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AFDELING ACCOUNTING
KEUZEVAK MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTING
1E SEMESTER 2015/2016
CASE 3: EASYJET
Stelios Haji-Ionanou, founder of EasyJet airlines, achieved profitability for the first time in 1999, almost
four years after launching his London based low-cost carrier. The concept behind EasyJet was to offer
low-cost airline service to the masses in Europe. The airline accomplished this by adopting an
efficiency-driven operating model, creating brand awareness and maintaining high levels of customer
satisfaction. A key issue in the case is whether the airline will continue to grow and survive in the
highly competitive low-cost segment of the market. In this context the Porter model is very relevant.
EasyJet is Europe's leading airline, operating on over 600 routes across more than 30 countries with a
fleet of over 200 Airbus aircraft. This company employs over 8,000 people including 2,000 pilots and
4,500+ cabin crew. Last year EasyJet flew over 60 million passengers.
EasyJet has strong positions in key markets: No. 1 at London Gatwick, London Luton, London
Southend, Bristol, Edinburgh, Milan Malpensa, Naples, Venice, Nice, Basel and Geneva; No. 2
at London Stansted, Paris Orly, Paris Charles De Gaulle, Lisbon, Lyon, and Rome Fiumicino.
Over 300 million people are within a one hour drive of an EasyJet airport
Hierna volgt belangrijke informatie uit het Annual Report 2014.
FINANCIAL PERFORMANCE
easyJet delivered record profit before tax of 581 million, an increase of 103 million from 2013
with a profit before tax margin of 12.8%. Profit before tax per seat rose by 1.09 year-on-year to
8.12. Return on capital employed grew by 3.1 percentage points to 20.5%(1). In light of the
continued strong financial performance and confidence in the future, the Board has decided to
increase the ordinary dividend pay-out ratio from one third of profit after tax to 40% of profit after
tax, which has resulted in a 35.5% increase in the ordinary dividend from 33.5 pence per share
to 45.4 pence per share.
The performance in the year was driven by:
continued revenue per seat growth in a higher capacity environment;
a 1.3 percentage point improvement in the load factor;
continued digital and data initiatives;
better than expected cost performance driven by the easyJet lean programme, one-off
benefits of the CFM engine selection and the continued scale advantages of increasing
the proportion of A320 aircraft in the fleet; and
rigorous focus on capital allocation and returns with continued strategy of allocating
aircraft to highest
model?
An effective budget converts the goals and objectives of management into quantified plans. If
done correctly, it can serve as a motivating force within the company as well the basis of control
and performance evaluation. Creating a budget is essential to the operation of a company. The
manner in which it is prepared and the roles of accountable employees in that preparation have
an impact on the effectiveness of the budget as a tool for planning, communicating, controlling
and evaluation.
Two different approaches to preparing a budget are the imposed budget (top-down budget) and
the participative budget (bottom-up budget). The imposed budget is created by top management
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with minimal input from those individuals who are accountable for budgetary results. The
participative budget, in contrast, encourages input, and accountable individuals directly
participate in the budgeting process along with top management.
Chris Kennedy is the chief financial officer of EasyJet. Kennedy is currently in the process of
preparing the 2016 annual budget and implementing an incentive plan to reward the
performance of key personnel. The final operating plans will then be presented to the Board of
Directors for approval. The budgeting approach of EasyJet is top-down.
7. Discuss two important negative behavioral implications of the top-down approach.
8. Discuss two important benefits that an organization can derive from the bottom-up
approach.
A disadvantage of participative or bottom-up budgeting is slack.
9. Discuss two important advantages and disadvantages of budgetary slack from the point of
view of EasyJet Corporations management group as a whole.
10. Describe how zero-based budgeting could be advantageous to the overall budget
process of EasyJet.