Case study provided by the Superbrands organisation.
European air travel has been transformed in recent years by an influx of low-cost carriers. As a result, prices have tumbled, passenger volumes have soared and the size of the European air travel market has expanded.
The European short-haul sector was dominated for years by the big airlines, which charged high prices. Although EasyJet was virtually the only budget carrier when it launched in 1995, it now has several direct competitors including Ryanair, Virgin Express, Go and KLM/Buzz. EasyJet and the other budget carriers have reduced fares to levels lower than 10 years ago.
EasyJet is "genetically engineered" to be low-cost and flexible. Its business model is a credible alternative for business travellers as it is built on high frequency between major cities in Europe. EasyJet believes that it can win traffic from the established carriers, such as BA at Gatwick, as they continue to downsize. Also, as the economy slows down, business travellers are seeking low-cost alternatives and migrating from full-fare carriers. The airline knows that business and leisure travellers alike respond when the right price is offered; as a result, it offers promotional fares at times of lower demand to encourage people to fly.
The airline's biggest achievement has been to change the shape of the European aviation market. EasyJet has shown the airline industry that the no-frills business model not only works but is also extremely popular with all types of travellers.
EasyJet has won plaudits for operating one of the youngest fleets in the airline industry. The company buys all its aircraft brand new from Boeing in Seattle. It is in the process of receiving 32 737-700 aircraft for delivery by May 2004, at which point the airline will have 48 aircraft. The new planes will primarily build frequency on existing routes, as the airline pursues its aim of further enhancing its profile with business travellers. A new European city will be added to its route network each year.
Founder Stelios Haji-Ioannou steered EasyJet into profit in only its third financial year and the airline was floated on the stock market in November 2000.The airline continues to grow its profits. Its results for the year ending September 2001 recorded profits of £40.1 million -- up 82% on the previous year when profits stood at £22.1 million. Revenue grew by 35% year-on-year to £356.9 million. In an industry famous for producing low shareholder returns, a margin of 11% is exceptional. The number of passengers rose 26% year-on-year to 7.1 million, driven by the introduction of seven additional aircraft and a 2.2% rise in average load factor to 83%.
Like Richard Branson and Virgin, Stelios has made EasyJet a 'people's brand' -- a champion to take on the giants and break the mould of conventional business practices. He has succeeded in showing that you don't need to offer tickets, free drinks and meals, use travel agents and have a complex system of connecting flights to survive. Business travellers will gladly forgo these to save money, as long as standards of reliability and safety are up to scratch.
EasyJet has demonstrated the effectiveness of direct sales over the phone and the internet. One of the company's biggest cost savings is derived from the fact that it does not need to pay commission to travel agents, allowing it to sell seats at prices other airlines could not afford. EasyJet also tapped into the telemarketing revolution of the mid 1990s with perfect timing, blazoning its telephone number on the fuselage of its aircraft. It also became involved in the internet at the right point, and online seat sales now account for 90% of all seats sold.
EasyJet was voted Low Cost Airline of the Year by Business Traveller Magazine for two years running. Stelios has personally won a clutch of prestigious awards, including New Media Marketer of the Year by Revolution Magazine and Ernst & Young's Young Entrepreneur of the Year 2001. Also in 2001 EasyJet received three awards at the Consumer Superbrands event. The awards were for Best PR Work, Most Significant Impact on Market Sector and Most Impressive Brand Developed in the Last Ten Years.
Stelios Haji-Ioannou, son of a Greek shipping tycoon, launched EasyJet in 1995 with just £5 million, beginning with a headline-grabbing fare of £29 from Luton to Glasgow (the fare is still about the same today). Stelios got the idea for EasyJet from Southwest Airlines in the US, which prospered by introducing a no-frills, low-price service on short haul routes. Stelios was also an admirer of Virgin's 'consumer champion' strategy and sought advice from Richard Branson before setting up EasyJet.
At first, EasyJet operated with limited competition from other budget carriers -- who stuck to different routes -- or from the major airlines. But then, after only a year in business, British Airways made a discreet 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.The launch of Go was a massive threat to EasyJet, which interpreted the move as a thinly disguised attempt by BA to put the budget carrier out of business. (Go has since become a separate entity from BA, after a management buy-out in 2001.) Stelios and his team went to war, initially fighting Go in the media, and then in the air, as its rival launched a service to Edinburgh, one of EasyJet's most important routes.
However, since Go's launch, EasyJet has had to deal with additional competition on other fronts. Ryanair rapidly expanded its fleet and KLM launched Buzz as yet another budget brand in an increasingly crowded market.
