This was the title of Sir Colin
Chandler's talk, delivered to the Association with characteristic verve
and wit on 14 February.
His subject was, of course
'easyJet'. Our Chairman, Ambrose Barber, introduced Sir Colin saying
that after starting as a De Havilland commercial apprentice in 1956 he
moved to Hawker Siddeley at Kingston rising to be MD of BAe's
Kingston-Brough Division and then Group Marketing Director. From
1985-89 he was Head of Defence Sales (receiving a Knighthood for
services to export), then Chairman of the Vickers Group and now
Chairman of 'easyJet'.
Sir Colin, in his relaxed,
informative and entertaining style, outlined the history of the airline
and explained its low cost philosophy. Stellios Haji-loannou started
the business in 1996 using a £5 million loan from his father to buy two
used Boeing 727s.
His objective was to take advantage of the opportunity to innovate made
possible by Margaret Thatcher's deregulation and market liberalisation
policies. Prior to this the market had been dominated by large,
overstaffed, airline partnerships with fares set by the IATA
(International Air Transport Association), resulting in high costs and
'EasyJet' emphasised safety, timekeeping, high
utilisation, rapid turn-round and pleasing the customer. They
introduced low cost, 'no frills' operating techniques (e.g. food not
included, no free newspapers), dispensed with tickets and agents
substituting on-line and call-centre booking. The lean business model
minimised management staff who were housed in non-prestige offices
without 'personal assistants', company cars, medical schemes or other
benefits. Everyone eats in the same canteen.
Heathrow was not used
because of its high costs and delays, Luton, Stanstead and Gatwick
being preferred, especially Gatwick.
The classic hub and spoke network
was replaced by a point-to-point route system flying to major airports,
unlike its main competitor. 'EasyJet' has seventeen bases of which ten
are in the UK. The company culture is lively and customer oriented. The
operation is constantly under review and steps are taken quickly to
correct adverse trends. Ineffectual directors are soon replaced. Growth
is rapid - from zero to 35 million passengers in eleven years - so
staff are recruited for what the job will be in two year's time.
After 'nine-eleven' the major carriers experienced large falls in
passenger numbers and reacted by putting fares up resulting in many
airline failures; in contrast the low cost operators reduced their
fares resulting in record revenues and profits. Today the business is a
PLC with a solid investor base.
The opportunity for growth in Europe,
particularly France, is such that even greater future annual growth is
forecast for the next five to ten years. For this reason 'easyJet'
bought BA's unsuccessful 'low cost' offshoot 'Go' and has purchased a
hundred and twenty Airbus A319s with an agreed price option on another
one hundred and twenty 319s, 320s or 321s. Tenders were invited from
Boeing and Airbus; Boeing was complacent but Airbus, fielding their top
people to pitch their product, was keen and made the best offer. A
modern fleet of efficient new aircraft gives reduced operating costs.
Ancillary revenue is raised from hotel bookings, car rentals, parking,
transfers and 'ski partners'. Early bookers get the lowest fares;
business passengers tend to book late so pay more! Speedy boarding is
achieved by releasing passengers in blocks - first to check-in are
first aboard. However, research showed that boarding first was highly
valued so, for a premium, passengers can book into the first block no
matter what time they check-in. 'EasyJet' fares are under attack from
competitors but ancillaries are doing well.
Safety is paramount.
The Board is the safety committee, meeting as such every three months.
The Safety and Security Director, a retired training captain and ex CAA
official, is responsible and has a direct line to the Chairman. Green
issues are seen as very important. The young fleet has low emissions,
carbon trading and offsets are to be introduced together with another
typically innovative initiative.
Today 'easyJet' is the number one low
fare airline, is growing steadily to satisfy a continuing demand, leads
the industry with its business model and is keeping up the pressure to
reduce costs and increase efficiency.
However, it is necessary to be
active in opposing Government's misguided 'green' taxation policy which
taxes all airlines the same whether they have modern low emission
aircraft or geriatric gas guzzling turbojets. The tax puts up the costs
to passengers, reduces load factors and increases emissions per
passenger mile! The airlines must be vigilant that they do not become
the Chancellor's 'cash cow'.
After a long question period, during which important issues were
raised, Les Palmer thanked Sir Colin for his splendid talk.