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Market

EasyJet operates in what has become one of the worlds most competitive air travel markets; the European short haul, point-to-point sector.

Before 1987, European air travel was effectively carved up by the national flag carriers, who considered air routes between the major European cities to be their own permanent domain. Under the old regime, flying schedules, fares and even the amount of passengers that each national airline could carry were negotiated between governments in uncompetitive 'bilateral' agreements. Competition from other airlines was almost unheard of.

In the face of huge opposition from a number of EU States wanting to protect their own airlines from competition, the European Commission introduced its ten-year reform process in 1987, which was responsible for creating an environment in which low-cost airlines could flourish and prosper.

Since April 1997, any airline holding a valid Air Operators Certificate in the EU can operate on any route within the European Union, including wholly within another country, without restriction on price or capacity. As a result, European air travel has been flooded with an influx of low-cost airlines. Having been the only European budget carrier when EasyJet launched in 1995, there are now several low cost operators including Ryanair, Virgin Express, Buzz, bmibaby and a host of others. For the year ending 2001 the low cost airlines had a 7.1% capacity share of intra-European traffic. By June 2002, the airlines had an 8.7% share. (Source: Official Airline Guide).

The European short haul aviation market is in the process of consolidation. Some of the large flagship carriers had been running unprofitable networks in Europe for some time. As they cut their services, EasyJet is likely to prove more resilient, able to pick up landing slots and increase its market share.

Achievements

EasyJet's biggest achievement has been to change the shape of the European aviation market with its no-frills business model.

EasyJet's high frequency, point-to-point services between major European airports meet both business and leisure customers needs. Many businesses have come to believe that it is a waste of money to spend the large amounts demanded on short haul flights with the flag carriers. EasyJet now carries up to 50% business traffic on some of its mature routes and calculates that companies can save up to 89% on their travel budgets by using low cost airlines.

While other operators have gone bust or made heavy losses, EasyJet is constantly expanding its operations. EasyJet went into profit in its third financial year. The company floated in October 2000, with an Initial Public Offering (IPO) of 310p. In the twelve months to September 30th 2001, the company reported profits of £40.1million -- up 82% on the previous year when profits stood at £22.1million. EasyJet reported a first half profit before tax (end March 31st 2002) of £1million. This was the first time in the companys history that it had recorded a profit in the first half of the year.

Awards won by EasyJet are numerous and include Best Low Cost Airline (Business Traveller Magazine) 1999 and 2000. In 2001 and 2002 this award was won by Go. EasyJet won three Consumer Superbrands awards in 2001 for Best PR work, Most Significant Impact on Market Sector and Most Impressive Brand Developed in the Last Ten Years. Go was awarded Best International short haul airline in 2002 by the readers of Conde Nast Traveller.

History

Stelios Haji-Ioannou, the son of a Greek shipping tycoon, launched EasyJet in 1995. Stelios got the idea for EasyJet from Southwest Airlines in the US, which has also prospered by introducing a no-frills, low cost service on short haul routes.

With an initial £5 million, the company began with two leased Boeing 737s and a headline grabbing fare of £29 from Luton to Glasgow (seven years on and the lowest fare is actually £12.50 including all taxes and charges which reflects the fierce competition within the market). EasyJet caught the imagination of customers in the late 1990s. It had the feel of a new economy company; low cost, bright and energetic. Additionally, its use of the internet has marked it out as an innovative, dynamic company.

At first EasyJet operated without too much competition. However, after only a year of business, British Airways made an attempt to buy the airline. This initially friendly approach soon turned sour when the global giant launched its own budget carrier, Go, in 1998. EasyJet accused BA of unfairly cross-subsidising Go and took its case to the High Court in February 1998.

Fast forward to August 1st 2002 and EasyJet has completed a deal to buy Go, turning EasyJet into the largest low cost airline in Europe, carrying 11,350,350 passengers in the rolling twelve months to September 2002.

The airline is currently based in a bright orange building adjacent to the main taxiway at London Luton Airport. To accommodate the needs of combined EasyJet/Go staff, the company will move to a new, larger site in Luton during summer 2003.

Product

EasyJet's mission is To provide our customers with safe, good value, point-to-point air services. To offer a consistent and reliable product at fares appealing to leisure and business markets on a range of European routes.

As of the end of September 2002, the new EasyJet served 88 routes to 36 airports in 33 cities. EasyJet has won plaudits for operating one of the youngest fleets in the airline industry. EasyJet currently operates a single fleet of Boeing 737 300s and 700s, all with 149 seats and in a single class. In September 2002, the combined airline had a fleet of 65 aircraft.

