EasyJet: dot.com case study
The airline was established in November 1995. It was launched by Stelios Haja-Ioannou, a Greek-Cypriot businessman, and based in the so called easyLand in London Luton. The first flight has been just a month later.
After only two years, in April 1997, Eayjet launched its own website to provide information to its customers about flights and times of departures. The first ticket online was sold only one year later.
Company analysis along years
ENTREPRENEURIAL BACKGROUND: capabilities and business idea
Stelios Haja-Ioannou was born in Athens in 1967 from a wealthy Greek-Cypriot couple. His father was a billionar owner of one of the world’s biggest tanker operations.
Stelios didn’t want to hanger around in the shadow of his father. He first founded the Stelmar shipping at the age of 25, and then he decides to turn into fly business in 1995, founding EasyJet.
“I was desperately trying to get rid of the daddy’s boy image. I had to do something away from home in an industry that my father knew nothing about, where my surname meant nothing to anybody.”
Stelios Haja-Ioannou
He created EasyJet’s name by himself. For the company logo and the following first advertising campaign he went to a small local design consultancy, White Knight, which gave the airline its famous shade of orange, used by no other airline at the time or since.
Stelios realised from start that it was hard to make short-haul air travel make glamorous and he had no intention of trying.
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He married a very simple philosophy: “No frills, no extras”.
According to this he developed his business idea: cut out the travel agents, the in-flight meals, pass on the massive savings to the costumers and even easy clothes for the staff.
Stelios also believed in a very spartan and paperless office with only pc and phones.
He took the inspiration from the low cost business of South West airline operating in USA.
“The cheaper you can do something, the more people there are who can afford it. People like you if you give them what they like. What they like is a low price.”
Stelios Haja-Ioannou
Stelios’s business idea is similar to Ryanair’s one but the strategies differ in several points.
EasyJet flies mainly to primary airports in the cities that it serves, while Ryanair often chooses secondary airports to get a higher cost leadership.
For example, EasyJet flies to Paris Charles de Gaulle Airport and Paris Orly, the primary airports in Paris, while Ryanair flies to the smaller Beauvais-Tillé Airport, which is quite far from the city centre of Paris.
EasyJet also focuses on attracting business passengers by offering convenient services such as the option to swap the booking with a earlier flight without any additional charges.
ENTREPRENEURIAL EVENTS
Stelios Haji-Ioannou standed down as chairman in November 2002 and was replaced by Sir Colin Chandler. In April 2009 he left because of contrasts with Haji-Ioannou about the airline’s strategy for rapid growth. Sir David Michels, the senior independent non-executive director, became interim chairman until a successor was named. Sir Michael Rake, chairman of BT and former chairman of KPMG International, join the board as deputy chairman in the summer
About the CEO, in 2005 Ray Webster was by Andy Harrison, and in July 2010 Carolyn McCall became the new one.
RESOURCES: capital, finance and fleet
The Easyjet’s journey started with two wet leased Boeing 737-200 aircrafts and three years later it ordered fifteen new Boeing 737-700 at a price of 500 mln. The company’s air fleet continues to grow during the years and was implemented in March 2000 with seventeen new Boeing 737-700s, a new version of the aircraft used by EasyJet.
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The growth of the company had been possible due to the purchase of the 40% of the shares of a swiss charter company called TEA Basel AG in March 1999 for a consideration of three million. The company was renamed EasyJet Switzerland and it was based in Geneva, it was the first EasyJet’s base outside the United Kingdom.
YEAR | PASSENGERS | TURNOVER (£m) | PROFIT/LOSS BEFORE TAXES (£m) | NET PROFIT (£m) |
30/09/2000 | 5.600.000 | 263,70 | 22,10 | 22,10 |
30/09/2001 | 7.115.147 | 356,90 | 40,10 | 37,90 |
30/09/2002 | 11.350.350 | 551,80 | 71,60 | 49,00 |
30/09/2003 | 20.332.973 | 931,80 | 51,50 | 32,40 |
30/09/2004 | 24.343.649 | 1091,00 | 62,20 | 41,10 |
30/09/2005 | 29.557.640 | 1314,40 | 67,90 | 42,60 |
30/09/2006 | 32.953.287 | 1619,70 | 129,20 | 94,10 |
30/09/2007 | 37.230.079 | 1797,20 | 201,90 | 152,30 |
30/09/2008 | 43.659.478 | 2362,80 | 110,20 | 83,20 |
30/09/2009 | 45.164.279 | 2666,80 | 54,70 | 71,20 |
30/09/2010 | 48.754.366 | 2973,10 | 154,00 | 121,30 |
In May 2002 EasyJet also acquired the London Luton based company Go for a consideration of £374 million. It permitted to Easyjet to double its fleet and extend its bases with three new airports: Bristol Airport, East Midlands Airport and London Stansted Airports.
