EasyJet- THE WEB'S FAVORITE AIRLINE (Case Study Solution)
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EasyJet:
THE WEB'S FAVORITE AIRLINE
Company Background
• Started by Stelios Haji-loannou in November 1995 .
• Headquarters “easyLand” @ Luton airport, London.
• Initial investment - £ 5 million.
• Began operating easyJet with 2 leased aircraft.
• Staff- Mostly teenagers.
• Most airline operations were outsourced.
• Followed the concept -"to offer low-cost airline
service to the masses“.
Outsourcing
• Done for lowering costs and increasing efficiency.
• Apart from planes, pilots, cabin crew, marketing/sales
people all other functions were subcontracted.
• Helped in maintaining 20 minutes turnaround and remaining
ticketless.
• Workshops/simulations were held for subcontractors and
were evaluated on quantitative and qualitative grounds.
Initial Days
• Started services from Luton instead of Heathrow/Gatwick
airports.
• First flight was from London – Glasgow @ £29.
• Advertising campaign – “Fly to Scotland for the price of a
pair of jeans!”
• Stelios was inspired by the business model of Southwest
Airlines:
▫ Single aircraft model
▫ Point to point short haul travel
▫ No in-flight meals.
▫ Rapid Turnaround time
▫ High Aircraft utilization
Initial Days contd.
• Added customization to the business model:
▫ Avoided travel agents
▫ Issued no tickets
▫ Encouraged direct sales over internet
▫ Used Brand “Boeing” having 149 seats.
▫ No frills travel
• Suffered losses of £3.3 million in 1996/97.
• Reported profit for the first time in 1998 amounting to
£2.3 million.
Impact of Deregulation of EAI
• Deregulation of EAI took place in 1992.
• Meant any European carrier could fly to any destination
and demand landing slots.
• Increased competition from low cost carriers reduced
aircraft fares.
• However, no. of competitors spawned after this were less
in comparison to US.
• Low cost carriers had to compete with high speed rail
service.
• Of 80 carriers that started after deregulation, 60 got
bankrupt by 1996.
Cost optimization techniques – To deliver low prices
• Saved £14 per passenger by eliminating meal service.
• Saved £10 per
passenger by flying into London’s Luton airport.
• Saved costs by not offering business class seats.
• Encouraged internet sales by offering discounts.
• Decreased flight
turnaround time (Each plane was flown for 11.5 hrs per day)
Creating Brand Awareness
• 10% revenues spent on newspaper, magazines and radio adv.
• Helped differentiate from competitors.
• Improved sales and fostered growth.
• Resulted in High Brand Recognition Rate of 88% in London
and 82% Geneva.
• Involved in Full Scale attacks on competitors.
Company strategy for providing competent services – Creating
Value
• Customer satisfaction was given significance.
• Customer safety was not compromised even though it meant
higher costs.
• Experienced pilots were hired.
• Punctuality was given utmost importance.
• Stelios portrayed image of Man of the people by personal
interaction with customers.
• No reimbursement offered for missed flights.
• Cost for changing flight - £1o + fare difference.
Company strategy for providing competent services contd..
• No pre-assigned seating offered. Allotment was based on
first come first serve basis.
• Target customers were “People who pay for travel from
their own pockets.”Which meant loss of 50% customers.
• Used Yield Management:
▫ To maximize seat utilization.
▫ To draw customers in search of cheap fares.
Competition
• Ryanair
▫ Established in 1985
▫ No Frills Carrier
▫ Used services of Travel Agents, issued tickets,
participated in global distribution system
▫ Fleet of 20 Boeing servicing 26 destinations.
• GO
▫ Established by BA in 1998
▫ No Frills Carrier
▫ Was founded when acquisition offer to easyJet turned
down, to defend BA market share
▫ Copycat of easyJet and considered to be subsidized by BA
Competition contd.
• Virgin Express
▫ Established in 1996
▫ Formed alliance with Sabena Airlines, flag carrier of
Belgium.
▫ Provided short to medium haul jet service.
• Buzz
▫ Established in 1999
▫ Started by KLM based at Stansted airport.
▫ Covered new destinations.
Challanges
• Whether to take privately held company public?
▫ Management style of Stelios not suited for this
• Maintaining quality of “easyJet” brand by Subcontractors
▫ Did not attend customers’ needs effectively.
• Needed to become more corporate
▫ Lack of senior managers.
• Relative youth and inexperience of some employees.
▫ High rates of absenteeism.
Analysis
• Is budget airline segment attractive place to compete?
▫ Budget airlines charge less so profit margin is less
▫ Employees have to be paid as per industry std.
▫ But cheaper tariffs help steal greater no. of customers
compensating low profit.
▫ However, as per the case 60 out of 80 low cost carriers
got bankrupt.
▫ So , in order to leverage this segment companies have to
operate effectively.
• Should Stelios extend the easy brand?
▫ Brand Awareness of Easy was high ( 80%)
▫ Stelios was the Man of the people
▫ People could relate him to the brand
▫ Satisfaction of easy Jet customers was high (resulted in
repeat bookings)
▫ USP’s included high punctuality, quality , safety,
customer value and satisfaction
▫ So current image of Easy brand was positive and should
be used to diversify business.
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