Note: this was originally published on 12 October 2013.
USP: The orange one. Europe’s largest no-frills airline. Increases efficiency by outsourcing where possible, cutting costs; short-haul, but serving destinations as far afield as Moscow.
Inspired by Southwest Airlines’ low-cost strategy, Stelios Haji-Ioannou established easyJet in 1995. Initially operating as “the ultimate virtual airline” with almost everyone aside from Stelios being a subcontractor and operating two wet-lease 737-200s from Luton to Glasgow and Edinburgh, easyJet grew exponentially. By the time easyJet floated on the LSE in late 2000, shares were six times oversubscribed. and was soon large enough to take over rivals such as Go and GB Airways, making itself the largest low-cost airline in Europe.
In 2002, Stelios stepped down as Chairman, but continues to be involved as an owner of $2bn of shares, a lone but loud dissenting voice, most recently accusing managers’ plans to order new aircraft as a “vanity project”. His legacy lives on, however, in other ways (see Strategy).
Eighteen years on from easyJet’s beginning, low-cost carriers now make up 17.6% of the aviation market (full-service carriers comprising 59.3%).
Ray Webster was CEO/Managing Director for 10 years, with Andrew Harrison taking over from 2005 to 2010. Now, it’s Carolyn McCall.
Stelios stepped down as Chairman in 2002, but his management style heavily influenced easyJet’s so-called ‘orange culture’: employees are expected to be passionate about their work, eager to help, and to work well in teams. Pilots, for example, should not be averse to helping cabin crew clear planes of litter to improve punctuality. Again, this can be traced to Southwest Airlines’ model.Unlike competitors such as Ryanair, customer satisfaction was considered important.
easyJet targeted three cost-conscious customer segments: the traveller visiting relatives, the leisure traveller on a brief trip, and the entrepreneur/small firm manager.
easyJet heavily invested in marketing, creating enviable levels of brand awareness. They focused on punctuality, low cost,
Flexibility in their strategies is very important, allowing for the mitigation of risk in a volatile market with fluctuating external costs. It also means that they can stay ahead of the competition, including other low-cost carriers, for example by ensuring that they continue to get the highest returns: a recent example of this would be the agreement with Airbus for a three-digit number of A320neo aircraft, which allows for them in practice to take as many or as few aircraft as they happen to need over the next few years, according to demand.
Methods of increasing the airline’s efficiency included differentiating tactics such as direct sales, offering online discounts, no in-flight meals, first-come-first-served seating, and solely targeting “people who pay for travel from their own pockets.” Stelios and Webster also aimed to foster a culture of teamwork and cooperation like that of Southwest Airlines.
easyJet was first floated in November 2000, with FL Group being a major shareholder from 2004 to 2006. By March 2013, easyJet made it into the FTSE 100.
Values: safety, pioneering, one team, passion, integrity, simplicity.
Airbus A319-100 x 138 (+15 operated by easyJet Switzerland)
Airbus A320-200 x 57 (+7 operated by easyJet Switzerland; +69 orders)
Airbus A320neo x 0 (+100 orders; +100 options)
easyJet is the world’s largest A319 operator, and has always preferred to run a single type, however in a rare departure from Southwest’s philosophy, the airline prefers to run relatively newer aircraft to reduce operating and maintenance costs; accordingly, the A320s on order will replace easyJet’s current aircraft. This means that by 2022, easyJet’s fleet size is expected to be 276, but could be anywhere between 165 and 298.
easyJet currently leases 26% of its fleet, whilst its objective is to lease 30% – although this can be attributed to a number of leases being deferred until 2013-4.
For fleet size comparison, Flybe has 41 Dash-8 and 23 Embraer E175/195 aircraft; JetBlue has 127 A320 and 58 Embraer aircraft.
In 2007, easyJet announced plans to develop its own aircraft: the EcoJet. The proposed EcoJet would be a short-haul propfan narrowbody aircraft, holding 100-200 passengers. The intended design would significantly reduce emissions and noise pollution compared to the Boeing 737, and would be constructed mainly from carbon fibre composite material.
It is unlikely, however, that we will see any kind of brand new aircraft development before 2025-30 – whether like the EcoJet or not – as the major aircraft manufacturers are developing their airliners along more conventional lines. What’s more, easyJet have kept very quiet on this front since the 2007 press release.
Hamburg will become easyJet’s second base in Germany in 2014.
easyJet’s five largest bases are London Gatwick (LGW), Milan Malpensa (MXP), London Luton (LTN), Bristol (BRS), and London Stansted (STN) Headquarters are located at Hangar 89, London Luton Airport.
