EasyJet: The 'Easy' Way to Succeed|Business Strategy|Case Study|Case Studies

EasyJet: The 'Easy' Way to Succeed

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Case Details:

Case Code : BSTR057
Case Length : 16 Pages
Period : 1995 - 2003
Organization : EasyJet
Pub Date : 2003
Teaching Note : Available
Countries : Europe
Industry : Aviation

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"It's a lot of fun. These (established competitors) are big players with high profit margins. I can undercut them. It's also a great way to build a brand."

- Stelios Haji-Ioannou, founder of easyJet.

"He (Stelios) has increased his fortune not by inventing new products and services but rather by making old ones cheaper and, in many cases, better."

- Forbes, July 9, 2001.

"I will be taking lessons in humility now that we are - for the time being - Europe's second largest low fares airline."

- Michael O'Leary, CEO of rival Ryanair, on easyJet's takeover of Go.

Easyjet Becomes The Biggest Low Cost Airline in Europe

In July 2002, easyJet completed its takeover of rival low-cost airline Go for 374 million. Go was a subsidiary of British Airways and one of the major competitors of easyJet. With the takeover of Go, easyJet became the largest low-cost airline in Europe, flying more routes and more planes than Ryanair,1 which was, until then, number one. Commenting on the merger, Stelios Haji-Ioannou (Stelios), the founder of easyJet said, "This is one of the most exciting developments in easyJet's history."2

Michael O'Leary, the CEO of Ryanair went on record saying he welcomed the competition, and affirmed that Ryanair would soon bounce back to reclaim its number one position. By 2003, easyJet (established in 1995 as a low cost airline, committed to the mission of safe, good value, point-to-point air services" and targeting the "leisure and business markets on a range of European routes") had become one of the most recognized brands in Europe. easyJet succeeded because of its commitment to providing a good quality service with a no-frills approach. The airline's operational policies supported its strategy of cost focus and provided a competitive advantage over other high priced airlines. Stelios was also an aggressive marketer who pulled no stops in increasing the popularity of his brand by all available means.

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In the mid-1990s, after the European Union deregulated air travel, a number of upstart airlines came up to provide no-frills travel around Europe. easyJet, Ryanair, Buzz,3 bmibaby4 and Go were some of the airlines fighting for airspace. Low-cost airlines were successful in Europe because of the increasing numbers of people traveling between the different countries in the European Union. Train travel was slow and expensive. Therefore, people looked to airlines to meet their travel needs.

Low-cost airlines identified the business opportunity and offered tickets at about half the price of a train ticket. They thrived on volumes rather than on profit margins. So successful were the low-cost airlines that some of the national carriers also set up low-cost subsidiaries. (Go was set up by British Airways, Buzz by Dutch carrier KLM, and bmibaby by British Midlands Airlines). The low-cost airline industry was characterized by high competition. The standard of service of all these airlines was the same and they competed within the same markets. This made rivalry intense. The low-cost airline industry moved towards consolidation in the early 21st century with Go being taken over by easyJet and Ryanair taking over Buzz.

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1] Ryanair was an Ireland based low-cost airline, set up in 1985.

2] BBC News, May 16, 2002.

3] The low-cost subsidiary of Dutch carrier KLM.

4] The low-cost subsidiary of British Midland airlines.


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