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easyJet
The Web’s Favorite Airline
      Presentation Submitted by Group 8
Agenda
•   History of easy Jet
•   Market size and Profitability
•   Cost structure
•   Consumer expectance management
•   Scheduling
•   Value delivery
•   Diversification to other business
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
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.
Cost compilation
• Cost structure
  – Left size are common
    cost
  – On Right were cost that
    were averted by easyJet.
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
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%
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
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
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
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
Easy jet

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Easy jet

  • 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