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 the productive capacity of a business is being used. In simple terms, it reflects how efficiently an airline is using its available seating capacity.
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 indicates that there were more empty seats on flights, leading to lower overall revenue per flight.
Step 3
Analysis: Explaining Effect
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Answer
As fixed costs such as fuel and maintenance are spread over fewer passengers due to reduced capacity utilisation, this results in higher unit costs per passenger. Consequently, easyJet plc may face tighter profit margins, impacting their overall financial performance.