Furthermore in October 2007 EasyJet agrees to acquire GB Airways for £103.5 million, the deal was used to expand EasyJet operations at London Gatwick Airport and also to establish a base at Manchester Airport.
Examining financial performance we can also give a look at the stock exchange performance (of the last three years) of the company compared to its sector performance.
COMPANY SECTOR
The company was floated on the London Stock Exchange on the 5th November 2000 at an offer price of 310p, valuing the company at £777m. Shortly after, easyJet joins the FTSE250 list of companies.
NETWORK & ICTs
EasyJet always had a particular attention for the development of the ICTs and was one of the first companies that decided to use Internet as a strong element for advertising and, later on, selling.
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In 1997, April, Easyjet launched “easyjet.com” to promote and inform people about flights and services. This milestone gave to the company a new global asset and launched the company in the rising ocean of “dot.com companies”.
Only one year later the website development allowed to sell the first ticket directly online. In the following years this service became core pillar of the company.
Thus, in 2001, EasyJet reached the goal of selling 10 million seats through its website and now nine out of ten EasyJet’s seats are sold via Internet, a far higher proportion than for any traditional airline.
Almost 125 million seats have been sold online in 2007 and nowadays around 3 million people visit the web site every week.
In the intervening years EasyJet changed its marketing strap line to the ‘Webs Favourite Airline’ as a direct challenge to British Airways’ self styled ‘Worlds Favourite Airline’. As the airline lead the industry in the development of internet technology and introduced new innovations, many elements of the easy-to-use and intuitive website have been widely copied by many other companies.
Today 98% of all EasyJet seats are bought online and the newer functions allow customers to change bookings, arrange refunds, book car hire / hotels etc, replicating perfectly the functions that had traditionally been provided through call centres or travel agents.
The airline’s pioneering approach resulted in EasyJet introducing a variety of online products and functionalities, and was the first airline to offer:
* (European airline) to pioneer e-ticketing
* Online discount to incentivize consumers to go online
* Transfers / changes of dates, names, times online
* Booking retrieval and request repeat confirmation emails
* Free transfers / flight rescheduling during times of disruption
* Online check in
* Speedy boarding, which is booked online
* Promotions and sales exclusive to internet
* Travel partners products (such as hotels, car hire etc), recognising the potential for ancillary revenue
* Calendar view with a two week window so flexible consumers can search for the lowest fare
* Booking window, ensuring passengers who want to book more than two months in advance must do so online
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* Dynamically packaged flights, insurance and car hire
* To raise public awareness / support for consumer and corporate campaigns
The web site now offers several and useful functions and it’s available in 18 languages. EasyJet.com has recently been recognized as the one of the UK’s top five e-retailers as well as the nation’s favorite airline and travel website by Hitwise. EasyJet.com continues to break new ground in the evolution of e-commerce.
“EasyJet really did become the web’s favourite airline, selling over three times the amount of seats that our competitors like Ryanair and Go sold online.”
Simon Pritchard, commercial systems manager
Additionally in September 1999 was launched the first series of ‘Airline’ on ITV. The programme follows the lives of EasyJet’s staff and passengers. Audiences for ‘Airline’ peaked at around 10 million and for the 10 years that it was shown on national television it was consistently ITV’s most popular factual programme, with higher ratings than any other observational documentary, including Big Brother.
One month later EasyJet was voted ‘best low cost airline’ by readers of Business Traveller, the first of many such awards.
INTERNATIONALISATION
Analyzing the internationalization process, the strong global vocation of the company was clearly enounced in its early years.
Starting with the acquisition of the Swiss air company TEA Basel AG, as we have already said, the company began to build its international business.
