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Swot Easy Jet

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BIRD’S EYE VIEW
SWOT Analysis of easyJet easyJet is Europe’s leading low fares airline. Formed in 1995 by Sir Stelios Haji-Ioannou, it has grown rapidly to become Europe’s fourth largest airline by passengers carried. Sir Stelios has credited easyJet’s success to two strategic imperatives. The first was “sweating the assets”, that is making sure that the planes were as full as possible and flying as much as possible. The second was a sophisticated yield management system which would set an infinite number of fares for a given flight, based on the demand and supply position for that flight. The prices for the seats fluctuated depending on the demand for them at a particular time. easyJet was the first LCC to start the sale of its airline tickets online. In 1999, Stelios was voted London Entrepreneur of the Year at the London Electricity Londoner of the Year Awards. In the same year, easyJet was voted «Best Low Cost Airline» by readers of Business Traveler magazine for the first time. easyJet was selected as a Business Superbrand by the Superbrand Council which recognizes companies with an outstanding brand name in November 1999. Other Superbrand companies include such globally-recognized names as Virgin, Coca-Cola and Manchester United. In December 1999, ‘Marketing’ magazine described the launch of easyJet as «one of the 100 great marketing moments of the 20th century». Stelios entered the Guinness Book of Records for being the world’s youngest international scheduled airline chairman when he launched easyJet in 1995 at 28 years of age. Sir Stelios was knighted by the Queen in June 2006, for services to entrepreneurship. The combination of favorable market conditions, robust operating principles and world-class marketing, underpinned by the entrepreneurial vision of the man now known to the public simply as Stelios, brought success and fame to easyJet. History The easyJet airline was founded in 1995 by Stelios HajiIoannou, with £5million family loan and 20 staff members, based on the Southwest Airlines model. The first bookings were made on the easyJet telephone reservation centre opened at easyLand, the home of easyJet at London Luton Airport. Its first passengers flew from London Luton to Glasgow and Edinburgh for the ludicrously low price of £29 one way on November 10th, 1995.

SWOT TEAM
In April 1996, easyJet took delivery of its first whollyowned aircraft (started operations with two leased Boeing 737-200) and went international with first services to Amsterdam from London Luton. easyJet launched its website, easyJet.com which provided information about the airline. In September 1997, easyJet placed an order for 12 brand new Boeing 737-300s for delivery by 2000. In October, easyJet also launched its second UK base at Liverpool Airport. easyJet bought 40% of a Swiss charter operation, TEA Basel AG, based in Basle for a consideration of three million Swiss francs in March 1998. This airline was later renamed ‘easyJet Switzerland’ and moved to Geneva where the first European base was opened. In April, 1998, the airline sold its first seat online at easyJet.com while telephone sales continued. easyJet ordered 15 brand-new Boeing Next Generation 737-700 aircraft in July 1998, with a list price in excess of $500 million. In June 1999, easyJet increased stake in easyJet, Switzerland to 49% and acquired an option over the remaining 51%. In July 1999, easyJet Switzerland inaugurates services from Geneva to Nice, Amsterdam and Barcelona (the first easyJet services wholly outside the UK). easyJet seat sales over the Internet passed the one million mark in October 1999. easyJet became the first low-cost airline to launch a flight arrivals information service on its web site in April 2000. Internet sales reached 85% of total sales in September. easyJet entered the London Stock Exchange Listings in November 2000 at an offer price of 310p and sold 25% of the stock to public. The IPO earnings went mainly towards financing the purchase of the new Boeing 737-700 order placed in March 2000 taking fleet size up to 44 aircraft by 2004. It established London Gatwick as its fifth base in December 2001, and becomes the second largest scheduled airline at the airport. In August 2002, easyJet and Go combined to become Europe’s largest low-cost airline and two months later, in October, they ordered Airbus A319 aircraft. Since then, the Airbus A319, together with Boeing 737-700s, are interchangeable on all easyJet routes, so maintaining the “any aircraft, any route” aspect of the easyJet business model. In November 2002, Stelios stood down as Chairman of easyJet and Sir Colin Chandler took over the position.

