The easyJet Internet Business Model
Kim O'Neil,
Advance Aviation Technology
Limited
September 2001.
Abstract
Most companies have a website to promote their
products and create a positive corporate image, but it makes sense to ride the
wave of Internet opportunity rather than simply surf the Net. easyJet's
approach to web marketing, which has involved scrapping its telephone sales
operation, is moving to an Internet-only approach. This has caused much upset
in the aviation industry, from low-cost to high-cost airlines.
1. Introduction
Many companies treat their websites as advertising,
which, whilst important, is only one small aspect of this medium. This approach
is just another manifestation of the 'corporate blues' – a preoccupation
with image, rather than with doing business.
However, there are companies that have made the
Internet the core of their business, and easyJet is one such company. easyJet
stakes its claim in the market as a low-cost airline operator, yet operates
quite differently from one. Traditional low-cost airlines fly old aircraft on
routes that the major airlines are not interested in, which may be cheap to
buy, but are not cheap to operate.
easyJet intensively operates modern aircraft on
competitive routes – they currently own 21 aircraft and by 2004, the fleet
will consist of 44 aircraft with an average age of less than four years. These
aircraft operate on 31 routes between 16 European destinations, and as the
fleet grows, so will the number and intensity of these routes.
As easyJet's fleet has grown, so have passenger
numbers: from a mere 30,000 in 1995 to a respectable 5.6 million by the end of
September 2000. During this period, profits have grown to £22.1m on
revenues of £263.7m.
2. Business Model
easyJet is not afraid of competition, simply because
it has developed a business model that ensures a built-in business advantage.
It hacks away at costs and overheads wherever they occur, which sometimes means
taking an unconventional approach.
Every effort is made to cut unnecessary costs. Travel
agents are considered an overhead, so passengers must book directly by
telephone or on the Web, where additional discounts on the ticket price may be
obtained.
The end result is an airline operating on sound and
competitive business principles that has simply learned to think 'outside the
box'. What makes it really go with a bang, is the way that the Internet has
been incorporated into the easyJet business model.
3. On the Web
easyJet has based its ticket sales on the Web. At
present, over 75 per cent of its sales are sold directly through the website.
This is all the more remarkable, given known consumer hesitation about buying
anything online.
When booking a flight, the passenger is not only
offered a choice of flights, but also the best fare available on each flight.
Moreover, not only are the offered fares lower than those of the competition,
but they can sometimes seem ridiculously lower.
Fares are quoted one way, which means that the best
price for the most convenient flight can be obtained both ways, optimising the
round-trip cost for the passenger. This approach compares very favourably with
the inflexible pricing and ticketing structures that are offered by
conventional airlines, and further reductions are offered for flights that are
booked on the Web.
4. Online Experience
The passenger's online experience reinforces
confidence in the booking process. A five-step approach is taken, allowing the
passenger to exit at any time. The booking form remembers essential passenger
information, so irritating re-entering of basic details is not necessary if
passengers want to experiment with dates and times. It will also remember these
details from one booking session to the next for registered users, speeding up
the whole process for the customer.
Once a passenger has booked their ticket for the first
time, they can directly influence the ticket price, and choices are offered to
them that are not available elsewhere. As a result, there seems little doubt
that easyJet's customers enjoy their online experience, so ensuring that they
come back regularly and often.
5. Web Strategy
The company is so confident in its Web strategy, that
it is now seems ready to take the next step in this process and become the
first 'Web-only' airline, completely doing away with telesales (something
already achieved by easyRentacar). Its aircraft no longer carry the telephone
booking reservation number, but only its website address.
easyJet maintains its confidence in this approach,
based on the real and dramatic growth in Web sales. The fact that this Web-only
approach is possible is a reflection of the way that consumer attitudes have
developed over the last decade, and the fact that the Internet and mobile
telecommunications technology have increasingly become integrated into everyday
life.
6. The easyJet Philosophy
easyJet consistently breaks new ground. In developing
its business, it has scored many firsts – particularly in its exploitation
of the Internet. Yet there is more to easyJet than meets the eye. Underlying
its actions is a business philosophy of efficiency and cost cutting. It has
shaped its operation to address the mass market, and has harnessed and
anticipated both passenger demand and consumer preferences.
The result has been rapid and sustainable growth in
the face of stiff competition from the big guns. It has broken the mould
assumed for low-cost airlines, operating a modern and expanding fleet
intensively on competitive routes. easyJet strategies are bold and adventurous
rather than risky. In fact, the company takes few real risks, as it applies
sound business principles whilst carefully exploring the market.
Author: Kim O'Neil
Kim has particular expertise in regulatory affairs and
in satellite navigation and telecommunications services. He is working on
ADS-B, fleet management, runway incursion and data-link applications. He has
considerable expertise in ATS safety and air traffic management systems. Mr
O'Neil previously worked for the safety regulation group of the UK CAA, as head
of engineering requirements. |
