Easyjet

The Web's Favorite Airline

1. COMPANY OVERVIEW

EasyJet was lunched in November 1995 with a fleet of two Boeing 737-300 aircraft flying from London to Glasgow and Scotland. Its mission was to offer low-cost airline service to the masses. This was successfully achieved by offering customers low fares with its no frill flights and adopting an efficiency-driven operational model; high brand awareness, maintaining a high level of customer satisfaction making it one of the leading low-cost airlines in Europe.

Extensive public relations and advertising campaign slogans by easyJet resulted in increasing demand for more flights resulting in the creation of new routes. The concept adopted by easyJet was the use of one type of aircraft which was brand new, point-to-point short haul travel, rapid turnaround time, high aircraft utilisation and no in-flight meals. This concept also involved avoiding the use of travel agents and issuance of tickets thereby encouraging sales over the internet.

By 1998, easyJet had acquired six Boeing 737-300 aircraft and flew twelve routes in five countries. By 1999, the airline had expanded with a fleet of eighteen Boeing 737-300 aircraft

and twenty-seven routes in Europe creating a niche for itself in the low-cost airline business.

2. THE SUCCESS OF EASYJET SO FAR

Much of easyJets' success was due to intensive research of a United States owned low-cost airline 'Southwest Airline'. Most of the concepts for easyJet were adopted from Southwest airline, yet easyJet added its own touch of ingenuity which reduced operating costs even further. EasyJet was strategically located at London's Luton airport. Its location enabled it to take advantage of the low labour costs, close proximity to downtown London and also low charges on airport fees. In order to maximize its cost cutting, the airline operated an open-plan, paper less office with no personal secretaries.

Stelios Haji-Ioannou, the CEO of easyJet, championed the idea of no frills travel. The only free item on board their flights was easyRider, the airline's in-flight magazine. This concept alone saved costs of at least ₤14 per passenger. Moreover, internet sales of tickets were encouraged reducing operating cost by 25% through the elimination of additional reservation agents, computer reservation systems and travel agents.

Even with the extensive cots in cost to keep prices low, easyJet did not compromise on the quality and safety of flights and aircraft. The airline flew brand new planes, hired experienced pilots with competitive salaries. Even flight attendants salaries were not compromised, which meant that customers would arrive onboard easyJet, to meet friendly staff smiling at all times.

One of the more distinctive characteristics of Easy Jet was its approach to customer satisfaction. CEO, Stelios Haji-Ioannou, enjoyed interacting with customers of Easy Jet. A few examples of this would include him working the phone lines selling tickets, replying to queries both by phone and email. The direct booking of easyJet flights through the internet or by phone was convenient for customers. As soon as the customer had paid by credit card, they received a six character booking reference number, which was the only thing required to board the plane. In addition, punctuality was important. If a flight arrived more than four hours late, a letter of apology with Stelios signature would be send to the customer, including a full refund. Customer satisfaction was believed to ensure many repeat customers.

Creating high brand awareness was very critical to the success of Easy Jet. By 1998, Easy Jet brand had a recognition rate of 88% in London and a brand awareness of 82% in Geneva through extensive public relations and advertising campaign. It also took the opportunity to make some news by publicly attacking its competitors.

3. ANALYSIS OF MARKET SITUATION

3.1 Macro environment (PESTL)

We take a look at macro environmental changes which affect or have a noticeable effect on the future company strategies.

Political

The European airline industry was highly regulated up until the early 1990s. Countries protected their National carriers by refusing other airlines landing slots in their countries. However, even with this deregulation in 1992, only 3-5% of passengers in Europe flew on low cost carriers, compared to 24% in the US. This was believed to be due to the direct competition with high speed rail services on some European routes.

Economical

Even with high entry costs, many new airlines came into the market. Though the cost of running an Airline in Europe was 40% higher than in the US, and as a result few low-cost carriers were as successful as easyJet. Even with such barriers to entry, it was predicted by analysts that the European low-cost market could grow by as much as 300% by 2004.

The value of the UK pound also made more viable to run operations from the UK. Avoid third person in order to get low price (price sensitive) - Don't understand this, and I can't find it anywhere in the case....Please explain. Anything else that can be added here?

Social

Due to the British and Germans being the most frequent travellers, most airlines set up their base in the United Kingdom. They also have more purchasing power because of the strength of their currency. - I'm confused about this currency stuff, as I don't find it mentioned in the case study... Please explain. Anything else to add here?

Technology

Direct sales of flights were done over the internet. Cheaper flights were advertised over the internet to encourage internet sales. In addition it avoided the use of travel agents, reservation agents and even computer reservation systems, which in turn also cut costs for easyJet.

Legal

Passing of legislation in the European Union allowed more freedom and now allowed other European airlines free access to destinations of their choice and demand landing slots irrespective of the existence of a flag carriers or not. This increased competition as more new airlines began to emerge.

3.2 Micro environment:

We can further identify trends