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...

Unlike competitor Ryanair which flew to outlying towns, easyJet flew to main destination airports around Europe, but used the smaller airports in the cities. For instance, it used Luton in London rather than the larger and busier Heathrow or Gatwick. Smaller airports offered better landing terms for the airline, helping keep prices low. They were also less congested, which made turnaround of planes quicker.

easyJet gained major efficiencies through quick turnaround times (less than 30 minutes) and progressive landing agreements with the airports. Quicker turnaround times increase the utilization rate of aircraft, allowing the airline to make the best use of them to become more profitable. Quicker turnarounds were achieved by simplified checking-in and by asking passengers to clear their trash before disembarking. The cabin crew also doubled up as cleaners. This helped get the plane ready more quickly and also saved additional cleaning expenses. On an average, easyJet planes made ten trips per day as against the normal six of other airlines.

The airline also did not assign seat numbers, which simplified ticketing and administration. It helped the airline save time as it ensured that passengers came to the airport on time to be able to sit together or get seats of their choice on the plane. The decision to fly short and medium haul point-to-point⁵ flights also enabled the airline to work with a smaller number of personnel than it would have had to with the more complicated hub-and-spoke system.⁶ Transfer of baggage and people from one plane to another was generally considered to be a vulnerable area for airlines. Flying point-to-point avoided the need for any kind of transfer, thus keeping operations simple and inexpensive.

easyJet was a paperless office and all transactions used computerized information systems. Documents were scanned, sent over the intranet to the concerned people and later eliminated. Stelios Haji-Ioannou (Stelios), the founder of easyJet realized when he was working at his father's shipping company that some people had the tendency to hold back information and created 'information empires' within organizations, which increased internal organizational politics.

He tried to avoid this at easyJet by emphasizing information sharing. Stelios also located himself in inexpensive localities, provided cheap services and cut out all frills. This had a dual advantage as it cut down overhead expenses and also created a unique brand positioning as an airline which gave value for money. The culture at the office also encouraged equality. There were no private cabins or personal secretaries. None of the trappings of bureaucracy were encouraged.

Cutting unnecessary costs was a way of life at easyJet. All unnecessary expenses were eliminated (An accountant once put up a memo on the notice board when she found too many sheets of printer paper wasted). Stelios said, "The world's biggest companies, such as Wal-Mart and McDonalds got that way because they sell low cost products. The cheaper you can make something, the more people there are who can afford it."⁷

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5] In the point-to-point system the planes had a simple flight route and flew from the origin to destination.
6] A hub-and-spoke system uses a strategically located airport (the hub) as a passenger exchange point for flights to and from outlying towns and cities (the spokes).
7] www.fastcompany.com