LOW COST Airlines - Ready for Takeoff in India

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Authors: Sanjib Dutta
Senior Faculty Member
ICMR (IBS Center for Management Research).

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Easy Jet Contd...

easyJet also focused on no-ticket travel. On booking a ticket, passengers were assigned a confirmation number. To check in at the airport, passengers only needed a passport (in case of international travel), or any other photographic identity, and the confirmation number. This made the checking-in process very simple and saved the airline a lot of hassle. As check-in could be done faster, planes could also be turned around more quickly. 4This was also more convenient for passengers as they did not have to produce any documents or wait for hours to check-in.

The prices of the tickets were based on the demand and supply of seats on a particular route at a particular time. The prices were dynamically determined by proprietary yield management software that constantly revised and recalculated prices according to demand and supply. If the rate of ticket sales for a particular flight was higher than normal, the ticket prices were revised upwards to avoid the possibility of a sell-out much in advance. This way, the airline ensured that it did not run out of seats on a particular flight too early and that it got the highest price with maximum filling of capacity.

Price variation was profitable for the airline as it could charge the best possible prices for a given seat. (If a person booked very early, the ticket price would be low, as a number of seats would be available. As the seats got taken, the reduced supply would increase the price). It was also beneficial to passengers, who had the flexibility to decide in the last minute and still find seats (albeit more expensive ones) on their desired flight.

By varying the prices, the airline also ensured that the maximum possible seats would be filled on a flight. The unit cost of flying a passenger was very low, so every additional passenger meant additional revenue. Flying with empty seats was a loss for the airline, as the cost of flying would remain the same whether the plane was full or not. Flying a full plane resulted in the optimum per unit cost of flying. If there were fewer passengers, the per-unit cost would be higher. Therefore, if a flight did not have enough demand, the ticket prices would be lowered to a great extent to encourage bookings. Some low-cost airlines (notably Ryanair) even gave tickets free, for the revenue they got from the other services for which they charged (like baggage handling).

easyJet flew only one type of plane - Boeing 737s. This focus on standardization was a key feature in keeping the costs of the airline low, thus allowing it to offer low fares. Flying a single model fleet also had the advantage of simplifying the maintenance of the planes. The airline did not have to stock spares for different types of planes. Bulk purchases of spares and other aircraft parts resulted in economies of scale. The single model fleet also reduced training requirements for the pilots and the cabin crew, as they had to only learn to operate a single type of plane. This ensured interchangeability of crews, spares and furnishings between planes which made operations easier.

Unlike other low cost airlines, easyJet flew new planes. A newer fleet of planes would be more fuel-efficient and cost less on maintenance than old ones. None of the planes of easyJet was more than five years old (the average age was three), compared to rival Ryanair, which flew planes some of which were over 15 years old. easyJet also decided to phase out older planes as newer ones came in, so that the average age of the fleet would remain low, to ensure greater safety for passengers, to which the airline was committed.

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