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Advanced Aviation Technology Ltd.
 
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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.

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Advanced Aviation Technology Ltd.
The Old Post Office,
The Street, Compton,
Surrey GU3 1ED. ENGLAND.
Tel. 44 1483 811 311.

Email: kim.oneil@aatl.net

 
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