[Business] EasyJet’s Focus on being “Primary” Made It The Primary
EasyJet is the second-largest low-cost carrier in Europe by number of passengers behind Ryanair. With the availability of over 30 European low-cost airlines, high availability of substitutes and low switching costs, buyer power arises. This is a major threat to all companies in this industry. Yet, how did EasyJet manage to maintain a growth rate of over 10%?
Today, we will depict the reasons for EasyJet’s success.
Primary Airport Focus
With a strong presence in major city airports and targeted loyalty programs, EasyJet was able to use its valuable and inimitable strengths to capture a large and loyal base of business customers.
Unlike many other low-cost airlines, EasyJet focuses on key airports that represent Europe’s largest markets by GDP. Currently, most primary city airports in Europe are extremely slot-constrained. Research shows that although secondary airport capacity continued to grow, there are not much room for the most convenient and proximal airports in major European cities to grow its slots. Compared to Ryanair, which operates only 35% of its flights in primary airports, 90% of EasyJet’s flights are run in primary city airports. Among those, EasyJet held the top 2 market positions by share of seat capacity in 80% of these airports. With high frequency of flights and proximity of airports, EasyJet’s unparalleled network distinguishes itself from other airlines by providing rare and inimitable convenience to depart and land in major airports. Business travelers, who often value convenience, thus uses EasyJet as a low-cost alternative of business travel. As of 2018, business travelers account for over 50% of EasyJet’s passenger flow. As companies would also like to maximize the efficiency of business travel, they preferred airlines that offer high frequency and flexibility of flights. EasyJet nailed this segment with their strong presence in airports — and more.
Loyalty Programs
Business customers are also offered flexibility through loyalty programs. Utilizing business travelers’ higher willingness-to-pay, the airline also rolled out EasyJet Plus, a loyalty program widely successful in increasing switching costs to its customers, retaining loyalty, and growing its ancillary revenue. Unlike most airlines, which offer points-based programs and separate purchases, EasyJet Plus requires customers to pay an annual fee, a definite-sunk-cost for customers, for a bundle of business-customer focused benefits including waived baggage fees, flexibility scheduling, and priority boarding. With an average use of 5 times per year, customers will be able to save costs after its third use with profit for EasyJet until its seventh use. This win-win strategy has allowed EasyJet to continually benefit from an increasingly loyal customer base. In 2019, 65.6% of easyJet seats were booked by customers who had made a booking in the preceding two years.
Purchase of Primary (Flagship) Airbus Aircrafts & Holiday Bundles
Looking forward, we anticipate a strong growth of EasyJet through lowering costs and capturing of synergies by entering the holiday business. On the suppliers’ side, in order to keep operating costs low and in light of slot constraints in major airports, EasyJet is switching to bigger aircraft with higher fuel efficiency. With a lower-than-average aircraft age and the aggressive investment in A320 and A321-Neo, a mid-sized aircraft known for its fuel efficiency, EasyJet will benefit from increased seat capacity and a 13–20% savings in cost per seat.
To better utilize the increased capacity and EasyJet’s other core competencies, the airline is also furthering its holiday business after launching North African routes during holiday seasons successfully: Currently, only 5% of EasyJet’s 10 million holiday flyers book a hotel through EasyJet. Seeing the ample opportunities to extend its reach in the wider travel value chain, EasyJet is set to launch holiday bundles, which includes the offer of accommodation and other services, starting from 2019.
Moving Beyond Its 24th Birthday
EasyJet reached its 24th year of operation today. The company utilized its strong presence in airports to capture business travelers who value convenience and flight availability. The addition of subscriptions and bundles will not only be able to capture business customer loyalty but also grow the new holiday traveler segment through capturing an enhanced value from the vertical integration of the holiday experience. To meet these demands, EasyJet is set to succeed with a higher revenue and lowered costs through the purchase of larger and more fuel-efficient aircraft. This is Generation EasyJet!
Stay Tuned!!!
(All information are either fact-checked or from credible sources.)