Thanks to this first operation EasyJet created in July 1999 its first subsidiary called EasyJet Switzerland and inaugurates services from Geneva to Nice, Amsterdam and Barcelona, the first EasyJet services wholly outside the United Kingdom.
The route to Barcelona was particularly important as Swissair used its political influence to prevent EasyJet from operating a scheduled service from Geneva, in order to protect its position on the route. EasyJet got around the restrictions by flying the first planeload of
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passengers for free then setting up a tour company called “easyJet Tours” to operate the route.
Swissair went bankrupt in 2001 and Switzerland later removed all barriers to flying within Europe.
At the same time Liverpool became EasyJet’s second base.
In December 2001 EasyJet continues to develop its presence at Gatwick by announcing it as its fifth base and establishing four new routes (Edinburgh, Malaga, Majorca and Zurich) to become the second largest scheduled airline at the airport.
Moreover EasyJet announces its intention to purchase Go, the low-cost airline set up by British Airways, based at London Stansted Airport. The combination of EasyJet’s 35 aircraft and Go’s 27 aircraft would create Europe’s number one low-cost airline when the deal completed in August 2002.
The growth continues over years and from 2004 to 2008 EasyJet establishing new bases all over the Europe: Dortmund, Berlin, Basel, Milan Malpensa, Madrid Barajas, Paris Charles De Gaulle and Lyon. These last two bases are part of a €600 million investment designed to strengthen EasyJet’s position as France’s second largest airline.
In 2008 the airline’s bases become 19.
“EasyJet is a fast growing company, especially in Berlin. The company has positively changed customer attitudes towards low-cost travelling.”
Angela Muller, senior cabin crew, Berlin
Thanks to its open-minded entrepreneurial view EasyJet was the first to take advantage of the newly-enlarged European Union in 2005, by starting flights to Hungary and Slovenia.
Nonetheless, in 2006, EasyJet decided for a massive expansion to new routes outside the EU including Marrakech, Istanbul and Rijeka in order to reach a strong position also in intercontinental flights.
INNOVATIONS: green & tech
During its expansion EasyJet didn’t forget to think about environment impact and in June 2007 the company unveils the design of its ecoJet, a next generation short-haul super-clean aircraft.
The aircraft would need to be 25% quieter and would emit 50% less CO2 and 75% less than today’s newest aircraft (the 737 and A320 families of aircraft).
This will be possible thanks to the latest research by airframe and engine manufacturers around the world.
The projection for the 50% CO2 reduction is based on the findings from the latest research by the industry leaders and will come from the engines (25%), the lightweight airframe (15%) and from improvements to air traffic control technology and design (10%).
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In easyJet’s current configuration and operation, the projection for the eco-liner would generate less than 47g of CO2 per passenger km. For comparison, easyJet’s current operations generate 97.5g of CO2 per passenger km, the Toyota Prius emits 104g of CO2 per kilometer; and the European car industry has recently been given a target to achieve 130g of CO2 per kilometer.
The design will contain a number of key features to make it radically more environmentally efficient:
* Rear-mounted “open-rotor” engines offer unrivalled environmental performance for short-haul flying due to their higher propulsive efficiency. However, there are significant difficulties in fixing such a large engine under a wing of a narrow-body aircraft, making rear-mounting of the engines the optimum solution
* A lower design cruise speed to reduce drag and a shorter design range to reduce weight
* Noise reductions are expected to come from a gear box between the engine and the open-rotor blades keeping them subsonic during take-off and landing, the use of the rear empennage to shield the ground from engine noise, and airframe improvements (such as no slats on the front of the wing)
* The airframe will be made of advanced weight-reducing materials similar to those used in current projects like the Boeing 787, which itself is estimated to be 27% more fuel efficient than the aircraft it will replace in many fleets
The “EasyJet ecoJet” will be the first step changes in technology that will be needed to reduce the emissions from aviation in 2050 to below 2005 levels and alone could lead to a stabilization of emissions from short-haul aviation at 2005 levels until 2035 providing massive environmental benefits.
“The aviation industry has an excellent record in reducing the environmental footprint of aircraft. Today’s aircraft are typically 70% cleaner and 75% quieter than their 1960s counterparts. Now we are planning the next generation that will help towards taking the plane out of the emissions equation.
