easyJet Working to Turn Europe Orange

A lot has changed in the 15 year period since Sir Stelios Haji-Iaonnou first approached officials at London Luton Airport and sold them his idea of launching a low-cost carrier with fares cheaper than a pair of jeans. The idea itself was hard to believe but when they discovered that the aircraft were to be painted orange and would have the airline’s call centre telephone number emblazoned across their fuselage, nobody would have blamed them if they turned the flamboyant businessman away without a second thought. But they believed in the idea and the ambition of the entrepreneur a view that has now seen easyJet grow into one of the biggest airlines in Europe and one of the most recognised brands in the world.

Like all stories there have been both good and bad times and as the industry has faced some of the most difficult operating conditions since the dawn of flight, easyJet has emerged as a carrier adaptable to market changes. There have been recent boardroom rumbles, changes in senior management, but now under the control of former Guardian Media Group, Chief Executive Carolyn McCall OBE, the relationship with the airline’s founder is now more stable and shareholders can look forward to a return on their investment.

Carolyn McCall was appointed as successor to Andrew Harrison in March 2010 after the former RAC executive made the move from budget airlines to budget hotels by joining Whitbread, the company that owns the Premier Inn chain. In the months that have passed she has firmly positioned herself at the helm of the carrier and brought some stability to the business, positioning it well to develop as the passenger market begins its recovery. The HUB sat down with Carolyn McCall at the headquarters of Airbus in Toulouse, France last week as she took delivery of the airline’s 200th Airbus, when she discussed some of the key issues impacting the airline and her aspirations for development.

One key area of discussion was capacity growth for the coming years; a period she acknowledged would “not be the easiest period for any airline”. The airline has previously revealed its intent to expand at a rate of seven per cent per annum, but she said there is now great scope to revise this upwards or downwards depending upon market conditions. With fuel prices fluctuating and concerns throughout the EuroZone about mounting state debt, she noted that securing some form of flexibility has been essential for the company.

"We're currently in the middle of the planning for the next two to three years. There are various levers we can use to control this such as lease extensions or returns, or even the deferral of orders,” she said. This project remains “a work in progress” according to McCall, but she noted that growth can easily be brought down to just two per cent per annum if necessary or up to ten per cent if required. “We now have this flexibility within our fleet,” she said, confirming that the airline has yet to formalise the delivery dates of the 15 additional Airbus A320s it ordered earlier this year. “These are due between 2013 and 2015 but we have good flexibility as to when we will actually receive these aircraft,” she said. Further flexibility is afforded through the retirement of some of its older aircraft. It now has just two Boeing 737-700s left in its fleet (based at London Luton) and these will depart in the next financial year (October 1, 2011 – September 30, 2012), while some of its early A319s are also now leaving its fleet.

As part of its fleet fleet planning study, the carrier is also considering modern generation airliners such as the A320neo, although McCall acknowledged that it is a little too early to discuss such options. “If this aircraft can bring the benefits that Airbus claims then we will certainly look seriously at the ‘neo’ but we are still in the early stages of our development plan,” she said.

The tight control on capacity will also spread across the airline’s route network. Carolyn McCall warned earlier this year that the airline would take a much tougher stance on route profitability and would not be afraid to drop routes and allocate resources elsewhere. “In five years time we would like to see easyJet as Europe’s preferred airline and I firmly believe we can reach that goal, but to achieve this we have to have a better focus on resource allocation in terms of profitable growth,” she explained.

The airline has already suspended flights to Helsinki, Finland and other points across its network and McCall warned that other routes could follow. “If you are keeping your fleet flat you need to make sure you are deploying those resources as well as you possibly can. In the past you may have let a route grow across three to four years, but now we can’t always accept that timescale,” she said.

According to McCall the main focus for development will be entirely about focusing on the markets where the airline knows there is a good growth potential. “France is a very good example,” she highlighted. “We only have a relatively small market share against a legacy incumbent in a country where the low-cost penetration is just 24 per cent, about 26 per cent short of the market average.” Italy, Spain and Switzerland are all other markets where, McCall acknowledges that easyJet can take a profitable share, with Germany potentially following at a later stage.

Under its current business plan, easyJet will operate a fleet of 204 aircraft at the end of its current financial year on September 30 and will potentially boost numbers to 214 by the same date in 2012 through a mix of new deliveries and retirements. The airline now operates from 19 bases and 130 airports across 30 countries, with more than 557 routes.

Speaking at Routes Europe in Cagliari, Italy last month, Alan McIntyre, Head of Network & Scheduling, easyJet, confirmed that the airline’s growth will come from a mix of increasing route frequencies, connecting existing airports within its network and adding new destinations. The airline has now formalised its network for this winter and is currently working on its development for summer 2012, where discussions are now underway with airport partners. Moving forward some aircraft remain unallocated for winter 2012/2013 and exploratory discussions are now bring opened with interested partners.

easyJet has overcome a number of obstacles during the recent economic recession and in some ways has grown up as a carrier. It is now introducing more frills for business travellers, an area of the market that it expects to grow from an existing 18 per cent share to 23 per cent over the next couple of years, as it thickens up many of its city pair routes by offering greater frequencies. There has even been talk of the airline introducing allocated seating but McCall acknowledged that this is not currently possible with the airline’s existing booking system. “We don’t have the technology to do this. We will review it but need to make sure we can deliver it operationally and ensure that it will not affect our punctuality in any way and our turnaround times can remain tight,” she said. “Ultimately there has to be real commercial benefits. It needs to be a real win on the commercial side.”

The launch of easyJet Holidays has also seen the carrier expand its visibility in the leisure market, bringing flexible options to passengers. “Not everyone wants to be flying in the middle night like some others offer in this business,” said Paul Simmons, easyJet’s UK Director. However, McCall is quick to play down talk of the airline adopting a hybrid business model. “We are not a hybrid airline. We are a low-cost operating model that is aiming to be distinct,” she explained.

The simple operating model combined with its proposition of offering consumers the best value fares to convenient fares to convenient airports means that easyJet is certainly well positioned for future success and to achieve its goal of becoming 'Europe's preferred airline' by turning the continent orange.

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