1. Introduction and History
A successful illustration of a European no frills air hose is easyJet. Stelios Haji-Ioannou ( Greek ) founded the company in 1995. It is based on the low-priced, no-frills theoretical account of the US bearer Southwest. The construct of easyJet is based on the belief that demands for short-haul air conveyance is monetary value elastic. That means, if monetary values for flights are being reduced, more people will wing. Traditionally air hose constructs are based on the premise that air hose traffic grows in line with the economic system and that cutting monetary values will merely take to a lessening in grosss. With the debut of the ‘no-nonsense ‘ construct to the European market, after its deregulating in 1992, easyJet has proven this theory incorrect and goes from strength to strength by really increasing the size of the market and more late by taking away riders from the big leagues ( see www.easyjet.com for rider figures, fiscal information and employee statistics ) . Today, it offers 125 paths from 39 European Airports ( see www.easyjet.com for path launch day of the months ) , with Luton, Liverpool, Geneva, Amsterdam as base airdromes[ 1 ]and is runing 72 aircrafts ( November 2003 ) .
November 1995: easyJet starts flights from Luton to Glasgow and Edinburgh with to leased Boeing 737-300 with a capacity of 148 seats at a monetary value of ?29 one manner. Seatings are being sold over telephone reserve system merely. In 1996 easyJet takes bringing of its first entirely owned aircraft and goes international with first services to Amsterdam from Luton. One twelvemonth subsequently easyJet launches its web site, easyjet.com which will from 1998 onwards form an built-in portion of the concern construct ( and which provides for some 90 % of the engagements today[ 2 ]) . In August 2002 easyJet expands its fleet and paths by geting British Airways ‘ low-cost subordinate Go. In October 2002 the air hose marks a trade to buy 120 Airbus, which will ease the air hose ‘s on-going growing scheme. Up until now, one of the basiss of the easyJet ‘s low-priced theoretical account has been to run a individual aircraft type fleet – which so far has been the Boeing 737 series – because uniformity means efficiencies in preparation, care and operating costs. However, easyJet ‘s new trade with Airbus is being viewed by the company as “ stupefying ” as the extra costs, which incur through the new type of aircraft are “ far outweighed by the fiscal benefits of this trade ” .
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easyJet argues that both Boeing and Airbus aircraft have loosely similar features but that a wider aisle on A319 will do it quicker to ship and debark, that it has an excess place on board ( 150 vs. 149 ) and that overall the A319 will take down costs by about
10 % compared to the current mix of aircraft, which will lend to lower ticket menus.
( See appendix 1 for Stelios Haji-Iannou ‘s other easyGroup endeavors ) .
2. The Mission Statement of easyJet
To supply our clients with safe, good value, point-to-point air services. To consequence and to offer a consistent and dependable merchandise and menus appealing to leisure and concern markets on a scope of European paths. To accomplish this will develop our people and set up lasting relationship ( see www.easyjet.com )
The footing of an administration ‘s mission statement should reply the inquiry “ What concern is the company in? ” easyJet is making this by saying that it provides ‘point-to-point air services ‘ to its clients. That clearly underlines that easyJet is non in the people or nutrient concern, neither in the service concern as such, but in the mass-transportation concern, and as such its theoretical account is based on cost efficiency of the mass-transportation concern. Furthermore, it reflects several determinations about what sort of air service easyJet wants to supply. Obviously, its focal point is on ‘European paths ‘ , aiming concern and leisure travelers likewise. Furthermore, it aims to offer ‘safe, good value ‘ transit. easyJet ‘s mission statement besides gives information on the ‘How to acquire at that place? ‘ by seting accent on its ‘people ‘ and ‘suppliers ‘ . What is losing from the statement is the importance of the client ‘s point of position, which could be expressed by stating, for case, ‘we want to be recognised asaˆ¦. ‘ . Besides, as the mission statement is the bedrock for the selling program it should be more quantifiable, as to how much market portion easyJet purposes to derive in the hereafter, for illustration.
3. Competitive Analysis
In order to analyze the air hose industry in item, it is utile to use Porters five competitory forces.
The menace of replacements
Minimal menace from other manners of conveyance like train and auto on domestic paths. Normally the clip and cost advantage of the low-priced bearers far outweigh the increased comfort and flexibleness of trains or autos ( e.g. on the path Luton/London to Glasgow a train takes around 6 hours and costs around ?80 while a easyJet plane takes merely one hr and costs around ?29 ) .
On international paths distances are normally excessively great for auto or train to be an alternate to air travel, expect possibly from London to Paris, which can be reached by Euro Star.
