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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 three options: a new fleet of electric and hydrogen powered aircraft, fo... 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
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Environmental Concerns: 94% of easyJet's customers are concerned about the environmental impact of air travel. A fleet of electric or hydrogen-powered aircraft could align with this concern and enhance easyJet's market positioning as a sustainable airline.
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Unique Selling Proposition (USP): Investing in such technology could give easyJet a distinct competitive advantage over other airlines, such as Ryanair and Jet2, thereby attracting customers prioritizing sustainability.
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Cost Implications: While the initial investment might be high, the long-term savings on fuel costs—jet fuel accounting for a third of operational costs—could justify the investment as fuel prices typically fluctuate.
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Consumer Willingness: There may be a readiness among consumers to pay premium prices for flights they perceive as environmentally friendly, potentially leading to higher profits.
Step 2
Arguments for increasing its market share of the package holiday market:
Answer
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Target Market: EasyJet is the seventh largest airline worldwide, with a considerable customer base primarily engaging in leisure travel. Focusing on package holidays can capitalize on this established market.
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Consumer Preferences: Many customers prefer package deals for convenience; thus, easyJet can attract more travelers by offering comprehensive travel solutions.
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Price Guarantee: EasyJet currently offers a best price guarantee which could be leveraged to enhance package holiday sales, especially in times when travel disruptions might limit conventional airline services.
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Lower Risk: Expanding market share in the package holiday sector may entail less risk compared to investing in new technology, providing an opportunity to maintain profitability in the short term.
Step 3
Recommendation:
Answer
After evaluating both options, I recommend that easyJet focuses on increasing its market share in the package holiday market. This strategy is less risky and more aligned with easyJet's existing operations and customer base, offering a more immediate path to profitability as they recover from the impact of the pandemic. The investment required for a new fleet of electric and hydrogen-powered aircraft, although potentially transformative in the long term, carries significant uncertainty and cost. By capitalizing on the demand for package holidays, easyJet can provide value to customers while ensuring steady revenue during recovery.