Posted at 12.11.2018
A successful exemplory case of a Western no frills air travel is easyJet. Stelios Haji-Ioannou (Greek) founded the company in 1995. It really is based on the low-cost, no-frills model of the US carrier Southwest. The idea of easyJet is dependant on the fact that demands for short-haul air transportation is price elastic. That means, if prices for flights are being reduced, more people will fly. Typically airline concepts derive from the assumption that air travel traffic grows in line with the economy and that cutting prices is only going to lead to a decrease in revenues. With all the advantages of the 'no-nonsense' notion to the Western market, after its deregulation in 1992, easyJet has proven this theory wrong and goes from durability to power by actually increasing how big is the market and recently by taking away individuals from the majors (see www. easyjet. com for traveler statistics, financial data and worker reports). Today, it offers 125 routes from 39 Western Airports (see www. easyjet. com for route kick off times), with Luton, Liverpool, Geneva, Amsterdam as bottom airports and it is functioning 72 aircrafts (November 2003).
November 1995: easyJet starts off flights from Luton to Glasgow and Edinburgh with to leased Boeing 737-300 with a capacity of 148 car seats at a cost of 29 one of many ways. Seats are for sale over telephone booking system only. In 1996 easyJet needs delivery of its first wholly held aircraft and moves international with first services to Amsterdam from Luton. Twelve months later easyJet launches its website, easyjet. com that may from 1998 onwards form a fundamental element of the business idea (and which gives for some 90% of the bookings today ). In August 2002 easyJet expands its fleet and routes by acquiring British Airways' low-cost subsidiary Go. In October 2002 the airline signs a package to buy 120 Airbus, which will assist in the airline's ongoing growth strategy. Until recently, one of the cornerstones of the easyJet's low-cost model has gone to operate a single aircraft type fleet - which up to now has been the Boeing 737 series - because uniformity means efficiencies in training, maintenance and working costs. However, easyJet's new package with Airbus has been viewed by the business as "stunning" as the excess costs, which incur through the new kind of airplane are "way outweighed by the financial benefits associated with this deal".
easyJet argues that both Boeing and Airbus plane have broadly similar characteristics but that a wider aisle on A319 will make it quicker to embark and disembark, that it has an extra seat up to speed (150 vs. 149) and this overall the A319 will lower costs by about 10% set alongside the current mixture of aircraft, which will donate to lower solution fares.
(See appendix 1 for Stelios Haji-Iannou's other easyGroup corporations).
To provide our customers with safe, value, point-to-point air services. To impact and to give you a steady and reliable product and fares attractive to leisure and business markets on a variety of Western european routes. To achieve this will develop our people and build lasting marriage (see www. easyjet. com)
The basis of an organisation's quest statement should answer the question "What business is the business in?" easyJet is doing this by proclaiming that it offers 'point-to-point air services' to its customers. That evidently underlines that easyJet is not in the folks or food business, neither in the service business therefore, however in the mass-transportation business, and as such its model is based on cost efficiency of the mass-transportation business. Furthermore, it demonstrates several decisions in what kind of air service easyJet would like to provide. Evidently, its concentrate is on 'Western european routes', concentrating on business and leisure holidaymakers likewise. Furthermore, it aims to provide 'safe, good value' travelling. easyJet's mission declaration also gives information on the 'How to get there?' by placing focus on its 'people' and 'suppliers'. What's absent from the statement is the importance of the customer's viewpoint, that could be indicated by stating, for case, 'we desire to be recognized as. '. Also, as the quest affirmation is the bedrock for the marketing plan it should be more quantifiable, as to how much market talk about easyJet aims to gain in the future, for example.
In order to analyse the air travel industry at length, it pays to to use Porters five competitive pushes.
Minimal menace from other modes of transport like train and car on domestic routes. Usually enough time and cost advantage of the low-cost service providers way outweigh the increased comfort and versatility of trains or vehicles (e. g. on the way Luton/London to Glasgow a coach needs around 6 hours and costs around 80 while a easyJet planes takes just one hour and costs around 29).
On international routes ranges are usually too great for car or teach to be an alternative to air travel, expect maybe from London to Paris, that can be come to by Euro Superstar.
