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EasyJet plc wishes to improve its profitability - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
EasyJet plc wishes to improve its profitability. To achieve this, easyJet plc is considering two alternatives: investing in a new fleet of electric and hydrogen powe... show full transcript
Worked Solution & Example Answer:EasyJet plc wishes to improve its profitability - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
Arguments for electric and hydrogen powered aircraft:
Answer
- 94% of easyJet’s customers are concerned with the environmental impact of air travel, indicating a new fleet of electric and/or hydrogen powered aircraft could resonate with customer values. This aligns with easyJet’s sustainability strategy, allowing it to lead in reducing the environmental impact of air travel.
- Transitioning to such aircraft could provide easyJet with a unique selling proposition (USP) compared to competitors like Ryanair and Jet2, attracting environmentally conscious customers.
- Although the initial investment in new technology is significant, customers may be inclined to pay higher prices for services perceived as environmentally friendly. Thus, this may help in covering operational costs in the long term.
Step 2
Arguments for increasing its market share of the package holiday market:
Answer
- Focusing on package holidays may require lower initial investment compared to the electric/hydrogen aircraft, reducing risk in a volatile market.
- With 97% of customer travel being leisure-oriented, enhancing package holiday offerings could tap into a vast market potential and improve profitability in the short term.
- EasyJet's established brand and reputation mean it can leverage existing customer trust to attract package holiday customers, who might not typically choose flight-only options.
- Additionally, by providing best price guarantees and full refunds, easyJet can attract customers wary of travel disruptions.
Step 3
Recommendation:
Answer
In conclusion, while investing in electric or hydrogen powered aircraft aligns with the company's long-term sustainability goals, it may also involve considerably higher risks and uncertainties. On the other hand, increasing market share in the package holiday sector appears to be less risky and could yield quicker returns on investment. Therefore, it is more suitable for easyJet plc to prioritize enhancing its package holiday offerings to improve profitability in the immediate future.