Individual company report EasyJet.docx
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Individual company report EasyJet.docx
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IndividualcompanyreportEasyJet
TheUniversityofNorthampton
ThecaseofFTSE250UKbasedcompany-EasyJET
Summary
Thisisabasicreportfor‘easyJetAirlinespubliclimitedcompany’.ItiswellknownthateasyJetAirlineCompanyisafamousandpopularlowcostairlinecompany.Moreover,itisoneofthebiggestlowcostairlinecompaniesinEuropeandtheUK.Thecompany’sbackgroundandhistoryshowthateasyJetdevelopedrapidlyandbecameasuccessfulcompany.Inaddition,itsfinancialsituationwasaffectedbyFinancialCrisisin2008,butrecoveredin2010.Furthermore,sixratioscomparedbetween2009and2010shownthateasyJethasincreasinglybeenimproving.Finally,theanalysisofSWOTshowsthatesayJethaspotentialtolaunchnewroutestomorecountries.
Contents
1.Introduction4
2.Mainbodyofthereport4
2.1Companybackground4
2.2Mainareasofactivity5
2.3Development5
2.4FinancialASPECTS5
2.4.1Afiveyearshareprice5
2.4.2SixRatiosanalysis5
2.4.2.1netprofitmargin(profitability)6
2.4.2.2ROCE6
2.4.2.3Averagesettlementperiod(efficiency)6
2.4.2.4currentratio(liquidity)6
2.4.2.5Gearing7
2.4.2.6interestcoverratio(interest)7
2.5SWOT7
2.5.1Strength7
2.5.2Weakness7
2.5.3Opportunity8
2.5.4Threat8
3.Conclusions8
4.Reference9
5.bibliography9
6.AppendiCES10
6.1fiveyearsharepricechart10
6.26ratioscalculation11
1.Introduction
AccordingtotheLondonStockExchange,EasyJETairlineslimitedcompanyisonthelistofFTSE250Index.EasyJetAirlinesCompanyisoneofthebiggestlowcostairlinecompaniesinEuropewhichsuggestsnotprovidingunnecessaryofferandservices,meaningthattheydonotprovideanyfoodanddrinksduringtheflight.Duetothelowcostandsimpleservice,itisverypopularinBritain.ThisreportisconcernedwiththeanalysisoftheEasyJetAirlinesCompany.Firstly,itwillintroducethecompanybylookingatitshistoricalbackground,locations,mainactivities,anddevelopmentsforthecompany.Secondly,itwillshowthefinancialdataforthecompanywhichincludesfive-yearsharepriceanalysisanduse6ratios’calculationtocompare2010with2009.InthispartwecanseethefinancialpositionofEasyJETcompany.ThirdlyitwillfocusonSWOT(strength,weakness,opportunity,threat)toanalysethecompany’smarketingstrategies.Finally,itwillpresenttheconclusiondrawn.
2.Mainbodyofthereport
2.1Companybackground
EasyJetAirlinesCompanyisaleadinglowcostairlinecompanyintheUK.Itonlysellsticketsontheinternetandphonecall.In1995,EasyJetAirlinesCompanywasbuiltupbySteliosHaji-loannou.Atthebeginningofitsactivities,thecompanyusedtwoleasingaircrafts.AtthattimeitwasasmallairlinecompanywhichofferedthetworoutesofshortjourneyfromLondon,Luton,toEdinburghandGlasgow.Moreover,thepriceoftheflightwas£29whichwasthelowestflightpriceavailable.Thecompanyusedasmartsloganforpromotingitsbusinesswhichsaid‘LondontoGlasgow,ischeaperthanapairofjean’.Itattractedalotofpeopleimmediatelyandfullofthefreight.(easyJet,2011)
Inthesecondyear,easyJetstartedgettingprofits.Inaddition,inAprilof1996,easyJetgotthefirstownedaircraftwhichenabledthecompanytoopenthefirstinternationalroutetoAmsterdam.(easyJet,2011)
In1997,easyJettookabigriskinvestmentforthecompanyinvesting5milliondollarstosignacontractwithBoeingCompanyforpurchasingthenewaircraft.Duetothebeginningofthebusiness,easyJetonlyusedtheBoeing-737,whichwasasmallaircraftforshortjourney.(easyJet,2011)
In1998,thefirstticketwassoldbytheinternet,sincethen,thecompanyhadtheopportunityofsellingticketsontheinternet.Sincetheinternetbecamemoreandmorepopular,itplayedanimportantroleinoperatingthecompany.Furthermore,itbecameaveryimportantpartforthedevelopmentofthecompany.AccordingtotheannualreportofeasyJet,therearenearly90%seatsweresoldbyonlinebooking.
In2002,EasyJetmergedwithGo-flyAirlinesCompany,whichhelpedEasyJetdeveloprapidly.ThemergerbetweeneasyJetandGo-fly,whichmadeEasyJetbecomethebiggestlowcostAirlinesCompanyinEurope.ItwasabigdevelopmentforEasyJetCompany.Inotherwords,easyJetbecamesuccessful.(easyJet,2011)
In2004,EasyJetordered120aircraftsofA319forthecompany.Itstartedusingthemainaircraftforlowcostairlinescompany.(easyJet,2011)
In2007,EasyJetbecamethefirstchoiceforshortjourneyflightintheGatwickAirportbytakingovertheGBairwayswhichbelongstotheBritishAirwaysCompany.