The menace of new entrants
High capital demands negate menace to some extent. easyJet was started with a loan of ?5 million, with 2 leased aircraft, but required a ?50million investing raised by debt and equity in twelvemonth two to rush enlargement and purchase 4 new planes.
The UK low-cost market is rather mature in comparing to the remainder of Europe and easyJet, as the biggest operator has rather a comfy place. However, enlargement into new European markets might turn out more hard as established ; hard currency strong holiday houses like TUI are puting up their ain low-priced operations ( see information about Hapag Lloyd Express, www.hlx.com )
Lack of take-off and landing slots makes it hard for new bearers to happen suited airdromes.
Loss leader is required in order to fall in the low cost market.
The power of providers
The monetary value of air power fuel is straight related to the cost of oil, as an single company easyJet does non hold the power to change this.
Airplane makers are concentrated in the industry, with Boeing and Airbus supplying the bulk of commercial planes and with easyJet runing one type of aircraft until late. easyJet ‘s trade with airbus nevertheless shows that favorable understandings can still be reached. The dependance on trim parts from one maker could present a hazard.
The more easyJet expands the more power it will posses over its providers
The power of purchasers
Buyer power within the air hose industry – and particularly the low-priced market – is comparatively strong, as clients will frequently shop around for the better monetary value, peculiarly with the dependance that the low cost air hose has on Internet gross revenues. Price disagreements can be easy found and exploited by the consumer, intending that the operator must maintain a regular cheque on monetary values.
Need for client trueness because of low shift costs
Customers have the Civil Aviation Authority ( CAA ) on their side which provides:
1. protection against the effect of travel organizer failure for people who buy bundle vacations, charter flights and discounted scheduled air tickets ; and
2. licences air hoses and ensures conformity with demands of European and UK statute law associating to fiscal resources, liability and insurance of air hoses.[ 3 ]
Rivalry among existing houses
Ryan air, BMIbaby, MyTravelLite and Buzz are major rivals of easyJet in the UK. Virgin Express, Hapag Lloyd Express, Germanwings and Air Berlin already are or might go rivals in the visible radiation of future enlargement programs. Ryanair is the lone one of these so far to hold succeeded and shown a uninterrupted annual net income ( see appendix 2 for fiscal informations ) .
A turning figure of circuit operators ( like Thomas Cook and TUI ) are selling air merely scheduled seats to cut down monetary values[ 4 ].
British Air passages and other traditional bearers out of the UK are rivals as good but on a lower graduated table as they target different market sections ( see appendix 3 for more item ) .
4. Selling Mix
Low monetary value is a cardinal component of the trade name.
Uses differential pricing ; off-peak traveling and engagement in progress makes a ticket less expensive.
Discounts for tickets booked online.
“ no-frills ” , point-to-point air services
besides auto hire on its web site ( usage of the Internet for roll uping merchandises ) and links to other easyGroup web sites ( see appendix 1 for other easyGroup endeavors ) .
Internet engagement system ( over 90 % of engagements ) .
Telephone reserve system.
Highlights its figure one place among Europe ‘s low-cost air hoses ( publicizing strap line: “ Size affairs! “ , motto: “ the web ‘s favorite air hose ” )
Advocates internal selling, originative work done in-house.
“ No Bullshit ” attack ( Stelios ) , humourous, attention-catching runs ( e.g. the giving off of free tickets on Go ‘s inaugural flight and Stelios protesting in a orange boiler suit against an addition of airdrome fees at Luton in a subdivision of Barclay ‘s bank which owns the airdrome ) .
5. SWOT – Analysis
5.1. Internal Analysis
Image, distinction on monetary value and trade name.
Is financially successful.
Is being seen as an advanced and flexible administration.
Has a strong e-business.
Is portion of the pool that has been awarded to run UK ‘s air traffic control system ( NATS ) .
Has no client keeping policy
Has small or no range outside of Europe.
Lack of service, flexibleness and concern focal point ( such as frequent circular programmes e.g. ) make the low-priced theoretical account unappealing for most concern travelers.
The two drivers of growing, the focal point on monetary value and the focal point on convenience ( frequent flights, few connexions, more nearby airdromes e.g. ) are making their natural bounds. Differentiation from at that place remains to be hard.
easyJet ‘s ain success makes it hard to enroll and develop staff rapidly plenty.
5.2 External Analysis
Experts predict great potency for future growing in the following old ages ( see appendix 4 ) .
The current recession is favorable as people and concerns are more cost-conscious.
More full-service air hoses may retreat from the regional market to concentrate on more profitable long-haul paths go forthing the market to the low-cost operators.
The short-breaks market, an of import market for easyJet grows more quickly than the UK travel market as a whole[ 5 ].
Reduced aircraft monetary values
Troubles to spread out as feasible new paths from London are scarce.
