The coloring material orange is progressively going synonymous with the house easyJet as it has become one of the world’s most profitable low-priced air hoses ( Alamdari and Fagan, 2005 ) . This paper examines the footing of their success and argues foremost, that easyJet from its origin basically adopted and stayed with the original low-priced theoretical account that was pioneered by Southwest air hoses in the USA.

Furthermore, this is a theoretical account that has served them good, ensuing in sustained concern public presentation and growing over a decennary. However, our 2nd point is that with this growing, and increased competition, there are marks of the demand for a alteration. Consequently, in what follows, we examine in bend: the historical beginnings of easyJet, stressing its values and the influence of the Southwest air hoses theoretical account ; the indispensable characteristics of its concern theoretical account ; and some indicant of its concern public presentation over clip.

Historical Beginnings: Personality, Values and the Southwest Manner

EasyJet was conceived in 1995, with its first flight happening in November of that twelvemonth. There are legion descriptions of the early start-up yearss, but one of the most graphic is certainly the followers ( Calder 2006: 113 ) :

The entryway to the mean airline’s central office is an impressive matter, intended to affect visitants. But the HQ of Britain’s most successful low-priced air hose is far from mean. For a piece, the modest anteroom of easyland – the powwow of impermanent edifices from which one of Europe’s taking air hoses is run – was adorned by a collapsible shelter. It was a little, two-person occupation, strung from the roof… Take one transportation millionaire, two Boeing 737s usually used for British Airways flights and several twelve gallons of orange pigment, and you have a revolution in the skies. But industry spectators like myself were slow to gain the graduated table of the upheaval signified by the first flight of easyJet.

The image conveyed above bases in pronounced contrast to the subsequent growing and current public presentation of easyJet. Indeed as we were fixing the first bill of exchange of this paper easyJet announced that pre-tax net incomes were up by 55 per centum to a record ?129 million in the twelvemonth to September 2006. Employee turnover was up 21 per centum, rider Numberss by 11.5 per centum ( to 33 million ) , the portion monetary value hit an all clip high, and 52 new Airbus jets were to be ordered ( Financial Times 2006 ) . The contents of Figure 1 below lists some of the cardinal mileposts in the development of easyJet.

Much of the early treatment of easyJet pivoted around its laminitis, Stelios Hajin Ioaanou ( ‘Stelios’ ) . His personality, background, ‘entrepreneurial approach’ ( Rae 2001 ) and ‘managerial style’ were wholly much discussed: the ‘no frills’ working environment ( e.g. no private offices ) and the ‘orange culture’ ( i.e. ‘being up for it’ ; ‘passionate’ and ‘shar’p ) were held to be of import bequests following his stepping down as Chairman in 2002.

In what was ab initio seen as really much a ‘personality-driven’ organisation it is of import to underscore the topographic point and function of Southwest air hoses in act uponing the personality of the Chairman. As one survey stated: ‘It was non until he flew on Southwest air hoses that Stelios felt he had found the right construct for a European air hose. Stelios intensively researched Southwest, run intoing with laminitis and CEO Herb Kellacher and purchasing 250 transcripts of Nuts – a book documenting Southwest’s success – for distribution to possible employees and clients. ( Sull 1999: 22 )

Southwest air hoses is really much an organisation in which a high degree of ‘selective perception’ is evident among perceivers and copycats ; you can see what you want to see in it ( Pate and Beaumont 2006 ) To easyJet the cardinal message received, accepted and followed dependably, was to follow and lodge to the original low-priced theoretical account pioneered by Southwest.

The Basic Low-Cost Business Model

The cardinal characteristics of this theoretical account are outlined below in Figure 2 below.

Merchandise Features

1. Fares/ web
Low, simple and unrestricted menus, high frequences, point to indicate, no interlining 2. Distribution
Travel agents and call Centres ( today internet gross revenues ) , ticketless 3. Inflight
Single category, high denseness seating, no repasts or free alcoholic drinks, bites and light drinks for purchase, no place assignment

Operating Features

1. Fleet
Single type, Boeing 737, high use, 11-12 hours per twenty-four hours 2. Airport
Secondary or uncongested, 20—30 minute turnarounds
3. Sector length
Short, mean 400 maritime stat mis
4. Staff
Competitive rewards, net income sharing, high productiveness

( Beginning: Alamdari and Fagan 2005: 378 )

Figure 2: The original Southwest Airlines low-cost concern theoretical account

Indeed, if anything easyJet appears to hold achieved farther purchase along the ‘no frills’ dimension of this basic theoretical account: travel agents were wholly avoided ( direct gross revenues merely ) and riders had to pay even for soft drinks and bites ( Sull 1999, 23 ) . Such characteristics of the easyJet low-priced theoretical account were held to be acceptable, or so attractive, to ‘people who pay for travel from their ain pockets’ ( Sull 1999:23 ) . Specifically easyJet targeted three cost-conscious and price-sensitive client sections: ( 1 ) the traveler sing relations ; ( 2 ) leisure travelers working brief trips ; and ( 3 ) enterprisers and directors from little houses.