In January 2002, EasyJet announced that it was in discussions with Boeing and Airbus concerning the possible acquisition of 75 (this figure has, subsequent to the Go deal, risen to 120) additional aircraft and that it was reviewing the benefits of operating a mixed fleet.

On October 14th 2002 EasyJet announced that it had selected Airbus as the supplier for 120 A319 aircraft, with a price protected option for a further 120 A319s.

There are no free meals on-board. Eliminating free on-board catering cuts out cost and unnecessary bureaucracy and management. People joke about airline food, so EasyJet take the stance 'why provide it if people do not want it?'

All tickets are booked direct, either on the internet or by telephone. Buying a ticket involves being given a reference number, which is used in place of a ticket. The direct sales approach is a prime example of how EasyJet seeks to simplify business processes to maximise efficiency and reduce costs to itself and its customers.

The internet plays a vital role in the EasyJet business plan and is critical to its on-going success. As a low cost operation, controlling the cost of doing business is crucial to the airline's ability to offer low fares. The internet provides the most cost effective distribution channel and EasyJet has aggressively pursued its strategy of encouraging passengers to book their seats online. A £5 discount for each flight is provided on all internet bookings. Customers can only book seats via the call centre if they are travelling within one month.

Since EasyJet started selling seats via the internet in April 1998, the airline has enjoyed dramatic growth in its online sales. The airline reached the one million seat mark in October 1999 and celebrated this important landmark by giving one lucky passenger unlimited free flights for a whole year. Five months later in March 2000, EasyJet reached two million seats -- it only took another three months after that to reach the three million mark. EasyJet now sells over 90% of its seats online, which is a higher percentage than any other airline, reinforcing its position as the 'Webs favourite airline', a slogan approved for usage by the Advertising Standards Authority.

EasyJet employs a yield management strategy, meaning that prices are closely linked to demand and the amount of time in advance that the ticket is booked. A ticket booked three months in advance will be significantly cheaper than one booked a week before the flight.

EasyJet's product also relies on punctuality. Central to this is the ability to turn the aircraft around quickly on the ground. Compared to the hour and a half that it takes on average to turn a 737 around at Heathrow, EasyJet's target time on the ground between flights is just twenty minutes.

In September, EasyJet relaunched its uniform for cabin crew and ground staff. With a variety of shirts, trousers, tops and accessories (including deer stalker and beanie hats) to choose from, staff can create their own individual look.

Recent developments

EasyJet completed the deal to buy Go on August 1st 2002 for £374 million. The combination of the two airlines makes EasyJet the largest low-cost airline in Europe. The benefits of the merger include the addition of a number of mature routes, which reduce the cost of network development, compared to creating new routes from start up. The acquisition also complements EasyJet's infrastructure, systems and people without affecting the planned growth and operating efficiency of its existing operations.

EasyJet's new economies of scale bring greater purchasing power for aircraft, fuel, maintenance and marketing expenditure. As a result, the new EasyJet will be able to bring more low fares to more people across Europe.

EasyJet continues to expand its European network. In 2002, it launched in Paris, and expanded considerably from Gatwick with the introduction of seven new destinations, making it the second largest scheduled airline from the south London airport. In August 2002, the low-cost airline signed an option to acquire Deutsche BA, BAs German subsidiary, and is in the process of turning the German operation into a low-cost airline, whilst deciding whether to purchase the airline outright.

Promotion

EasyJet does not use television advertising. Instead it relies heavily on press, outdoor and radio advertising and PR, orchestrated in-house. All advertising is intended to reinforce the EasyJet brand values. EasyJet has developed its central principle of being 'consumer champion' with its campaigns, which the airline has initiated on behalf of consumers to defend their right to affordable air travel. The company vigorously opposes any activities that might jeopardise this.

All EasyJet sales promotions are exclusive to the internet, so customers must go online if they wish to take advantage of promotional fares.

Awareness of EasyJet has also been raised by 'Airline' the ITV docu-soap. It is about the life of staff and customers at EasyJet in Luton and is ITV's premier docu-soap with audiences of over eight million per episode. Six series of the programme have now been aired.

EasyJet also uses its own aircraft as airborne billboards. Following the introduction of several new EasyJet routes in Gatwick in Feb 2002, EasyJet painted the sides of some of its planes with BIG @ Gatwick.

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