EJ was founded by Stelios Haji-loannau in 1995. Headquarters are based at EasyLand next to Luton Airport. EJ’s current fleet has 122 planes, flying 282 routes on a network of 74 airports and 21 countries. It has 16 bases from which it flies domestic and intra Europe flights. Flights began in November 1995 from London-Luton to Edinburgh and Glasgow using two leased Boeing 737-200 and contracted staff, pilots and cabin crew. The airline grew rapidly through heavy marketing campaigns that grew the customer base.
In October 2000 the company was floated on the London Stock Exchange. The acquisition of Go Airlines in 2002 has allowed expansion into more markets and expand its network. EJ focuses on customers, markets and cost reduction. The airline provides low cost, high frequency, point-to-point air services (www. easyjet) for leisure and business customers within Europe. The generic strategy adopted by the company is overall cost leadership. This is achieved by having a standardised fleet, reducing maintenance, servicing and staff training costs.
They provide point-to-point services, carrying no cargo which allows for fast turnarounds resulting in higher utilisation of aircraft. Ticket sales are made entirely via the internet reducing costs of intermediaries and call centres. There are no onboard meals or services included in the fare. These factors have enabled the company to have one of the lowest costs per unit thus offering low fares to customers yet still maintaining a profit. See Appendix for financial data and statistics Ryanair
Ryanair was founded in Ireland and began its operations n 1986 flying routes from Waterford in Ireland to Gatwick, London. Throughout the 1980’s they rapidly grew their networks but made a significant loss. In 1995 mimicking the Southwest Airlines model Ryanair relaunched and became the first LCA in the UK. In 2003 they acquired Buzz Airlines giving access to 11 more airports in France. They currently have 16 bases and operate 341 routes. The fleet is standardised with one type of aircraft Boeing 737-800 of which currently there are 107 (www. Ryanair) with firm orders for a further 189.
The aircraft are relatively new so are efficient on fuel burn giving off less co2 emissions than older aircraft. Ryanair has much the same business model as EJ but serves more secondary airports as landing and airport fees are cheaper and caters mostly for the leisure customer. The overall cost leadership strategy is also used. Key Success Factors It is important to keep controllable costs to a minimum to keep a competitive advantage in the airline industry. This ensures you are able to offer fares at the lowest possible price yet earn a profit.
Both EJ and Ryanair have strategies to implement this. The offering of such low fares is preventing many of the larger European airlines to enter as they have higher costs so would be struggling to maintain a profit. Ryanairs average fare6 is the lowest at 41 followed closely by EJ 45. 17. Sufficient cash flow is crucial as the industry is not only open to fluctuations in operating costs but also cyclical demand. By having a strong balance sheet the airlines are able to weather any short-term variables such as a fall in demand through winter and sharp fuel prices.
Again both airlines in question have this; EJ has cash and cash equivalents of 861m and Ryanair has 907m. Fuel hedging is a strategy taken to cope with price shocks. This is when fuel is bought in advance for a set price to combat any sharp rises. Ryanair hedged 90% of its fuel prices from June 2006 to October 2006 to offset any risk. Differentiation could increase demand for services from a particular airline. Ryanair is embracing technology and adding mobile phone use to their in-flight services and website and onboard gambling.
This again will bring increased revenue through their ancillary services7. EJ is focusing on businesses that are looking to minimise their travelling expenses. Aggressive marketing, web presence and strong branding are key success factors. Both airlines have strong marketing backgrounds both good and bad. EJ has a strong brand image, through heavy marketing, televised series “Airport” and web presence through their website. However is also well known for flight delays which may sway potential customers given a choice.
Ryanair is steeped in controversy, (McDonald, ITV), following reports of bad customer care and Michael O Leary’s’ marketing tactics which have been deemed as somewhat controversial. Load Factor is important as it is the key to revenue and profitability. If seats are not filled on particular flight revenue is lost forever. Ryanair currently has a load factor of 83% whilst EJ has 84. 8% (2006) so both airlines are utilizing their assets well. Conclusion There is room in the sector for both airlines although there is head to head competition between them for new networks and passengers.
By focusing on the business segment EJ can spread its services and gain a market niche. Bad publicity for customer service is a key issue; this could have an adverse effect as now there are many airlines covering the same routes giving more choice to customers. Gaining market share on the profitable routes is a major key to success, which both companies are aiming for through increasing their capacity and expanding networks by setting up bases across Europe and acquiring more aircraft.
Size and market share are critical for a long-term success which both airlines have achieved. Acquisitions and differentiation are the way forward for both companies deterring further competition as the market will become saturated. The traditional carriers such as BA are now implementing new strategies, cheap flights to gain passenger traffic. It is important that EJ and Ryanair keep their fixed costs low and hedge their variable costs to ensure they can continue to offer low fares.