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Company Background
Started by Stelios Haji-loannou in November 1995 . Headquarters easyLand @ Luton airport, London. Initial investment - 5 million. Began operating easyJet with 2 leased aircraft. Staff- Mostly teenagers. Most airline operations were outsourced. Followed the concept -"to offer low-cost airline service to the masses.
Outsourcing
Done for lowering costs and increasing efficiency. Apart from planes, pilots, cabin crew, marketing/sales people all other functions were subcontracted. Helped in maintaining 20 minutes turnaround and remaining ticketless. Workshops/simulations were held for subcontractors and were evaluated on quantitative and qualitative grounds.
Initial Days
Started services from Luton instead of Heathrow/Gatwick airports. First flight was from London Glasgow @ 29. Advertising campaign Fly to Scotland for the price of a pair of jeans! Stelios was inspired by the business model of Southwest Airlines:
Single aircraft model Point to point short haul travel No in-flight meals. Rapid Turnaround time High Aircraft utilization
Suffered losses of 3.3 million in 1996/97. Reported profit for the first time in 1998 amounting to 2.3 million.
Competition
Ryanair
Established in 1985 No Frills Carrier Used services of Travel Agents, issued tickets, participated in global distribution system Fleet of 20 Boeing servicing 26 destinations.
GO
Established by BA in 1998 No Frills Carrier Was founded when acquisition offer to easyJet turned down, to defend BA market share Copycat of easyJet and considered to be subsidized by BA
Competition contd.
Virgin Express
Established in 1996 Formed alliance with Sabena Airlines, flag carrier of Belgium. Provided short to medium haul jet service.
Buzz
Established in 1999 Started by KLM based at Stansted airport. Covered new destinations.
Challanges
Whether to take privately held company public?
Management style of Stelios not suited for this
Analysis
Is budget airline segment attractive place to compete?
Budget airlines charge less so profit margin is less Employees have to be paid as per industry std. But cheaper tariffs help steal greater no. of customers compensating low profit. However, as per the case 60 out of 80 low cost carriers got bankrupt. So , in order to leverage this segment companies have to operate effectively.