High capital requirements negate threat somewhat. easyJet was started with financing of 5 million, with 2 leased plane, but required a 50million investment increased by personal debt and equity in 12 months two to accelerate expansion and purchase 4 new planes.
The UK low-cost market is quite mature compared to the rest of European countries and easyJet, as the biggest operator has a significant comfortable position. However, enlargement into new Western markets might demonstrate more challenging as set up; cash strong vacation businesses like TUI are setting up their own low-cost businesses (see information about Hapag Lloyd Exhibit, www. hlx. com)
Lack of take-off and landing slots makes it problematic for new companies to find suited airports.
Loss leader is required in order to join the reduced cost market.
The price of aviation gas is directly related to the expense of oil, as an individual company easyJet does not have the power to improve this.
Airplane manufacturers are focused in the industry, with Boeing and Airbus providing nearly all commercial planes and with easyJet operating one type of aircraft until lately. easyJet's package with airbus however demonstrates favourable contracts can still be reached. The reliance on spare parts from one manufacturer could present a risk.
The more easyJet expands a lot more power it'll posses over its suppliers
Buyer ability within the air travel industry - and especially the low-cost market - is relatively strong, as customers will most likely check around for the better price, specifically with the dependence that the reduced cost airline has on Internet sales. Price discrepancies can be easily found and exploited by the buyer, and therefore the operator must keep a normal check on prices.
Need for customer loyalty because of low turning costs
Customers have the Civil Aviation Expert (CAA) on the side which gives:
1. safeguard against the consequence of travel organiser inability for people who buy package deal holidays, charter plane tickets and discounted slated air tickets; and
2. licenses airlines and ensures compliance with requirements of Western european and UK legislation relating to financial resources, liability and insurance of airlines.
Ryan air, BMIbaby, MyTravelLite and Buzz are major competitors of easyJet in the united kingdom. Virgin Exhibit, Hapag Lloyd Express, Germanwings and Air Berlin already are or might become rivals in the light of future growth ideas. Ryanair is the only person of these so far to have succeeded and shown a continuing yearly profit (see appendix 2 for financial data).
A growing quantity of tour providers (like Thomas Cook and TUI) are selling air only slated seating to reduced prices.
British Airways and other conventional carriers out of the UK are competition as well but on a lower range as they target different market segments (see appendix 3 for greater detail).
Low price is an integral factor of the brand.
Uses differential prices; off-peak traveling and booking beforehand makes a ticket less costly.
Discounts for seat tickets booked online.
"no-frills", point-to-point air services
also car retain the services of on its website (use of the web for bundling products) and links to other easyGroup websites (see appendix 1 for other easyGroup enterprises).
Internet arranging system (over 90% of bookings).
Telephone reservation system.
Highlights its number 1 position among Europe's low-cost airlines (advertising strap collection: "Size things!", slogan: "the web's favorite airline")
Advocates inner marketing, creative work done in-house.
"No Bullshit" deal with (Stelios), humorous, attention-catching promotions (e. g. the giving away of free tickets on Go's inaugural journey and Stelios protesting in a orange boiler suit against a rise of airport terminal fees at Luton in a branch of Barclay's lender which possesses the air port).
Image, differentiation on price and brand.
Is fiscally successful.
Is being seen as an impressive and flexible organisation.
Has a strong e-business.
Is part of the consortium that is awarded to run UK's air traffic control system (NATS).
Has no customer retention policy
Has little if any scope outside of Europe.
Lack of service, overall flexibility and business focus (such as regular flyer programs e. g. ) make the low-cost model unappealing for some business vacationers.
The two individuals of development, the focus on price and the concentrate on convenience (regular flights, few relationships, more nearby airports e. g. ) are reaching their natural limits. Differentiation following that remains to be difficult.
easyJet's own success helps it be difficult to recruit and educate staff quickly enough.
Experts forecast great prospect of future growth within the next years (see appendix 4).
The current recession is favourable as people and businesses are more cost-conscious.
More full-service airlines may withdraw from the regional market to give attention to more profitable long-haul routes going out of the market to the low-cost operators.
The short-breaks market, an important market for easyJet grows more rapidly than the united kingdom travel market all together.
