Explain one effect on easyJet plc of the reduced capacity utilisation of its aircraft in 2020.
- Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Explain one effect on easyJet plc of the reduced capacity utilisation of its aircraft in 2020.
Worked Solution & Example Answer:Explain one effect on easyJet plc of the reduced capacity utilisation of its aircraft in 2020.
- Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Step 1
Knowledge: Understanding Capacity Utilisation
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Answer
Capacity utilisation is a measure of the extent to which a business is using its productive capacity. In the context of easyJet plc, it reflects how efficiently the airline is operating its aircraft.
Step 2
Application: Contextualised Example
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Answer
In 2020, easyJet's capacity utilisation fell from 91.5% in 2019 to 87.2%. This decrease indicates that fewer seats on flights were filled compared to the previous year.
Step 3
Analysis: Explaining the Effect
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Answer
The reduction in capacity utilisation means that easyJet had more empty seats on each plane. This leads to fixed costs being spread over a smaller number of passengers, resulting in higher unit costs and average costs for the airline. Consequently, the overall profitability may decline due to increased operational inefficiencies.
