Oxford Brookes University
Module Title : Strategic Management
Easyjet Case Study
Assignment Submitted Monday 20th December 2004
1. The Key Environmental Drivers in the Airline Industry
(appendix , PESTEL / Porters Five forces)
The airline industry is a turbulent and competitive sector, influenced by multiple environmental variables/driving forces. How these key drivers influence individual sectors within the industry differ.
Political issues, such as the threat of ongoing war in the Middle East, and more recently issues in Sth. America have driven oil prices up. This is intrinsically linked to the cost of aviation fuel. Whilst these political factors have direct economical ramifications such as increasing fuel costs, increased congestion, environmental restrictions, higher security, and insurance, they also have potentially indirect devastating socio-cultural effects for the airline industry, upon the attitudes towards air travel. The result of these shifts in attitudes cause a snowball effect throughout the industry. Where by, a decrease in air travelers, impacts upon airline profits, whilst the requirements for increased airport security, result in a slower turn-around for operators, increasing costs for the airlines, and in turn raising the cost of air tickets. Large numbers of network carriers have resulted in a substantial overcapacity in the market, which was exacerbated by the events stemming from September 11th. These all reflect the increased perceived risk of terrorism.
Surprisingly these key drivers have proven to be potentially advantageous for the ‘no frills’ airlines. An increase in low-cost airline passengers reflects, or more so suggests, a general consensus that these airlines are less likely to be targeted by terrorists. Whilst major airlines suffered immensely post 911, the European low-cost airlines entered a period of unprecedented growth. We could also ascertain to an extent, that the perceived risks associated are not subject to short-haul flights. Additional key drivers in the growth of low cost airlines include the deregulation of the European Airline industry, increases in disposable income, leisure time and internet use.
Key technological advancements have been of particular benefit to ‘low-cost’ airlines. They have facilitated the implementation, of such systems as internet booking. This combined with shifting attitudes towards purchasing tickets online has been capitalized upon by the ‘no-frills’ airline sector.
2. Critical Success factors for ‘low cost’ airlines
The ‘low-cost’ airlines share a common approach to conducting business. This stems from the business model established by Southwest (US since 1967). Southwest has paved the way, proving to be a model organization for ‘low-cost’ airlines. Critical to the success of ‘low-cost’ airlines, as the name suggests, is the delivery of competitively lower(cost efficient) travel costs to the consumer, compared with their major counterparts. Customers expect a service that places price over comfort. Factors determined by consumers/stakeholders are central to success, thus it is critical for the organization to able to consistently meet these requirements (Thomson, 2004).
“…we aim to provide our customers with safe, good value, point-to-point air services. To effect and to offer a consistent and reliable product and fares appealing to leisure and business markets on a range of European routes. To achieve this we will develop our people and establish lasting relationships with our suppliers” (Easyjet 2004). Easyjet’s mission statement outlines the company’s aspirations or promises, therefore determining, to a degree, stakeholders expectations of their service. It clearly states that Easyjet aims to provide a safe, good value and reliable transportation. We could therefore state that critical to Easyjets success is the delivery of these promises.
There are also, however a number of critical success factors dictated by the industry or nature of the business environment. These airlines concentrate on providing point to point, short-haul flights throughout Europe. Distinguishing factors consistent across all ‘low-cost’ carriers, include the ability to sustain minimal operational costs and significant investment in ongoing promotional activities, which contribute towards enhancing market place awareness and perception. The establishment of a strong culture and public image, reinforced by clear, and recognizable branding is also evident. Online bookings account for 90% of Easyjets business. Internet accessibility (online booking) and the supporting technological infrastructure of their service, has also proven a fundamental imperative for ‘low-cost operators’. The necessary financial backing to support the operations/infrastructure, human resource requirements, and physical assets (ie.planes etc), establishment of an efficient and effective supply chain and logistics are all critical to the carriers success. How does Easyjet meet these critical success factors?