Stansted used to be their second-largest base, but its flights are now being moved to Gatwick and Southend (SEN).
Unlike Ryanair, easyJet prefer to serve cities’ major airports, whether they are closer to their respective city or not. All of easyJet’s services are direct flights.
easyJet will operate Flybe’s Gatwick slots from March 2014, and is considering operating flights from Gatwick to Guernsey.
While easyJet operates fewer flights to popular holiday destinations such as Kos or the Canary Islands than Ryanair, focusing heavily instead on business passengers, its destinations are often closer to where the passenger actually wants to go.
Ownership and Management
Board of Directors
Michael Rake – Non Executive Chairman (since Jan 2010). Has been or is Chairman or Director at various companies, including BT, Barclays, and McGraw Hill. He is currently a member of the Prime Minister’s Business Advisory Group.
Carolyn McCall – Chief Executive (since July 2010). Previously Chief Executive of Guardian Media Group, as well as Non Executive Director of Lloyds TSB, Tesco, and New Look. Awarded an OBE for services to women in business; Woman of the Year 2012. MA in Politics.
Chris Kennedy – Chief Financial Officer (since July 2010). Degree in Engineering & Electrical Sciences. Previously had a long career with EMI, progressing to International CFO. Lots of experience.
A bunch of Independent Non Executive Directors that I won’t include.
Alita Benson – People Director (since June 2011). Joined easyJet in February 2011 as Head of HR Central Services, before which she was in charge of HR Business Partners at T-Mobile and was involved in its merger with Orange. BA in English Lit., postgrad Diploma in Personnel Development.
Warwick Brady – Chief Operations Officer (since October 2010). Joined in May 2009 as Procurement Director. Extensive airline experience, including managing low-cost airlines, early start-ups, and restructuring. Previously CEO at Mandala Airlines, where he transformed it into a low-cost carrier; also previously Chief Operating Officer of Air Deccan/Kingfisher, India’s second-largest airline at the time. Deputy Operations Director at Ryanair from 2002 to 2005.
Mike Campbell – Europe Director. Joined in October 2005 as People Director. Worked at Wedgewood and Fujitsu across the world. His early career was in education and research. BSc in Mathematics, MSc in Fluid Dynamics.
Trevor Didcock – Chief Information Officer (since September 2010). Previously CIO at Homeserve, AA, RAC, with an earlier career in IT, finance, and engineering at companies such as Mars, J P Morgan, and Esso. BSc in Mechanical Engineering, MBA.
Peter Duffy – Marketing Director (since February 2011). Previously Marketing Director for Audi UK, Marketing Services Director at Barclays. BSc Economics, MBA.
Chris Kennedy again.
Cath Lynn – Group Commercial Director (since April 2012). Joined easyJet in 2002 following merger with Go. Cath has been in a number of senior positions in easyJet. Before her airline career, she spent 12 years in retail for Sainsbury’s. In 1998, however, Barbara Cassani headhunted her to manage cabin services, ground operations and customer service for Go. BA in Geography.
Carolyn McCall again.
Paul Moore – Communications Director (since November 2010). Previously a Communications Director for FirstGroup, and Director of Corporate Affairs for Virgin Atlantic during several crises. Paul won the PR Week Award for Crisis Communications in 2002. Paul started his career as a civil servant within the Department for Transport.
Giles Pemberton – General Counsel and Group Company Secretary (since April 2006). Previously in a similar position at Cable & Wireless. LLB, and a qualified solicitor in England & Wales.
In terms of shares, as of November 2012:
easyGroup Holdings Ltd (Stelios Haji-Ioannou) – 26.07%
Polys Haji-Ioannou – 11.11%
Standard Life Investments Ltd – 7%
Prudential Group of Companies (M&G) – 6%
easyJet is, based on a business model that has proven extraordinarily successful (cf. Ryanair, Wizz Air, Flybe… Laker*…). Its yield management system (extracting the most revenue possible from every flight) has worked well, and the airline has returned a significant net profit, year on year. They’ve now broken into the FTSE 100 and have coped well during the recession.
In 2011-2, easyJet took in a total revenue of £3.854bn, or £58.51 per seat. After tax, the profit on this was £255m, or £3.87 per seat.
According to ICAO figures, the (forecast) net profit margin for all airlines worldwide in 2013 is $12.7bn on $711bn revenue, or 1.8%, equating to airlines earning an average of £2.51 per seat.
easyJet’s core profitability has meant it’s been able to cope well with fluctuating external factors such as the price of oil and air passenger duty that have caused problems for airlines such as Flybe, and their Lean programme has ensured that they kept their structural cost advantage.
