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Evaluate these two options and recommend which one is more suitable for easyJet plc to improve its profitability - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Evaluate these two options and recommend which one is more suitable for easyJet plc to improve its profitability. Arguments for electric and hydrogen powered aircra... show full transcript
Worked Solution & Example Answer:Evaluate these two options and recommend which one is more suitable for easyJet plc to improve its profitability - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
Arguments for electric and hydrogen powered aircraft:
Answer
To start, investing in electric and hydrogen-powered aircraft aligns with the growing environmental concerns expressed by 94% of easyJet's customers. Implementing this option offers a unique selling proposition (USP), distinguishing easyJet from competitors like Ryanair and Jet2. This commitment to sustainability could attract eco-conscious travelers who are willing to pay a premium for greener flights.
Moreover, since jet fuel constitutes a significant portion of operational costs, transitioning to electric/hydrogen-powered aircraft may ultimately lead to cost savings, as easyJet could eliminate fuel expenses.
However, the initial capital investment for developing and integrating this new fleet would be substantial, posing a financial burden on the company in the short term.
Step 2
Arguments for increasing its market share of the package holiday market:
Answer
Conversely, focusing on the package holiday market appears to be a less risky approach with immediate potential for profitability. By capitalizing on its established reputation as a prominent low-cost airline, easyJet can tap into the leisure travel segment, which comprises 97% of its customer base. This strategy could significantly enhance market share with a relatively lower investment compared to introducing a new aircraft fleet.
Furthermore, easyJet's package holiday offerings, coupled with a best price guarantee, appeal to customers who prefer cost predictability while planning their vacations. This tactic can draw in travelers who may have experienced disruptions in the past, creating urgency in booking through easyJet.
Step 3
Recommendation:
Answer
In conclusion, while investing in electric and hydrogen-powered aircraft aligns with long-term sustainability goals, the financial implications and timeline for return on investment may hinder immediate profitability. Therefore, enhancing easyJet’s market share in the package holiday sector appears to be the more suitable option for improving profitability in the short to medium term.