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Evaluate the two options and recommend which one is more suitable for easyJet plc to improve its profitability. - Edexcel - A-Level Business - Question 1 - 2022 - Paper 2
Question 1
Evaluate the two options and recommend which one is more suitable for easyJet plc to improve its profitability.
Worked Solution & Example Answer:Evaluate the two options and recommend which one 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
94% of easyJet’s customers are concerned with the environmental impact of air travel, making a new fleet of electric and/or hydrogen powered aircraft appealing.
By adopting this approach, easyJet could establish a unique selling proposition (USP) against rivals such as Ryanair and Jet2. This aligns with their sustainability strategy aimed at reducing the environmental impact of air travel. Customers may be willing to pay higher prices if they believe they are making an environmentally positive choice.
Moreover, jet fuel costs account for a significant portion of airline expenses, and investing in electric or hydrogen aircraft could alleviate these ongoing costs, thereby enhancing profitability in the long term.
Step 2
Arguments for increasing its market share of the package holiday market:
Answer
Switching focus to package holidays could leverage easyJet's established network, as it is the seventh largest airline globally with a strong reputation across 35 countries.
97% of their customers travel for leisure, indicating that easyJet can target this demographic effectively. The airline offers a best price guarantee and full refunds on holidays canceled over 28 days in advance, attracting customers who may be hesitant due to previous travel disruptions.
Additionally, increasing market share in package holidays requires lower initial capital investments compared to developing a new fleet of aircraft, making it a less risky and more sustainable strategy in the short run.
Step 3
Recommendation:
Answer
Given the current economic landscape and easyJet's established reputation, focusing on increasing its market share in the package holiday sector is more suitable for improving profitability. Although investing in electric and hydrogen powered aircraft aligns with sustainability goals, the high initial capital outlay and associated risks make it less viable at this time. Therefore, developing attractive package holiday options could provide easier paths to profitability while enhancing customer loyalty.