the internet has helped in keeping the prices by seeing the removal of agents or the middle men. About 96 percent of the bookings are through the internet.
2.0 Indian Airline Industry
The airline in India is among the fasted growing in the world. Since the Indian aviation sector was liberalized, the Indian airline industry has been undergoing great transformation (Budhwar, P & Varma, A 2010, p. 25). Up until recently the industry has been primarily a government-owned sector but in the recent years the Indian airline industry has become dominated by privately owned airlines as well as low cost carriers. About 75 percent of the airlines in India are privately owned. For a long time the prospect of a travelling using air was considered a privilege of a few in the Indian, but in today society travelling using air has become cheap and hence affordable to many in the Indian society. The Airport Authority of India is responsible for managing about 122 Airports which are within the country, 11 of which are International Airports, 28 are civil enclaves and 94 are domestic airports. 70 percent of the passengers’ traffic is handled by the top five airports. 50mpercent of the passenger traffic are handled in both Delhi and Mumbai together.
2.1.0 EasyJet to Expanding into the Indian Market
India being one of the major emerging markets has for the last decade been experiencing tremendous economic growth (Budhwar, P & Varma, A 2010, p. 25). This has resulted in the creation of jobs both skilled and unskilled for the people. In addition, foreign direct investment, as a result of the availability of cheap labour and government policies that promotes investment. Easyjet Airline Company is planning an expansion into the Indian market for the period between 2012 and 2017. Entry into the Indian market is a strategic decision for Easyjet Airline Company that is set to boost the continued growth and expansion of the company. As a result of increased deregulation and liberalization, the Indian aviation industry ahs witnessed a significant increase in the entry of private players in the aviation industry (Khurana K 2009, p. 298). The Indian aviation industry comprises of three types of players, mainly;
· Low cost carriers
· Full cost carriers
· Other start up airlines
2.1.1 Price strategy
· Promoting low price can be key element of the EasyJet airline brand.
· Enhancing the use of different pricing strategies; the off-peak travelling and booking in advance makes a ticket less expensive.
· Providing discounts for the tickets which are booked online.
2.1.2 Promotion strategy
· It is the number one airline in Europe that offers low cost airlines
· Uses a lot of internal marketing and encourages creativity within the staff
3.0 Opportunities of Expanding into the Indian Market
The Indian Government has come up with a policy called the open sky policy which is designed to attracted foreign players into Indian Aviation Market (Harvey G 2007, p. 45). This has proved to be working well towards the growth of the industry. This is an opportunity for EasyJet Airline Company. The strong market fundamental, Easyjet Airline Company is expected to register a compound annual growth rate more than 160 per. In addition, the plan of Easyjet Airline Company to expand into India is favoured greatly by some steps of the Indian Government has taken.
3.1 Estimated Growth
There is an estimated growth of 12 percent per annum within the domestic passenger market. There is an anticipated growth in the International passenger market by 7 percent and a growth in the International Cargo by around 12percent.
3.2 Privatization and increased air movements
The plan to privatize International Airports has been progressing very well via the method of a Joint Venture (Budhwar, P & Varma, A 2010, p. 25). There is an expected an inflow of massive foreign investment for construction as well as maintenance of the airports. There is an increase in the number of air movements and this is expected to grow. This growth can be attributed to an increase in the number of smaller aircrafts operating.
3.3 An Increase in Passenger Traffic Market
Both domestic and International passenger traffic handled annually is expected to grow as a result of the economic growth in India (Stone, B & Jacobs, R 2008, p. 24). This economic growth has led to a growth in the middle class and an increase in foreign direct investment.
3.4 The Cargo Traffic Market
India is increasingly becoming a destination for companies that are outsourcing for labour and raw materials. As a result this has greatly contributed towards the growth of the Indian airline industry in terms of cargo transportation.
4.0 Threats of Expanding into the Indian Market
There are challenges that are likely to come with the expansion of Easyjet Airline Company into the Indian market. Nonetheless, these challenges are less different from the challenges that face airline companies around the world (Cento A 2008, p. 17). Indian is one of the major emerging markets in Asia and second from china in terms of growth rate. With every economic boom there are social as well as economic dysfunction facing the community and the investors. The major challenge or threat that can and will face easyjet entry into the Indian market is how to penetrate the market with ease and at low cost for the company. The company is planning to spend more on actual operations than on the marketing but this does not mean that marketing is at the bottom of its list. In fact this is and continues to be very crucial in shaping the growth of the company.
There are threats that arise as a result of legal and political issues. These political and legal threats might to an extent affect the company’s cost of operating (Cento A 2008, p. 32). Issues such as high tax demands and the ever increasing cost of fuel is and continues to put more and pressure on the company’s expenditure bill. In addition, being a developing country means that the per capita income is still very low and therefore the purchasing power of majority of Indians is also low. The high population is a promising market for easyjet limited but also this means that the level of competition in the Indian airline industry is growing and will continue to grow. With a cut throat competition, the company faces the prospects of spending a lot on marketing and developing new products before it expects to make any profits for a period that is unknown. Other political threats include; government policy and instability in some parts of India. The country is about to undertake an election and every election comes with a measure of uncertainty for the investors.
4.1 The threat that come as a result of substitutes
There are minimal threats from other form s of transport that are very common in India such as the use of train and motor vehicle. The time as well as cost advantage for the carriers which are low-cost is much more than the comfort and flexibility that comes with the use cars or trains or cars.
4.2 Threat from new entrants into the market
This expansion requires high capital in order for the company to have an effective start and entry. As a bigger airline it properly positioned in terms of finances to have a comfortable entry into the Indian market. On the other hand the expansion of EasyJet airline will prove more challenging once it is established. The reason for this is because of the presence of more
Since India is a developing country, the infrastructure is also being upgraded. As a result of this there are some few cases where the airline can lack slots for taking-off as well as landing which is challenging for new carriers to find suitable airports.
4.3 Threat from power of suppliers
The Issue such as the ever fluctuating cost of oil, EasyJet airline does not have any control over the prices of oil. Similarly the dependence of on spare parts from a single manufacturer can pose a great challenge and especially in the new territory.