EasyJet reports demand still strong

Authors Avatar

Alexandre Malisani        

Coursework 1

EasyJet reports demand still strong

This year, oil prices is affecting negatively EasyJet and other airlines, since they cannot make a profit if the oil price stays at current levels.

Strong demand is the only positive side of the unprecedent rise in costs due to the high prices of oil, $140 a barrel, which could lead to a loss of nearly 6$ billion this year.

Those airlines which will be in the market this summer will have a very high revenue and costs because of the rise of petrol, which will lead to a very low profit. In September, when the peak summer season has finished, the revenue will dicrease drastically, as a result, the profit will turn negative.

EasyJet is already working in lowering costs, so that the high price of petrol won’t strike in a hard way the company. Their planes are now flying up to 2% slower on some routes in order to save hundreds of punds per flights.

Join now!

In first place, for airlines, oil is the fundamental material needed to offer their services. When the price of oil increases, the supply dicreases, which leads to an increase in the price, but dicrease in quantity. This action produces a dicrease in the total income, which can be seen in the following graph:

In this graph, we can see how the supply dicreased because of the rice in costs. To lose the less amount of profit, the price is increased, and because of that the demand dicreases. As a result the quantity supplied dicreases.

The quantity ...

This is a preview of the whole essay