Stelios idea and his implementation of easyJet is of having a customer-oriented highly-advertised low-cost airline. The key ideas that really worked for easyJet in there as follows:
1. The ideology is to have the airline stay in the air most of the time. EasyJet keeps their airplanes in air almost two times more than the industry average. Their 2 planes are doing the job of 3 planes of other carriers. As a result they reduced some of their fixed and overhead costs.
2. The purpose of the airline was to transit customers from one place to the other without wasting money on customer frills. This saves the airline €14 per passenger.
3. The airline targeted only non-corporate customers who paid themselves for their trip. They removed the business class seats from their airlines and they marketed their airline accordingly ...view middle of the document...
About 60% of their sales came from internet Sales in October 1999.
6. Stelios left no stone unturned while promoting his airline spending 10% of their revenues on advertising. He also every once in a while used to take a dig at his competitors to undermine their airline services and promote easyJet.
7. Stelios also has set-up a very informal corporate culture in their company and values employee satisfaction really highly.
Even though easyJet tried to make a very low-cost airline they did put a lot of effort on providing customer satisfaction.
1. They never compromised on the safety of their passengers and their airplanes.
2. Stelios personally handled grievances of his customers and took information directly from his customers rather than doing a market research.
3. The airline was very punctual and their flights arrived on time more number of times than other airlines. Almost 90% of their London-Glasgow flights arrived less than 15 minutes late which was higher than any other airline in any route.
The cost of running an airline was 40% higher in Europe than that in U.S. Also only 3-5% of the passengers flew on low-cost airlines compared to 24% of that in U.S. The entry and exit barriers are really high and the industry was highly competitive. 75% of 80 start-up carriers post 1992 went bankrupt within first 4 years of their operation.
Even though easyJet were doing well in their business model, Ryanair was the biggest player in low-cost airlines with 20% profit on €300 million revenues compared to easyJet’s revenue of €123 million. It is clear that the easyJet has still very good scope of improvement in their operation.
There are also new entrants like British Airways’ Go airlines which pose a threat to the company’s market share even though easyJet has won the initial battle with Go airlines.
Extending the Business Model:
The firm is trying to extend their low-cost business model to other industries like cybercafés, rental car and internet banking.