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Evaluate these two options and recommend which 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 is more suitable for easyJet plc to improve its profitability. Arguments for electric and hydrogen powered aircraft: ... show full transcript
Worked Solution & Example Answer:Evaluate these two options and recommend which 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
A significant portion of easyJet’s customer base, 94%, expresses concern regarding the environmental impact of air travel. By investing in a fleet of electric or hydrogen powered aircraft, easyJet could cater to this environmentally conscious demographic, enhancing its brand image and meeting customer expectations. This initiative not only aligns with the growing trend toward sustainability in the aviation sector but also provides easyJet with a unique selling proposition (USP) compared to competitors such as Ryanair and Jet2.
Moreover, the potential for consumers to pay premium prices for eco-friendly options could translate into increased revenue. Currently, jet fuel constitutes about a third of the total operational costs of airlines. Transitioning to electric or hydrogen aircraft would eliminate this expense, significantly improving cost efficiency in the long run.
Step 2
Arguments for increasing its market share of the package holiday market:
Answer
Focusing on increasing its market share in the package holiday segment may be a cost-effective strategy for easyJet. This option does not require the substantial capital investment that a new fleet of electric/hydrogen powered aircraft would entail, making it a sound business decision in a fiscally constrained environment.
As the seventh largest airline in the world, easyJet already has significant assets, including 342 aircraft and an extensive customer base of 48 million across 35 countries. By honing in on leisure travelers—97% of easyJet’s customers—there is a clear opportunity to convert flight-only customers into package holiday buyers. The introduction of attractive offers such as price guarantees and flexible cancellation policies may further entice customers, particularly in light of recent travel disruptions.
Step 3
Recommendation:
Answer
Given the current context, it is advisable for easyJet to prioritize increasing its market share in the package holiday sector. This approach presents a lower-risk option that can yield immediate benefits while allowing the airline to leverage its existing strengths. Although investing in electric or hydrogen powered aircraft aligns well with long-term sustainability goals, it entails significant upfront costs and risks that may not be sustainable in the near term.