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BIRD’S EYE VIEW easyJet launched pioneering online technology which allows customers to view and change their bookings online in July 2003. easyJet established a new base at Berlin Schönefeld in November 2003, dramatically expanding the existing network with the addition of 11 new routes. In February 2004, easyJet announced new base at Dortmund, increasing the existing network with eight routes. On 28 May 2007, easyJet made history by checking in an entire flight through the new, ground-breaking self-checkin kiosks at Nottingham East Midlands airport. In July 2004, easyJet introduced Europe’s most generous hand baggage allowance by removing the 5 kg weight restriction and in December, Hotelopia and easyJet teamed up to launch exclusive accommodation products and services as easyJet Hotels. EuroAirport-Basel-Mulhouse-Freiburg is announced as the airline’s next base in January 2005. In May 2006, Ray Webster, the Chief Executive of the Company steps down from his post. In June, Gatwick became the airline’s biggest base with flights to 29 destinations. In a bid to further improve its offering to business travelers, easyJet and ServisAir introduce easyJet Lounges, easyJet joined the European Low Fares Airline Association (ELFAA) on 1 October 2005. In October, easyJet and Europcar introduced the opportunity to purchase car rental at the same time as flight bookings through ‘dynamic packaging’. easyJet has already been offering «dynamically packaged» travel insurance to its UK market since March 2005. In October, easyJet announced a new base at Milan’s Malpensa Airport. Malpensa was the airline’s 16th base in Europe and first in Italy. easyJet became the first major low-cost airline to roll-out internet check-in for its UK passengers in February, offering a 15-minute gate arrival time for those traveling only with hand baggage. Andrew Harrison, the new Chief Executive of the company, took up his post on 1 December 2005. The airline expanded into new markets outside the EU to Marrakech, Istanbul, and Rijeka in March 2006. The airline appointed Ogilvy UK as the airline’s first Pan-European advertising creative agency in May 2006. It launched a new base at Madrid’s Barajas airport in August and in November, and introduced a new facility of ‘Speedy Boarding’ that will give passengers greater choice over their seating arrangements onboard the aircraft. Profit after tax in 2006 increased by 59.4% over 2005. Basic earnings per share increased by 56.8%. In January, 2007, easyJet, Europe’s leading low-fares airline, and Microsoft launch the pioneering “easyJet desk top gadget.” The two leading technological innovators have teamed up for the development of the new Windows Vista and the 2007 Microsoft Office System to create a range of desktop «gadgets» and web services to ensure travel is seamless from desk top to touch down. The «easyJet desk top gadget» enables customers to personalize flight information and booking services using the Microsoft Vista technology. Strategy and business model easyJet’s operational policies were based on keeping costs to a minimum to allow the airline to offer the lowest fares possible. It adopted a number of practices that helped curb wasteful expenses and provided the best possible service within the limits prescribed by cost. easyJet’s strategy has six key foundations: 1. Strong branding: easyJet has invested a lot in PR and advertising. It has been coming in airline TV programs and created strong brand profiles in catchment areas through advertising. The neon orange ‘easy’ brand represented value for money. Sir Stelios has been known come out in public and demonstrate against any increase in taxes and also exhibit strong support to a greener environment. 2. Pricing and revenue management: The airline follows a one-way, time- dependent pricing with only online reservations except for two weeks before take-off, when telebooking is allowed. 3. Lower unit costs: Although easyJet does have lower operational costs, its operating margins are much lower than Ryanair. This is because it flies to major airports most of the time, uses two main types of fleet, invests heavily in advertising and public relations and adopts limited fuel hedging. Its fares are also much higher than that of Ryanair (but it gets to some extent gets neutralized by the higher distance of Ryanair airports from city and town centers). 4. Network strategy: easyJet follows a point-to-point route connection and grows by joining dots. It focuses on catchment areas and low prices to obtain traffic. Unlike Ryanair, it flies to destinations within cities but uses smaller airports (like Luton and not Heathrow, London) within the cities itself throughout Europe. It expands by increasing frequency of flights. It operates 289 routes from 79 airports, connects 36 cities and has 17 main bases. 5. Employee culture: easyJet employs around 4,859 people around Europe. In terms of culture, easyJet favors an informal company culture with a very flat management structure, which eliminates unnecessary and wasteful layers of management. All office-based employees are encouraged to dress casually. Ties are banned - except for pilots! Remote working and ‘hot-desking’ have been characteristics of ea-

