Environmental Analysis of Easyjet and Its Competitive Advantage.

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Arfan Aslam, Asad Riaz, Umar Yousaf, Tanveer Ahmed, Raj Kotecha



Stelios Haji-Ioannou, the founder of easyJet, initially became interested in the idea of a European low-cost airline in May 1994 after being offered a stake in a Virgin Atlantic Airlines franchisee. On refusing the offer, Stelios soon after flew on Southwest Airlines, a successful low-cost carrier in the US. This experience became the catalyst in his decision to create easyJet.

EasyJet was established in March 1995, with low-cost flights from London’s Luton Airport to Glasgow and Edinburgh in Scotland, supported by an advertising campaign, “Making flying as affordable as a pair of jeans - £29 one way”. The flight was full, and demand for low-cost flights grew rapidly. Thereafter, Stelios over the next two years concentrated on expanding easyJet and raised additional finance to invest in additional aircrafts. By 1998 easyJet owned six Boeing 737-300s and flew 12 routes in five countries. However, today it owns 64 aircraft and offers 88 routes from 36 European airports.¹  

Stelios modelled easyJet around Southwest Airlines’ operational techniques, in terms of having one type of aircraft, point-to-point short haul travel, with no-frills, rapid turnaround time and with very high aircraft utilization. However, Stelios had an extra innovation up his sleeve, which was based on a paperless office. He completely avoided travel agents and issued no tickets, but encouraged internet sales. The idea of this paperless office was a key element that Stelios looked to maintain as he cherished the idea of a hassle-free environment. In 1996/7 easyJet suffered pre-tax losses of £3.3 million, however in 1998 the company announced annual pre-tax profits of £2.3 million, which was the first time the airline had posted a profit in its brief history and in 2002 pre-tax profits mounted to £71.5 million.²


To look at easyJet’s environmental analysis we have to ask ourselves, ‘Is the budget airline segment an attractive place to compete?’ To answer this question we have to look at the external opportunities and threats in the airline industry and then come to an overall assessment.

The deregulation of the airline industry in December 1992 passed by European Union legislation meant that now any European carrier could fly to any destination and demand landing slots. The new directive means that air travel companies can now expand their business and take up new ventures in Eastern Europe possibly with new routes being opened up. This can also give easyJet the prospect of developing an operation in other parts of the world, for example, starting up an operation in Sydney and setting up a ‘hub’ to possibly expand even further.

Demographic changes also give the airline industry an opportunity to target potential customer groups. For example, the number of people having short holiday breaks has significantly increased over the past few years and forecasts state that the market demand for short breaks will increase between 2001 and 2004. However, the growth will be slower than in previous years due mainly to a slowdown in the economy.³ This gives easyJet the scope to offer holiday deals, like cheap weekends for example, directed at such groups to possibly boost their customer base and keeping on top of their market research.

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However, there are also a number of threats that easyJet and the airline industry may face. For example, the market that easyJet operates in is highly competitive (the ‘degree of rivalry’ is a feature of Porter’s Five Forces). The downside to the deregulation of the airline industry is that it could open up the possibility of new airlines coming in to the market. This could add to the number of low-cost carriers operating in Europe and possibly outside of Europe. With the likes of Ryanair, Virgin Express, KLM and British Airways, these existing airline companies can pose a threat to easyJet ...

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