Case Study EasyJet

Topics: Low-cost carrier, Airline, London Gatwick Airport Pages: 11 (3773 words) Published: January 3, 2015


Case Study Analysis: “easyJet”
Overview

Historical Background

The airline was established in 1995 as part of the EasyGroup conglomerate. It was launched by Greek-Cypriot businessman Stelios Haji-Ioannou with two wet leased Boeing 737-200 aircraft, initially operating two routes: London Luton to Glasgow and Edinburgh. In April 1996, the first wholly owned aircraft was delivered to Easyjet, enabling its first international route, to Amsterdam. Until October 1997, the aircraft were operated by GB Airways, and subsequently by Air Foyle as EasyJet had not yet received its Air Operator's Certificate. EasyJet was floated on the London Stock Exchange on 5 November 2000. In 2002 easyJet acquires one of its main competitors “GO”. In 2009 easyJet operated more than 400 routes with over 175 aircraft in 27 countries and for the first time in its history, more than 50% of the passengers came from outside the UK. Present Situation

easyJet delivered record profit before tax of £317 million up by £69 million from 2011. The result was delivered despite headwinds from a £182 million increase in unit fuel costs and ongoing consumer pressure from the weak European economy combined with a £50 million increase in Air Passenger Duty charges in UK, France and Germany. Profit per seat (including fuel) rose by 84 pence to £4.81. This performance was driven by: 5.5% capacity growth and a 1.4 percentage point improvement in load factor to 88.7%. Passenger numbers rose 7.1% to 58.4 million. Total revenue per seat grew by 5.9% (7.5% at constant currency) to £58.51, driven by improved load factors; the annualisation of changes to fees and charges made in 2011; the careful targeting of capacity to markets with the strongest returns potential; improvements to easyJet.com; the success of the “europe by easyJet” campaign and from competitor capacity constraint in the market. Cost per seat excluding fuel fell by 1% for the full year (and grew by 1.8% at constant currency). Unit cost increases were driven by increased charges at regulated airports especially in Spain and Italy and higher load factors. Cost pressures were partially offset by shorter average sector lengths, the easyJet Lean programme delivering significant savings in ground handling and non-regulated airport charges, by the increased proportion of larger A320 aircraft in the fleet and by the exceptionally low levels of disruption in comparison to previous years. easyJet generated operating cash (excluding dividend payments) of £457 million in the year. In light of the continued strong financial performance and cash generation of easyJet and the robustness of the easyJet balance sheet, the Board has decided to reduce the level of dividend cover from five times to three times and consequently the Board has recommended paying an ordinary dividend of 21.5 pence a share or £85 million.

MISSION STATEMENT

To provide our customers with safe, good value, point-to-point 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

Basic Product or Service

Copying, similar operations in the USA, and Ryanair flying out of Ireland, easyJet was one of the first ‘low-cost’ airlines in the UK, flying from Luton to Scotland. It then launched similar low-cost services to continental Europe. The company has transformed the European air travel market and has spurned many rival imitators. A central strategy of being low price is being low cost and that has a number of implications for how easyJet and its rivals are run. Low cost comes from two major principles – exploitation of assets and high operational efficiency. easyJet flies its Boeing 737s for 11 hours a day, four hours longer than BA. Their pilots fly 900 hours a year, 50% more than BA pilots. In terms of operating efficiency, it...
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