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BIRD’S EYE VIEW syJet since the beginning. Employees can buy company shares and also are given performance awards appreciating their services. 6. Commitment to customer service: It targets both business and leisure travelers. Customer proposition of easyJet is “Low cost with care and convenience”. easyJet has adopted the philosophy of providing basic service with a smile. It has been achieving above average customer satisfaction, proven by the awards that it has been receiving over the years. It does not have any weight restrictions on hand baggage but only limits the size of baggage. They also have the facility of accommodating a passenger who has missed flight on the next flight at an extra charge of just £35 within two hours of the departure of the original flight. It also provides seating in easyJet lounges at a rate where the early passenger can wait and relax. Features of the business model: easyJet keeps costs low by eliminating the unnecessary costs and frills. Their business model meets the customers’ demand for a simple, budget-driven travel alternative. This is achieved in a number of ways: � Pioneer in the use of internet: easyJet was one of the first airlines to embrace the opportunity of the internet when it sold its first seat online in April 1998. Now over 95% of all seats are sold online, making easyJet one of Europe’s biggest internet retailers, substantially reducing its distribution costs. The passengers who book online receive an email containing their travel details and confirmation number, rather than tickets through the post. Online buyers also benefit from paying the price of a local call, instead of the standard national rate of easyJet’s booking line. easyJet’s internet booking process is simple and straightforward for which it has won many awards; � Maximizing the utilization of substantial assets: easyJet flies its aircraft intensively, with swift turnaround times each time it lands. This gives it a very low unit cost with maximum utilization of its fleet. It has permission to carry passengers , cargo and mail in aircrafts of 20 or more seats; � Ticketless travel: Passengers receive booking details via an e-mail rather than paper and hence resulting in ticketless travel. This helps to significantly reduce the cost of issuing, distributing, processing and reconciling millions of transactions each year; � No “free lunch”: The airline has eliminated unnecessary services which are complex to manage such as free catering, pre-assigned seats, interline connections and cargo services. This keeps the total cost of production low; � Efficient use of airports: easyJet flies to main destination airports throughout Europe, but gains efficiencies compared to traditional carriers with rapid turnaround times, and progressive landing charge agreements with airports; � Paperless operations: Since its launch, easyJet has simplified its working practices by embracing the concept of the paperless office. The management and administration of the company is undertaken entirely on IT systems which can be accessed through secure servers from anywhere in the world enabling huge flexibility in the running of the airline; � Safe and efficient flight operations: The average age of easyJet fleets is about 2.5 years. It has only one class in flights. easyJet’s Airbus A319 have two pairs of overwing exits instead of the standard one-pair exits, fulfilling extra safety requirements required for higher passenger density. It also uses the internet and the telephone as efficient marketing tools. Ancillary sources of Revenue are: a) Credit card fees; b) Excess and extra baggage charges; c) Speedy boarding fees; d) Sporting equipment fees; e) Ticket changes charge; f ) Infant fees; g) easyJet lounge fees; h) Profit share from in-flight sale of food, beverages, and boutique items; i) Commissions received from products and services sold for e.g. hotel bookings, car hiring, travel insurance, credit card etc. Issues: The airline seems to be positioned very well, with experts predicting strong growth in the low cost-sector. Given the saturated market and the shortage of other options in the UK, competition is likely to intensify – inevitably followed by consolidation, an early sign of which is easyJet’s purchase of GO. The UK market offers little growth opportunity; therefore concentration will be on the continental market and other new EU member markets. So easyJet must look at some issues with a long term perspective. These issues are: � What should be the long term game plan to combat competition and hostile takeover bids? � How should it grow and expand its operations without affecting its operating margins? � Which are the most lucrative geographical markets and niche segments that it must focus on? � Should it plan for expanding outside Europe in a major way? � How can it increase its sources of ancillary revenue?

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BIRD’S EYE VIEW

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BIRD’S EYE VIEW
SWOT Analysis easyJet’s mission statement: “To provide our customers with safe, good value, point-topoint air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. To achieve this we will develop our people and establish lasting relationships with our suppliers.” Vision and objectives are: � Low fares and high frequency between major European airports; � Consumers willing to pay ( a little ) more for valueadded proposition; � Growth based on joining the dots and adding frequency. Recommendations 1) easyJet is already catering to business travelers by operating from within city airports, but it needs to further innovate its services to attract the frequent business traveler. 2) The airline should make a definite plan to expand into low cost medium haul sector as the short haul routes are getting filled up. With adding a little more of services on its flights, it should be able to easily adapt to this sector. 3) The growth of the low cost market will slow down considerably in the next five years which will increase operating costs. So easyJet, which has very sensitive operating 4) The value price segment to which easyJet is targeting is bound to increase in numbers, but also the variety of choice available to them is also increasing. So easyJet has to devise strategies to retain customers and build customer loyalty. 5) Expansion into Russia. Middle-East, Africa and Asia should be part of any dynamic player in the airline industry in the face of intense competition within Europe and saturating demand. 6) easyJet should increase its sources of ancillary revenue in-flight and on ground to reduce its vulnerability to external forces not under its control. Conclusion easyJet’s major strength besides its business strategy has been the aggressive, flamboyant marketing approach adopted by its ex-chairman Sir Stelios which has enabled the brand name to earn very high recall and recognition. Hopefully this will continue and serve the company well in the competitive markets. But the need of the hour for easyJet is to broaden its vision to include progressive measures for becoming a global player by refining its current strategic business model. This is very important as the current European markets would definitely get saturated and as the LCC industry is moving towards consolidation it has to look for new avenues for growth and expansion. margins must make a definite plan to overcome this hurdle without comprising its ‘no-frills’ advantage.

Taxes and Global Warming Impact on LCCs
When it comes to using LCCs, the impact on people’s pocket is a far bigger potential deterrent than concerns about the environment itself. Three out of ten people would be put off flying to and from France if a new ‘green tax’ on LCCs was imposed according to a survey by the online magazine website FrenchEntree.com. LCCs created the problem of rising passenger numbers. Indeed, according to the Civil Aviation Authority figures, 3.1m travelled from the UK to Europe on LCCs in 1996, and by 2005, it was 51.5m! Air travel will be the fastest-growing source of carbon emissions by 2050. Already by 2020, we will take half a billion flights annually (up from 189m in 2002), and aviation does far more damages than its perceived 2 per cent of UK emissions. In a review of the economics of climate change last year, Nicholas Stern put aviation’s share just at 1.6% of global greenhouse gas emissions. In fact, LCCs contribution to global warming is two to four times that because of the amplification of negative effects of burning kerosene at altitude. “Planes are 10 times more damaging to the climate than trains, so if we don’t do something about the growth in aviation, Britain will find it very hard to meet its global warming targets.”, said John Sauven, Greenpeace Director.

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