Reduced airplane prices
Difficulties to increase as viable new routes from London are scarce.
Competition will probably intensify, given the saturated market and the lack of other choices.
Increased competition will probably lead to increased difficulties in requiring incentives from communities, like the very low fees easyJet received at Luton.
Companies minimize on business travel in times of monetary downturn and because of new time-consuming security measures travel substitutes like videoconferencing are launched.
easyJet seems to be positioned perfectly with experts predicting excellent growth opportunities for the reduced cost-sector. Given the saturated market and the lack of other options in the united kingdom, competition is likely to intensify - undoubtedly followed by loan consolidation, an early indication which is easyJet's purchase of GO. THE UNITED KINGDOM market offers little expansion opportunity, therefore amount will be on the continental market, a step forward in this way is establishing a significant new platform at Berlin, with flights from 11 European cities, and perhaps as well on Eastern European countries. Emphasis remains on pricing Strategy and enlargement of its course network. Promotion must persuade people that it is safe to fly
and set up easyJet as Europe's largest low-cost carrier (as easyJet is already doing in its ad: "Size concerns!")
The following factors are likely to have an impact on the airline industry and really should therefore be studied into consideration when formulating a Marketing Arrange for easyJet.
Threat of battle in the centre East
The Air A long way system is not considered as a taxable perk by the federal government in the manner that company autos are taxed which may change to permit easyJet to compete on more equal grounds with famous brands BA.
A EU east-enlargement may provide access to practical, new marketplaces.
Likelihood of increasing fuel costs, congestion and other environmental restrictions, as well as the chance of higher security and insurance charges to reflect the chance of terrorism.
As the recession is likely to last for a few additional time, business travellers could keep an eye on the travel expenses.
Globalisation should continue steadily to boost traffic in the long-term.
The advantages of the one currency in European countries will probably bring more business to easyJet as Europe becomes more included.
To make an impression on the French and German publics might cause problems as there shows up still to be always a general reluctance to utilize credit cards over the phone and Internet.
The people are standard quite friendly to the chance of cheap flights. Nonetheless they may feel begrudged where they see offers found in newspaper publishers where airfare are for 10 only to discover that the actual cost is much higher for the particular time or day they would like to take flight on.
A key issue would be the scope to which technological advancements - such as the use of the Internet on syndication and cost synergies from industry loan consolidation - can offset upward pressures on prices and costs.
easyJet has to keep track of technological developments in neuro-scientific e-commerce and aircraft manufacture to be able to get a competitive benefits.
The face of aviation is gradually innovating. The long-standing problems of the industry
- by means of many network carriers and substantive over-capacity in many markets - were exacerbated by the happenings of September 11th (see appendix 5 for a post-Sept. 11th introduction). That is more likely to pave the way for a few acceleration along the way of airline restructuring and loan consolidation. Experts think that there isn't room for the existing multitude of companies in European countries, and these will eventually be whittled right down to 3 or 4 major airlines, with others utilized or restructured to target more on regional traffic. This also presents an opportunity for 'no-frills' service providers to increase their market talk about. Additionally, some restructuring of the industry's sophisticated and outdated regulatory system will be needed.
In the long run, trend development may itself slow gradually as the best air travel market segments mature. Furthermore, falling yields, which have boosted flights growth in the past, can't be relied upon to persist, at least at the rate they may have for days gone by decade roughly. If cost tendencies are less favourable - for example because of increasing fuel costs, congestion and other environmental limitations, as well as the prospect of higher security and insurance charges to reflect the risks of terrorism - the range for lower yields would be less, and this might reduce future expansion trends. An integral issue would be the extent to which favourable cost developments - including the impact of the web on distribution costs and cost synergies from industry consolidation - can offset these upward stresses on prices and costs. The full-service airlines, saddled with big sites and firmly unionised workforces, cannot easily embrace the management strategies of the no-frills airlines. Moreover, their opportunity for defensive mergers is bound by competition policy. The ability of international airlines to expand is limited by ownership constraints (In america foreigners cannot own more than 25% of a national flight, in the European union the limitation is 49% ).