2.2Mainareasofactivity
ThemainactivityofEasyJETAirlinesCompanyistheseatofflight.Itsellsbyonlinebookingorphonecallbooking.TherearenotravelagentssellingtheticketsforEasyJet.Thecustomerwillreceiveanumberfortakingtheflight,andthengetsanemailofconfirmationfordetailsandthebookingnumberorpassword.TheheadquarterofeasyJetisinLondon,LutonAirport.EasyJethas129destinationsover29countrieswithmorethan500routesbetween118airports(OneSource,2011).ThefleetsizeofeasyJetis183.In2010therewere£3,452millionturnoversmakingitoneoftheleadingairlinescompaniesintheUK.
2.3Development
Atthebeginningofitsactivitiesthecompanyhadonlytwoleasedaircraftsand20staffmembers.ItdevelopedtooneofthebiggestairlinecompaniesintheEuropehaving7,359employees(Onesource,2010)and183fleets.From1995to2010thatisin15years,easyJetgrewrapidlyachievingawell-deservedtitleofthebiggestlowcostairlinecompanyinEurope.In1999,easyJetwasvotedin
2.4FinancialAspects
2.4.1Afiveyearshareprice
Theperiodchosenforafive-yearsharepriceisfrom24thOctober2005to25thOctober2010.Therearetwoapproachesforanalysingsharepricesforthecompany.Thefirstoneistechnicalmethodwhichusesachartshowingthechangesintheperiod.Thesecondoneisnewsmethodwhichexplainsthereasonforthechangesofshareprice.AsitcanbeseeninAppendix1,concerningthetechnicalmethod,thehighestpointduringthisperiodwasinAprilin2007wheretheshareindexisat726.5andthevolumeare1,257,500(yahoo,2011).However,thelowestpointwas244.5inJuly2008andthevolumesare6,197,300.Obviously,fromApril2008toOctober2009,itremainedunderthe300points.Since2008,thechartforthesharepricehasshowndownwarduntil2010,whenitstartedtoincreaseslowly.Thepositivechangeduringthisperiodis58.61%.Asitcanbeseeninthenewsmethod,duetotheFinancialCrisisin2008,easyJetwasalsoaffectedasaresultofwhichthesharepricechartshowsarapiddecrease.
2.4.2SixRatiosanalysis
2.4.2.1netprofitmargin(profitability)
Netprofitmarginisakindofprofitabilityratiothatshowsthepercentagedirectlyandanaveragepersoncaneasilyunderstanditwithlittledifficulty.Itusesthenetprofitbeforeinterestandtaxationdividedbythesales.Accordingtotheformulapresentedinthisreport,theincreaseinnetprofitmargindependsonthenetprofitandsales.Thatistosayifthenetprofitgoesup,theratiowillbecomegreater.However,ifthesalesgoup,theratiowillbeless.Comparingtheratiobetween2010and2009,thecalculations(seeappendix2)showthatitwas5.18%in2010and2.05%in2009-anincreaseof3.13%.Inotherwords,thecompanyachievedmoreprofitthanlastyear.Actually,accordingtothefinancialreportforEasyJetAirlinesCompany,itgot£154,000in2010and£54700in2009;howeverthesalesdifferencebetween2010and2009wasabove£300,000.
2.4.2.2ROCE
ReturnonCapitalEmployedistheratioofbusinessinvestmentinaccountingareathatreflectsprofitabilityofthebusiness.Itusesthenetprofitbeforeinterestandtaxationdividedbyequitypluslong-termloans.AccordingtotherelevantformulawecanseethatiftheROCEgetsagreatervalueitmeansthattheborrowingmaybelessorthebusinessgetsmoreprofit.ComparingtheROCEbetween2010and2009,thefigures(seeappendix2)showthatitwas5.96%in2010,whichwasover3.59%higherthanin2009.Accordingtothesetwofigures,wecanseethecompanyearnedmoremoneythanlastyear,meaningthatthecompany’sprofitisincreasing.Inotherwords,EasyJetAirlinesCompanyisgettingmoreandmorepopular.
2.4.2.3Averagesettlementperiod(efficiency)
'Accountreceivableisunproductivemoney'.Thisratiomeanshowlongthecompaniescanreceivemoneyfromcustomersorthelengthoftimeadebtortakestopay.Thatistosaythisratioshowstheefficiencyofmoneyreceived.Comparingbetween2009and2010,thefigures(seeappendix2)showthatin2009thecompanytook9moredaystogetthemoneybackfromcustomersthanin2010.Inotherword,theratioofaveragesettlementperiodshowsthatin2010,easyJetreceivedthemoneyquickerthan2009.Itmeansthatthecashflowofthecompanywouldbeeasier.Forexample,ifbothyearsplantoinvestsomeprojects,itwillbeeasiertoinvesttheprojectin2010,because2010ismoreefficientthan2009.
2.4.2.4currentratio(liquidity)
Currentratioisakindofliquidityratioforthebusinessinaccountingarea.Companiesuseittoseethesituationforpaymentofthecurrentliabilities.Italsogivesasignalwhetherthecompanyisinliquationornot.Theformulaofcurrentratiousesthecurrentassetdividedbycurrentliability.Iftheresultislessthan1,itmeansthatthecompanymaybeliquidatedbe
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