EasyJet is already setting the environmental standard in the airline industry. Our fleet of 131 aircraft has an average age of only 2.3 years – the youngest of any major airline in Europe. We have recently called for over 700 of the dirtiest aircraft to be banned from Europe’s skies and are active supporters of the EU’s Emissions Trading Scheme and Single European Skies programme.
The aircraft example we have unveiled today represents the next major step forward in airframe and engine technology. The lightweight structure and open-rotor engines are based on technologies that are being developed right now by the major manufacturers.
The EasyJet ecoJet is realistic and it is achievable. If the ecoJet were to be made available today we would order hundreds them for fleet replacement and to achieve the ‘green growth’ that our industry has committed to.”
Andy Harrison, EasyJet’s Chief Executive
Furthermore, on the 14th February 2011, EasyJet announced its intention to trial a revolutionary nano-technology coating on its aircraft aimed at reducing drag and increasing fuel efficiency.
The ultra thin coating, already used on US military aircraft, is a polymer that cross links and bonds to the paint surface and only adds an estimated 4oz to the weight of the aircraft. The coating reduces the build-up of debris on the aircraft’s structure, leading edge and other surfaces; thus reducing drag on the surface of the aircraft. The manufacturers of the coating estimate that it could reduce easyJet’s fuel consumption by 1-2%. The airline has coated eight aircraft and will compare their fuel consumption with the rest of the fleet during a 12 month trial period.
Nowadays an EasyJet passenger is responsible for 22% fewer emissions than a passenger on a traditional airline, when they fly the same route and use the same type of plane. Since its launch in 1995, EasyJet has always strived to improve its efficiency to keep its costs down. Passengers benefit through low fares and a reduced carbon footprint.
This is achieved through a range of investments and innovations. easyJet’s fleet of 194 aircraft, many with Tech Insertion engines, is one of the youngest in Europe averaging less than four years old. It fills more of its seats than more than any scheduled European airline with a load factor of over 87%. easyJet planes taxi using one engine, use less ground equipment than legacy carriers and fly passengers to airports close to city centres, often with good public transport links. Weight onboard is reduced with light-weight carpets and the airline is currently looking at lighter seats in the cabin.
“EasyJet is really pleased about the trial with the special coating on our aircraft. Efficiency is in easyJet’s DNA. If we can find new ways of reducing the amount of fuel used by our aircraft we can pass the benefits onto our passengers by offering them low fares and a lower carbon footprint. All airlines should be incentivised to reduce the environmental impact of their operations which is why we welcome the government’s commitment to move from APD to a fairer, greener per plane tax. We look forward to seeing the details of their proposal.”
Carolyn McCall, EasyJet’s CEO
MISSING DATA AND OPEN QUESTIONS
During our analisy we found lot of satisfactory materials that allowed us to perform a deep analisy about the company we are dealing with.
We tried to point out just the main features in order to present a light paper to the reader.
Nonetheless we faced some problems regarding getting information about e-performances and further questions on future planning.
Technically we had some troubles to get information and personal interview both through the personal e-mail contacts, and with the telephonic assistance service.
We believe that this lack of data is not so determinant in our business analysis, since we managed anyhow to get some useful information.
We thought to mention our technical problems believing that this depended on lack of time.
In order to present our potential interview we decided to report one of the e-mails we sent to the company’s press office.
From: | XXX |
Sent: | Sun 4/10/11 11:42 AM |
To: | [email protected] |
Good morning,
We are a team of students, of the University of Pavia.
We decide to write a case report about your company, because it has been largely developed around the web, offering us an important case of “dot.com” company.
We were looking for your e-performances, we would appreciate to receive some information and data about:
* Attraction: daily number of visitors
* Conversion: number of Goal Achievement/ Visits
* Retention
* Orders via Internet even for extra services
* Average order value
Moreover, we have several question about your project “EcoJet”. In particular:
* What is the environmental performance that EasyJet is calling for and how will this be delivered?
* What impact will the EasyJet ecoJet have on emissions from aviation?
* How realistic is this project?
* When should it be built and what should the range of the EasyJet ecoJet be?
Thank you very much for your great help.