The "no-frills" market within Europe is immature relative to that of the US. The
sector makes up about only around 5% of most intra - Western european capacity, although share
is much higher in the united kingdom local market and on services between the UK and
Europe, closer to 20%. Further strong growth is expected over the next 2-3 years as
new operations set up, and new destinations are added to the prevailing carriers'
networks. However as the united kingdom market becomes saturated, these providers are likely to
focus their development at continental European hubs. The knowledge of the US market suggests that deregulation will be accompanied by industry consolidation. So far there's been limited improvement in this way but many are viewing the current problems as the catalyst necessary to completely restructure the Western european airline industry. In the US the industry has consolidated into seven major carriers, which bring over 80% of traveler traffic of US airlines. Europe is a lot more fragmented with the equivalent shape for the seven Western european majors of them costing only 47%.
easyJet has to consider whether it will respond to new entrants by ceding niche-segments or by rivalling aggressively on price, routes and service in an attempt to drive the entrant out of the market. To make the strategic decision market research on the size of different combinations of costing and service is necessary. easyJet must also understand how much it costs the rival to serve, and exactly how much capacity the competition has for, every course involved. Finally, the new entrant's competitive goals are of relevance to assume how it would respond to any strategic steps easyJet might create. By obtaining these information residual doubt would be limited, and the incumbent flight would be able to build a self-assured business case around its strategy. It is highly recommended that easyJet goals mainly leisure holidaymakers as business often demand recurrent flights to a wide range of places, seek quality service and consistent flyer programs, and are willing to pay a premium for these benefits. Also, endeavoring to appeal to generally different customer needs operates counter to the entire trend operating industries, where distinctive approaches, personalized to different customers, have generally come to dominate. No real opportunity offers the long-haul business as it is very different, both technically and in customer needs, to short-haul travel. easyJet should continue steadily to focus on price and attempt to connect the dots in its network, which cost less than beginning new cities. Thereby, it needs to make certain that a progress in its network and fleet does not lead to raised operating costs. It will also consider putting more emphasis on direct marketing by e. g. producing a person retention design. To identify its brand further on promotional lines, easyJet could expose a CRM (cause related marketing) structure, creating a reputation for being a 'caring air travel', e. g. by advertising shares in forest help programmes over its website, collecting forex on plane tickets for charity etc. , in that way giving its individuals 'a sense of mental comfort and well-being' when they choose to travel with easyJet. Overall, easyJet has to develop a natural and accurate diagnosis of the market-niche to be dished up. A relentless determination to quality service and cost control is as important as the self-control to establish a growth plan (see www. easyJet. com for easyJet product life pattern and online marketing strategy).
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Under the easy brand Stelios Haji-Iannou has furthermore set up and Internet car rental service (easyRentacar), a string of Internet cafes (easyEverything), a financial services site (easyMoney), a portal site for good buys online (easyValue) and a free of charge e-mail service (easy. com). In every his ventures he is using "yield management to remove the perfect margin from each customer" and keep costs down. Furthermore, produce management "can help to better use price in the marketing combine to best reach the most customers". However, there are no cross-shareholdings between easyJet and these other easyGroup companies. easyJey manages separately from the other companies although some cross-marketing contracts do are present. Also, results of the non-airline businesses have been merged as they have lost 75m in three years.
151m (96m) 71%
Source: Tran, M. (2002)
See http://www. ryanair. com/download/morganjune. pdf for genuine data.
Compare Flight Traffic Data (Europe) - Air Transport World http://www. atwonline. com/Pdf/worldairlinereport_2002. pdf
The air travel market is currently being re-shaped by the development of existing low-cost airlines. It's been estimated that they can expand their European market share from 5% to 25% by 2010, establishing themselves on the long-term basis.
(Source: International Travel Reports (2003), available on http://www. internettravelnews. com/article/20223 Friday, 28th November 2003)
Low-cost airlines are gearing up to adopt large chunks out of these rivals. In a decade, low-cost airlines could be the prominent form of air travel in Europe. . In European countries, no-frills travel makes up about only 5% of Western european flights, but it is likely to expand to claim a 12-15% share in the next decade.
(Source: BBC News (2002), on http://news. bbc. co. uk/1/hi/business/2038192. stm; Fri, 28th November 2003)