Competition is likely to escalate, given the concentrated market and the deficit of other options[ 6 ].
Increased competition is likely to take to greater troubles in demanding inducements from communities, like the really low fees easyJet received at Luton[ 7 ].
Companies cut on concern travel in times of economic downswing and because of new time-consuming security steps travel replacements like videoconferencing are introduced[ 8 ].
6. Situational Analysis
easyJet seems to be positioned really good with experts foretelling first-class growing chances for the low cost-sector. Given the concentrated market and the deficit of other options in the UK, competition is likely to escalate – necessarily followed by consolidation, an early mark of which is easyJet ‘s purchase of GO. The UK market offers small growing chance, therefore concentration will be on the Continental market, a measure frontward in this way is puting up a major new base at Berlin, with flights from 11 European metropoliss[ 9 ], and perchance every bit good on Eastern Europe. Focus remains on pricing Strategy and enlargement of its path web. Promotion needs to carry people that it is safe to wing
and set up easyJet as Europe ‘s largest low-cost bearer ( as easyJet is already making in its advertizement: “ Size affairs! ” )
7. Plague Analysis – Selling Plan
Plague analysis for easyJet for the following 5 old ages
The undermentioned factors are likely to hold an influence on the air hose industry and should hence be taken into history when explicating a Selling Plan for easyJet.
Menace of war in the Middle East
The Air Miles strategy is non considered as a nonexempt fringe benefit by the authorities in the manner that company autos are taxed which may alter to let easyJet to vie on more equal evidences with the likes of BA.
A EU east-enlargement may supply entree to viable, new markets.
Likelihood of increasing fuel costs, congestion and other environmental limitations, every bit good as the chance of higher security and insurance costs to reflect the hazard of terrorist act.
As the recession is likely to last for some more clip, concern travelers will maintain an oculus on their travel disbursals.
Globalization should go on to hike traffic in the long-run.
The debut of the individual currency in Europe is likely to convey more concern to easyJet as Europe becomes more incorporate.
To win over the Gallic and German populaces might do jobs as there appears still to be a general reluctance to utilize recognition cards over the phone and Internet[ 10 ].
The populace are general rather friendly to the chance of inexpensive flights. However they may experience begrudged where they see publicities found in newspapers where flight are for ?10 merely to happen that the existent cost is much higher for the peculiar clip or twenty-four hours they wish to wing on.
A cardinal issue will be the extent to which technological promotions – such as the usage of the Internet on distribution and cost synergisms from industry consolidation – can countervail upward force per unit areas on monetary values and costs.
easyJet has to maintain path of technological developments in the field of e-commerce and aircraft industry in order to derive a competitory advantage.
8.1 Strategic issues confronting the air hose industry
The face of air power is bit by bit germinating. The long-standing jobs of the industry
– in the signifier of big Numberss of web bearers and significant over-capacity in many markets – were exacerbated by the events of September 11th ( see appendix 5 for a post-Sept. 11th overview ) . This is likely to pave the manner for some acceleration in the procedure of air hose restructuring and consolidation. Experts believe that there is non room for the current battalion of bearers in Europe, and that these will finally be whittled down to three or four major air hoses, with the others absorbed or restructured to concentrate more on regional traffic. This besides represents an chance for ‘no-frills ‘ bearers to increase their market portion. Along with this, some restructuring of the industry ‘s complex and outdated regulative system will be required.
In the longer term, tendency growing may itself decelerate bit by bit as the large air travel markets mature. In add-on, falling outputs, which have boosted air travel growing in the past, can non be relied upon to prevail, at least at the rate they have for the past decennary or so. If cost tendencies are less favorable – for illustration because of increasing fuel costs, congestion and other environmental limitations, every bit good as the chance of higher security and insurance costs to reflect the hazards of terrorist act – the range for lower outputs would be less, and this might cut down future growing tendencies. A cardinal issue will be the extent to which favorable cost tendencies – such as the impact of the Internet on distribution costs and cost synergisms from industry consolidation – can countervail these upward force per unit areas on monetary values and costs. The full-service air hoses, saddled with large webs and strongly nonionized work forces, can non easy encompass the direction schemes of the no-frills air hoses. Furthermore, their range for defensive amalgamations is limited by competition policy. The ability of international air hoses to spread out is limited by ownership limitations ( In the US aliens can non have more than 25 % of a national air hose, in the EU the limitation is 49 %[ 11 ]) .
