Can Easy Jet penetrate the air travel market in UK and Greece

Research Question: Can Easy Jet penetrate the air travel market in UK and Greece
Intended Audience : Easy Jet investors
The IB Number :
Session : September 2017
Proposal word count and IA word count: 1925 words
Acknowledgements
I would like to acknowledge and thank the manager of Easy Jet and the staff for their time and the information offered. I am grateful for accepting to be interviewed despite having a tight schedule.
 
Executive Summary
Easy Jet management and shareholders have seen the need to expand its services considering that increased demand for airline services in Greece. The business core operations intend to focus on the UK market. However, there is the need for further research to if Easy jet needs to penetrate the Greek market. The report presents a research proposal that includes the research question, the rationale, the theoretical framework and the methodology used to understand the UK airline market.
The first part of the report includes the introduction containing details of the company and the research hypothesis. The second part presents the analysis based on both primary and secondary research, which includes personal interviews with the company's management. The report contains the financial graph to understand the company performance. A detailed evaluation of financial and non- financial elements are presented using NPV analysis, SWOT, and PEST analysis that discusses the various investment options for Easy Jet. The report presents recommendations followed by a conclusion on the same.
Contents page
1 Introduction………………………………………………………. 5
2 Research proposal………………………………………………. ..8
3 Recommendations ……………………………………………….13
4 Conclusion ……………………………………………………….14
5 Appendix ………………………………………………………..16
Introduction
Easy Jet limited management and shareholders have expressed their interest in expanding the business by the fact that there is an increasing demand airline service in Greece. Greece offers private health care and specialized diagnostic services, attracting several people to travel to Europe (De Oliveira Cabral, 2016). Easy jet has operated within the domestic routes in the UK dating back from 1994. Easy jet is the product of deregulations within the air industry (De Oliveira Cabral, 2016). In 2010, after more than 16 years, the number of airlines serving the same routes had increased with large number of low-cost carriers dominating the market (De Oliveira Cabral, 2016).
British Airways and Olympic Air are among the leading service providers that have remained competitive offering low-cost airfares on places served by Easy Jet (Michl, 2016). On the other hand, Easy jet has gained a unique position in the market-providing point-to-point services to minimize its operating costs. The company heavily invested in growing its network to improve its efficiency, including on time and low-cost flight services (Michl, 2016). As the company keeps on expanding, the main question is: can Easy jet break through the Greek market, and if so, should it be an organic process or through a takeover (Dunn, 2010).
Rationale
The research explored the dilemma faced by Easy Jet Limited with its plans to expand its services in the UK. The UK having the largest low-cost carrier services makes it an ideal investment opportunity for airline services to expand its operations (Bazargan et al., 2013). Greece is an ideal route due to the increased demand for travel specifically for specialized health care services. Easy Jet is looking for the best option of investing and getting a good return on its investment. The possible investment opportunity for the company is to launch a new route from London to Volos; Volos is a busy tourist destination for UK travelers (Costantino et al., 2016). The research reviewed the possibility of purchasing a majority of shares in one of the airline competitors in Greece specialized in charter flights from the UK (Costantino et al., 2016).
Method Employed: Theoretical Framework
The research was analyzed based on a dual approach; these included the nonfinancial and financial elements to understand the feasibility of investing in the project. Some of the key areas reviewed included the growth and evolution of the company, analysis of the company, including the external environment and investment assessment (Bazargan et al., 2013). The analysis part included both primary and secondary research findings through personal interviews of the company management. Using both financial and non-financial analysis presented possible investment options for the company (Sadgrove, 2016).
Methodology
The research methodology included conducting an in-depth analysis by obtaining data from the manager of the company at Athens International Airport. The interview included some of the company representatives (Belobaba, Odoni & Barnhart, 2015). Reviewing its strategic plan combined with the interviews provided important insights to understand the structure in Greece and its overall operations. Secondary research included collecting relevant information related to the airline industry. Reviewing both the internal and external factors, analyzing data from various sources (Belobaba, Odoni & Barnhart, 2015).
Anticipated Difficulties
Some of the anticipated problems included having biased interview questions and limited information since only two people were involved in the interview (Reeder et al., 2015). The other risk included the company not willing to share out confidential financial reports, and other sensitive data.Time limitation was a major factor that we considered before embarking on the research (Reeder et al., 2015).
Action Plan
One of the strategies that helped in overcoming the difficulties included verifying data using secondary sources, complementing information from independent sources like the company financial reports and online data (Reeder et al., 2015). Making appointments with the company representative in advanced helped us get adequate time to ask all the relevant questions for the research (Reeder et al., 2015).
Main Results and Findings
Low-cost carriers like Easy jet have been able to overcome the recession crisis of 2008, it is evident that only a few carriers lost money during the financial year ending during 2010 (De Oliveira Cabral, 2016). Note that the data mentioned in the graph below includes, all groups of companies for Easy jet versus Ryan air one of the main competitors.
(De Oliveira Cabral, 2016).
Factors that has enabled the continuous growth of profitability of EasyJet has been the reduction in the capacity, especially in European markets. The airline has aggressively focused on being conscious about the cost for travelers ,especially those who wish to trade down (De Oliveira Cabral, 2016). This strategy aims at increasing cooperation efforts to increase revenues in other area like on-board sales. Low-cost carriers focused on reviewing their past revenues before considering raising revenue per passenger flown (De Oliveira Cabral, 2016).
Competitive forces combined with high costs of fuel have reduced their profit margin. Low-cost carriers constantly establish alternative ways to increase its revenues, these include lifting its top fare limits and venturing into global distribution services (Vasigh, Fleming & Humphreys, 2014). Consolidation has helped the carriers to grow, with mergers being common within the industry. Other low-cost carriers have attempted to fill in gaps created by the exit of low-cost carriers like WizzAir affected by the recession (Mellat-Parast et al. , 2015). The collapse of SkyEurope and Ryanair occupying its air base in many parts of Italy in one example. Even though Easy jet try to push for ancillary revenues in diverse ways, Ryanair displays unique ways to cope with the competition using advanced technology like mobile telephone services to offer a wide range of services (Kauffman, Liu & Ma, 2015).
Analysis/Evaluation
After analyzing the market, succeeding in penetrating the competitive market can be achieved by following two options. The first one is to launch a new route , preferably from London to Volos in Greece and the second option for expansion is to invest in one of the major players in the Greek market like Hellasjet (Jarach, 2017). To review the two options an assessment both financial and non-Financial will help in arriving at the right decision (Kuratko, Hornsby & Covin, 2014).
Investment appraisal includes determining if the company long term investment, including replacing machinery investing in new plants or new product and research and development project (Chang, 2016). Using the NPV can help evaluate the two options by estimating the company's inflows within the first few years of its operation.Payback period will help in estimating the time required for a return for the two investment (Chang, 2016).
 
Analysis of investing in the new route
Administrative costs

60

Marketing cost

800

The Cost of running the facilities

118

Taxes for council

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