At this phase we need briefly to notice on staff conditions ( competitory rewards, net income sharing, high productiveness ) in Figure 2. First, in a general sense, it is singular how small human resources and staffing affairs figure in treatments of the easyJet scheme ( Sull 1999 ; Jones, 2005 ) ; they are basically conspicuous in their absence. Second, if one turns to more specific affairs there are evidences to oppugn the world of the staffing attack in Figure 2. For illustration, on the competitory wage forepart, it has been estimated that pilots at easyJet earn around 25 % less than pilots working for traditional bearers ( Jones 2005: 151 ) . This derived function was a considerable beginning of tenseness and trouble when easyJet took over the air hose GO in August, 2002, with calls for work stoppage action happening at the clip ( Jones 2005:91 ) . In the latter portion of this paper we turn to look at these kinds of human resources and employment related affairs in more item.

The Basic Business Model and the Bottom Line

Earlier we made mention to the impressive public presentation figures of easyJet for the twelvemonth to September 2006. This has non been an stray success narrative. For illustration, easyJet pre-tax net income figures rose from ?5.9 million in 1998 to ?40 million in 2001, and now to the current all clip high of ?129 million.

At least one major survey has attributed this success to easyJet lodging really closely to the original characteristics of the low-priced theoretical account outlined in Figure 2. In kernel this research ( Alamdari and Fagan 2005 ) , which involved 10 low-priced bearers in Europe and the USA, reported that, foremost, easyJet adhered really closely ( 74 % compatible ) to the original theoretical account, a figure merely exceeded by that for Ryanair ( 85 % ) ( Alamdari and Fagan 2005: 388 ) . Furthermore their 2nd cardinal consequence was that the closer one adhered to this theoretical account, the higher was profitableness.

The success of easyJet ( and Ryanair ) in this respect has been noted in other surveies. For case, the McKinsey Quarterly ( 2005 ) reported that easyJet and Ryanair history for approximately 50 per centum of place capacity in Europe’s low-priced market, with between 2004 and 2006 merely easyJet ( 8.9 % ) and Ryanair ( 29.4 % ) holding positive mean operation borders.

Although both easyJet and Ryanair are ever hailed as the two fiscal success narratives of the European low-cost sector, with both adhering most closely to the original low-priced theoretical account ( Figure 2 ) , it is of import to recognize of import differences between them. For illustration, easyJet’s unit costs are reported to be dual those of Ryanair, with the former break-even point ( 76 % of capacity ) being higher than that of Ryanair ( 63 % ) ( McKinsey Quarterly 2005 ) . Other differences between the two, which have been noted, are that easyJet has more head –to-head competition with the conventional bearers because it uses more constituted airdromes than Ryanair ( Jones 2005: 211 ) .

Much of the bottom line success of easyJet has been attributed to its output direction system which seeks to pull out the maximal gross per flight ( Jones 2005: 212 ) . It is these kinds of sentiments which underpin their micro-type marks. For illustration, the purpose is to turn the current net income per place figure of some ?2.50 to ?5 by the terminal of 2008.

Are there Signs of Changes in easyJet’s Business Strategy?

Current net incomes are good and the accent on output measuring and tough marks will still stay. This said, there are marks of some existent or proposed alterations in the concern theoretical account. These have arisen because of the rise of new low-priced competition, alterations in the conventional bearers ( limited frills ) , and external force per unit areas such as oil monetary value rise.

The alterations are designed to turn to some concerns of bing client sections and to pull new clients. For illustration, in April 2003 easyJet launched a dedicated web site for concern travel agreements which allows corporate clients to entree monthly direction information so that they can track travel spend. In June 2005 it introduced easyJet sofas, which riders had to pay for, but which were viewed as attractive to concern travelers. Figures released in

The Times ( 11th November, 2006 ) suggest that they have been comparatively successful in capturing the concern market: Stansted and Luton ( easyJet’s London bases ) have the highest proportion of frequent circulars among major airdromes at over 50 per centum as compared to 39 per centum of riders at Heathrow. Measures have besides been taken in recent old ages to turn to client concerns sing the deficiency of lucidity of the full menu until the last phase of engagement, through an upgraded package system. A cardinal inquiry remains ; can easyJet systematically capture the concern traveler sector, with their considerable outlooks of ‘added extras’ while staying true to their winning expression of cost leading? Lone clip
will state.

Mentions

Alamdari, F. and Fagan, S. ( 2005 ) Impact of the attachment to the original low-priced theoretical account on profitableness of low-cost air hoses, Transport Reviews 25, 3: 377-392. Calder, S. ( 2006 ) No Frills. London: Virgin Books.

Fiscal Times ( 2006 ) 15th November, p24. Jones, L. ( 2005 ) easyJet, the Story of Britain’s Biggest Low-Cost Airline. London: Aurum. McKinsey Quarterly ( 2005 ) August edition. Pate, J. and Beaumont, P. ( 2006 ) The European low-priced air hose industry: the interplay of concern scheme and human resources, European Management Journal 24, 5: 322-329. Rae, D. ( 2001 ) easyJet: a instance of entrepreneurial direction, Strategic Change 10, 6: 325-336. Sull, D. ( 1999 ) easyJet’s $ 500 Million Gamble, European Management Journal 17, 1: 20-38. The Times ( 2006 ) , 11th and 15th November.

View as multi-pages