easyJet was founded in 1995 by Stelios Haji-Ioannou with a low-cost business model. By 1999, easyJet had grown to a fleet of 18 planes serving 27 routes across 5 countries in Europe. easyJet was able to achieve significant cost savings through measures like online booking, high aircraft utilization, outsourcing activities like check-in, and maintaining a paperless office. This allowed easyJet to offer consistently low fares to customers while maintaining profitability. The company also employed strategies like price skimming and optimizing schedules to increase load factors and revenue. easyJet looked to continue expanding its low-cost business model but recognized risks in relying solely on this approach.

1. easyJet
The Web’s Favorite Airline
Presentation Submitted by Group 8

2. Agenda
• History of easy Jet
• Market size and Profitability
• Cost structure
• Consumer expectance management
• Scheduling
• Value delivery
• Diversification to other business

3. Birth of easyJet
• Founder: Stelios Haji-Ioannou
– Serial entrepreneur
– Low cost model
• Internet Cafes, Rental Cars, Internet booking etc.
• November 1995
– Started with two leased aircraft
– Staff of reservation agents
– Advertized on
• “Fly to Scotland for the price of jeans”
• Early 1998
– Fleet size 6 Boeing 737-300
– Flight on 12 routes in 5 countries
• November 1999
– Fleet size 18 Boeing 737-300
– Flight on 27 routes in 5 countries

4. Market size and Profitability of
European Low cost carrier
US European
Total Market size X 1.4 X
Low cost passengers 0.24 X 0.03 (1.4 X) – 0.05 (1.4 X)
= 0.042 X – 0.07 X
With growth of 300% 0.168 X – 0.28 X
Business players left 0.021 X – 0.035 X
• Thus US market is more lucrative than European low cost market
• Other facts
• 60 of 80 carriers were bankrupted in 1992-96.
• Analyst predicted growth rate of 300%.
• Market of business traveler were 50% of total aviation market and left
out.

5. Cost compilation
• Cost structure
– Left size are common
cost
– On Right were cost that
were averted by easyJet.

6. Cost structure
Heading for cost reduction Savings
Meal services (per passenger) £14
Alternative airport (per passenger) £10
Internet Sales 25% of operating cost
Saving on agent commission £0.80
High Aircraft utilization
1. In terms of aircraft cost 6 / 11.5 = .52 aircrafts
(Less number of aircraft needed)
2. Same aircraft fleet Low maintenance cost
Income from missed flight on one route per flight
Cost of travelling on London – Glasgow = £29 (original fare) + £10 ( re-ticketing) = £39
Total revenue = £39 * 0.04 ( percentage of average miss flight) * 149 (capacity of aircraft) = £ 234
Profit margin (per passenger) £1.50 (seems less)
Cost of change in flight £10
No reimbursement for missed flights

7. Cost from London to Geneva
Cost Items £ % • Most of the activities
Airport Charges 600 15% including a few vital
Aircraft Ownership 560 14% activities were outsources
ATC 480 12% – Check in
– Consumer Information
Crew 400 10%
desk etc.
Marketing / Sales 400 10%
• Also the office and work
Fuel 400 10% place maintained low-cost
Maintenance 400 10% – No personal secretary
Overhead 400 10% – Paperless office
Ground Handling 400 10% • High turnaround time
Total 4000 100%

8. Customer expectancy management
(Exhibit 5)
• Price skimming is used Week Outbound Inbound
4 £ 49 £ 69 - £ 99
to tap in customer when
3 £ 49 £ 69 - £ 99
and where available (6 seats )
• Every available seat 2 £ 59 (sold out)
1 £ 64 (2 seats (sold out)
when ever available was left)
booked to increase load 1 day £ 69 £ 139
factor

9. Schedule to favor
London -Glasgow London -Zurich
100% 80%
80%
Percentage
60%
Percentage
60%
40% 40%
20%
20%
0%
0-15 16-30 30-60 60-180 0%
0-15 16-30 30-60 60-180
Late
Late
Easy Jet British airways
Easy Jet British airways Swissair
London -Mallorca
100% • Sticking to schedule allowed to
80%
turn around in short duration and
Percentage
60%
40% hence increase number of flights
20% required.
0%
0-15 16-30 30-60 60-180
Late
Easy Jet Go Virgin

10. Value for customer
• Low fare travel
– Due to high utilization of aircraft
– Low maintenance cost
– Low cost of distribution of tickets
– No frills
– On schedule
– And price skimming/ revenue management for
optimal price that can be charged
– High load factor

11. Diversification plans
• Low fare business
– Low fare business is risky because
• Can be eaten up by bigger players if don't put up high
volumes
• Some business like of air travel needed high sunk or
entry barrier to get into the business which takes time to
recover
• May be caught up with a niche market that may die
down soon