Some of the large flagship carriers have been running unprofitable networks in Europe for some time and the industry is ripe for consolidation. As the flagship carriers cut their services, EasyJet and other low cost point-to-point European carriers are likely to prove more resilient, able to pick up landing slots and further increase their market share.
EasyJet now flies to 17 airports in 16 major business city destinations and operates 40 routes. The airline flies from bases in London, Liverpool, Geneva and Amsterdam to Barcelona, Nice, Madrid, Zurich, Athens, Malaga and Palma. In the UK, it flies to Aberdeen, Edinburgh, Glasgow, Belfast and Inverness.
EasyJet employs a "yield management" strategy, meaning that prices are closely linked to demand and how far in advance the seat is booked. A seat booked three months in advance will be significantly cheaper than one booked a week before the flight. Equally, peak-time flights such as 6pm on a Friday cost more than those at less busy times. The aim of this strategy is to maximise seat sales for every flight.
EasyJet's product relies on punctuality as well as cost effectiveness. Central to this is the ability to turn aircraft around quickly on the ground. Compared to the average hour and a half that it takes to turn a 737 around at Heathrow, EasyJet's target time on the ground between flights is just 20 minutes.
All seats are booked direct either on the internet or the telephone. The airline offers £5 discounts on all seats bought on the web, and all bookings made more than one month prior to departure have to be made online. Bookings are confirmed by a reference number rather than 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 to its customers.
As businesses seek to make cost savings in their travel budgets, EasyJet is winning a bigger slice of the business traveller market. Its network of large city destinations and its flight timetables are designed to suit both business and leisure customers' needs. EasyJet calculates that companies could save up to 89% on their travel budgets by using low-cost airlines.
EasyJet believes that the contraction of the industry, which is already underway, will provide a range of unique slot and airport opportunities for the airline. Growth will also be aided by the availability of cheaper aircraft and a larger pool of pilots. One example of this changing market is illustrated by EasyJet's expansion at Gatwick -- where it is now the second biggest user of the airport.
Given its margins, EasyJet does not have a large marketing budget. Consequently, its marketing relies for the most part on public relations and sales promotion. No expensive advertising agencies are used -- the in-house marketing team design the ads themselves.
Like his mentor Richard Branson, Stelios has proved a skilled PR operator building EasyJet into a powerful brand with the minimum of marketing expenditure. This strategy has attracted levels of media coverage that most companies can only dream about. He is a master of the publicity stunt as, for instance, when he "hi-jacked" Go's maiden flight by booking tickets for himself and a team wearing EasyJet-orange boiler suits. The airline has played the starring role in LWT's 'Airline' docu-soap for four series -- a fifth series will air in 2002.
Stelios also generates publicity by positioning EasyJet as a David battling against the airline industry's Goliaths. The company occasionally uses press advertisements to attack giants such as BA and Swissair, including one that compared BA Chief Executive, Bob Ayling, and Go Managing Director, Barbara Cassani, to Disney's 'Beauty and the Beast'. In another dig at BA, EasyJet used the catchphrase "The Web's Favourite Airline" to mock its competitor's "World's Favourite" tag.
Advertisements are increasingly being used to target the business traveller, with EasyJet positioning itself as providing huge savings for companies with large travel budgets. Recent ads have emphasised the airline's best overall punctuality (Source: Civil Aviation Authority October 2001), the high frequency of flights to major European business airports, great value, flexible one-way fares, the low £10 charge to change a ticket, the young fleet and the airline's 25% year-on-year growth.
Promotions offering special deals on selected routes are a vital marketing tool. In the past, these ran primarily in the tabloid press, but they are now predominantly internet-based -- reflecting the airline's sophisticated use of the internet.
In the final analysis, EasyJet's most prominent marketing tools are its own aircraft. The company uses them as airborne billboards, not only to advertise the company's phone number and internet address, but also to convey messages attacking competitors. The plane which was used on EasyJet's first flight to Athens had "No Travel Agents" written in Greek on its side -- a message that spawned a mini-riot among local holiday companies.
Stelios Haji-Iaonnou sums up the EasyJet brand as "the no bullshit approach". As the company's name suggests, its mission is to offer a high-quality service at the lowest possible price by minimising costly overheads. This cost-cutting image is balanced by an emphasis on safety, security, punctuality and in-flight service.
The company believes in demonstrating its commitment to low prices by keeping its own costs to a minimum and therefore its identity is deliberately cheap and cheerful.
As Richard Branson has done with Virgin, Stelios Haji-Ioannou personifies the EasyJet brand. He appears in many of the airline's advertisements, conducts PR stunts and enjoys playing the part of "consumer champion".
Things you didn't know
© 2002 Superbrands Ltd
This article was first published on brandrepublic.com