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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.
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
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A significant majority of easyJet’s customers (94%) are concerned about the environmental impact of air travel. Adopting a new fleet of electric or hydrogen-powered aircraft aligns with their values and could attract more environmentally conscious passengers.
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This move would differentiate easyJet from competitors like Ryanair and Jet2, enhancing its unique selling proposition (USP) and emphasizing its commitment to sustainability.
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Consumers may be willing to pay higher prices for tickets, believing that their choice supports environmentally friendly practices.
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Since jet fuel accounts for about one-third of total operational costs, transitioning to electric or hydrogen could alleviate this expense over time.
Step 2
Arguments for increasing its market share of the package holiday market:
Answer
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The package holiday sector represents a significant marketplace that easyJet has the potential to penetrate more deeply, enhancing profitability without the heavy capital investments required for new aircraft.
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Currently, 97% of easyJet's customers travel for leisure, and targeting package holiday bookings would allow the airline to cater specifically to this audience, providing a competitive edge.
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easyJet has an established reputation and offers a best price guarantee, which can instill greater consumer trust and attract holiday customers looking for reliability.
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By focusing on package holidays, easyJet can reduce risks associated with significant upfront capital required in aircraft investment, while tapping into an existing clientele eager to book holidays as travel restrictions ease.
Step 3
Recommendation:
Answer
Based on the analysis of both options, easyJet should prioritize increasing its market share in the package holiday sector. This strategy is likely less risky in the short term and capitalizes on existing customer interests, providing a more immediate boost to profitability. In the longer term, the transition to electric or hydrogen-powered aircraft could still be considered, aligning with environmental goals, but may require extensive planning and investment.