The “ no-frills ” market within Europe is immature comparative to that of the US. The
sector histories for merely about 5 % of all intra – European capacity, though the portion
is much higher in the UK domestic market and on services between the UK and
Europe, closer to 20 % . Further strong growing is expected over the following 2-3 old ages as
new operations start up, and new finishs are added to the bing bearers ‘
webs. However as the UK market becomes saturated, these bearers are likely to
concentrate their development at Continental European hubs. The experience of the US market suggests that deregulating will be followed by industry consolidation. So far there has been limited advancement in this way but many are sing the current crisis as the accelerator necessary to wholly reconstitute the European air hose industry. In the US the industry has consolidated into seven major bearers, which carry over 80 % of rider traffic of US air hoses. Europe is far more disconnected with the tantamount figure for the seven European big leagues at merely 47 %[ 12 ].
8.2 easyJet ‘s Future
easyJet has to see whether it should react to new entrants by yielding niche-segments or by viing sharply on monetary value, paths and service in an effort to drive the entrant out of the market. To do the strategic determination market research on the size of different combinations of pricing and service is needed. easyJet besides needs to cognize how much it costs the rival to function, and how much capacity the rival has for, every path in inquiry. Finally, the new entrant ‘s competitory aims are of relevancy to expect how it would react to any strategic moves easyJet might do. By obtaining these information residuary uncertainness would be limited, and the incumbent air hose would be able to construct a confident concern instance around its scheme[ 13 ]. It is advisable that easyJet marks chiefly leisure travelers as concern frequently demand frequent flights to a broad scope of finishs, seek quality service and frequent circular programmes, and are willing to pay a premium for these benefits. Besides, seeking to appeal to widely different client demands runs counter to the overall tendency in service industries, in which typical attacks, tailored to different clients, have by and large come to rule[ 14 ]. No existent chance offers the long-haul concern as it is really different, both technically and in client demands, to short-haul travel. easyJet should go on to concentrate on monetary value and effort to link the points in its web, which cost less than opening new metropoliss. Thereby, it needs to do certain that a growing in its web and fleet does non take to higher operating costs. It should besides see seting more accent on direct selling by e.g. presenting a client keeping strategy. To distinguish its trade name further on promotional lines, easyJet could present a CRM ( cause related selling ) strategy, developing a repute for being a ‘caring air hose ‘ , e.g. by selling portions in forest aid programmes over its web site, roll uping foreign currency on flights for charity etc. , thereby giving its riders ‘a sense of psychological comfort and wellbeing ‘[ 15 ]when they choose to wing with easyJet. Overall, easyJet has to develop a realistic and accurate appraisal of the market-niche to be served. A grim committedness to quality service and cost control is every bit of import as the subject to set up a growing program ( see www.easyJet.com for easyJet merchandise life rhythm and selling scheme ) .
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Under the easy trade name Stelios Haji-Iannou has moreover established and Internet auto rental service ( easyRentacar ) , a concatenation of Internet coffeehouse ( easyEverything ) , a fiscal services site ( easyMoney ) , a portal site for deals on the net ( easyValue ) and a free e-mail service ( easy.com ) . In all his ventures he is utilizing “ yield direction to pull out the ideal border from each client ”[ 16 ]and maintain costs down. Furthermore, give direction “ can assist to better usage monetary value in the selling mix to outdo make the most clients ”[ 17 ]. However, there are no cross-shareholdings between easyJet and these other easyGroup companies. easyJey operates independently from the other companies although some cross-marketing understandings do be. Besides, consequences of the non-airline concerns have been mixed as they have lost ?75m in three old ages[ 18 ].
Net income for Ryanair
April – September 2002 Year-on-year addition
151m a‚¬ ( ?96m ) 71 %
Beginning: Tran, M. ( 2002 )[ 19 ]
See hypertext transfer protocol: //www.ryanair.com/download/morganjune.pdf for existent informations.
Compare Airline Traffic Data ( Europe ) – Air Transport World hypertext transfer protocol: //www.atwonline.com/Pdf/worldairlinereport_2002.pdf
The air hose market is presently being re-shaped by the enlargement of bing low-priced air hoses. It has been estimated that they will spread out their European market portion from 5 % to 25 % by 2010, set uping themselves on a long-run footing.
( Beginning: International Travel News ( 2003 ) , available on hypertext transfer protocol: //www.internettravelnews.com/article/20223 Friday, 28th November 2003 )
Low-cost air hoses are pitching up to take big balls out of their challengers. In a decennary, low-priced air hoses may be the dominant signifier of air travel in Europe. aˆ¦ . In Europe, no-frills travel histories for merely 5 % of European air travel, but it is likely to turn to claim a 12-15 % portion in the following decennary.
( Beginning: BBC News ( 2002 ) , available on hypertext transfer protocol: //news.bbc.co.uk/1/hi/business/2038192.stm ; Friday, 28th November 2003 )