To go into the issue of fuel further: easyJet estimated that their fuel bill for 2013 would be £30m higher than last year, with non-fuel-related exchange rate movement costing the company another £50m. More generally, fuel prices are expected to stabilise at $127 per barrel – this is a 55% increase from 2006. Their cost advantage makes easyJet capable of absorbing this hit.
For the past five years, load factor, turnover, net profit, earnings per share, and sheer numbers of passengers flown have risen. We can expect statistics on 2012-3 very soon.
Since going public in 2000, easyJet experienced a solid boom for several years, though with some slightly bumpy stats between 2005 and 2008 – although they never stopped turning a considerable profit, and passenger numbers have increased in every year that figures are available. easyJet has more than recovered since. In 2011-2, basic earnings per share increased from 52.5p to 62.5p.
This is all great news for prospective easyJet pilots, as their financial success is leading to expansion, which means more destinations, more flights, more planes, more pilots.
*To be fair to Laker, they couldn’t survive during a recession characterised by double-digit inflation, as well as relying too heavily on a favourable Sterling-US Dollar exchange rate. That and a conspiracy involving several flag carriers’ predatory pricing.
Big: as I mentioned earlier, easyJet are buying 135 Airbus A320neo aircraft, with an option for another 100 – 85 of which are to replace older aircraft. O’Leary recently announced that Ryanair are almost doubling the size of their fleet with an order of 175 Boeing 737NGs (while simultaneously being predictably controversial by denying the existence of climate change), which hold nine more seats each than the A320neo, and plan to carry 110m passengers a year by 2019.
As I write this, easyJet have announced new flights from Bristol to Marrakech and Reykjavik; five days ago, they announced plans to expand their Berlin base and the opening of a Hamburg base in early 2014. The order for new A320neo aircraft is a huge deal.
Terms & Conditions
Depends on how long you’ve been around. Base pay for a Second Officer is £35,919 or £44,901 for a First Officer, with £17.23 per sector. You can expect to be promoted to SFO after flying over 2500 factored hours, and the minimum for the left-hand seat is 3000 factored hours.
FlexiCrew pilots – see below – are on temporary contracts, and while they may be offered permanent employment by easyJet themselves after flying 1250 factored hours, these may still not be full-time, and could be based at one of their European bases.
In February 2013 easyJet made a big deal of offering 330 of their 450 FlexiCrew pilots permanent (but 75%) contracts, but BALPA’s response is critical:
‘easyJet has been dragged kicking and screaming by BALPA into offering a permanent contract to some of its growing casual pilot workforce. But, despite the spin in today’s easyJet announcement, this “take-it-or-leave-it” contract is being denounced by pilots across easyJet.
‘BALPA has been inundated with concerned young pilots, desperate for a job and experience, who will still have to put up with two years on a zero hours contract and uncertain lifestyle. And, because of their £100k loan repayments, these pilots will take home less than a McDonalds employee.
‘And this from a company that is knocking on the door of the FTSE 100 and is hugely successful with a management team rewarded as such.’
It’s worth noting, however, that easyJet now offers better terms to its pilots; details are below.
Do they take low-hour pilots?
Yes: easyJet run a MPL scholarship with CTC, CAE OAA and FTE Jerez, in which they cover the costs of base and type training, as well as an A320 type rating. Provided you satisfactorily complete your training, you would be employed as an easyJet First Officer.
The alternative route for integrated FTO cadets is through their zero-hour contract scheme known as FlexiCrew, in which pilots are employed by their FTO and utilised by easyJet when there is demand. BALPA and easyJet recently re-negotiated the terms of these contracts, which were typically offered for 24 months: benefits of the New Entrant Contract include contracts with agencies such as CTC or Parc being capped at 12 months, after which pilots will be employed by easyJet as a Second Officer on £38,000 per annum; new loan arrangements underwritten by easyJet are also included; this contract also means that pilots will be able to undertake collective bargaining.
Do say: What’s the deal with airline peanuts?
Manager from easyjet just said I couldnt board flight because I criticised @easyJet on twitter before boarding the flight.
— Mark Leiser (@mleiser) September 24, 2013
easyJet (2013, 18 June). Making a strong business stronger.
Young, K. (2013, 6 October). Desert island discs: Carolyn McCall. BBC Radio 4.
Pate, J. & Beaumont, P. (2007). The low cost orange flying machine: The case of easyJet.
Calder, S. (2006). No frills: The truth behind the low-cost revolution in the skies. Virgin Books.