Q1) Is the budget airline segment an attractive place to compete?

Answer 1)

Competitive Rivalry:

 The advent of many “no-frills airlines.”

 Many players with offerings that aren’t very differentiated
 High operating costs make it imperative for players to employ cutthroat strategies
to draw in customers
 The fixed costs are incredibly high in this industry. This makes it hard to leave the
industry because they are probably in long term loan agreements to stay in
business
 The products involved or the planes are highly complex, which also heightens the
competition.
On the whole competitive rivalry is a strong force

Bargaining power of buyers:

 Two categories of buyers – single buyers who purchase tickets for business or
personal reasons and the other being travel agents and online portals who act as
intermediaries
 There are low switching costs between companies because many persons choose
the flight based on where they are going and the value at the time.
 The service provided is exclusive. Each airline has a niche
Overall the bargaining power of buyers has a shallow threat in this industry.

The threat of new Entrants:

 This industry requires a large amount of capital, and without a strong customer
base, there will be little to no profit in the first few years.
 Existing firms can and will use their high capital to retaliate against newer firms
with whatever means necessary, such as lowering prices and taking a loss.
 Although there are low switching costs between brands, consumers tend to only
chose well-known names. Airline tickets are expensive, so people don’t want to
give that money to firms they don’t trust.
 There is also a constant regulation by the concerned body of the government
Hence the threat of new entrants is a low force
The Threat of Substitutes:

 Consumers can choose another form of transportation such as a car, bus, train,
or boat to get to their destination
 There is, however, a cost to switch. Some means of transport can be costlier
than a plane ticket. The main price is time. Planes are by far the fastest form of
transportation available.
 Consumers do sometimes choose other methods for various reasons such as
cost if they are not traveling very far, which raises the risk.
This constitutes a medium level risk

Bargaining power of suppliers

 The top two manufacturers in the world currently are Boeing and Airbus. In this
industry, the inputs are extremely standardized. Airline companies only seem
to differentiate with amenities. The planes are very similar.
 Airline companies cannot easily switch suppliers. Most firms have long term
contracts with their suppliers. Planes are such high capital products that firms
probably make long term loan agreements and have more favorable credit
terms when they don’t switch companies.
 Very few suppliers in the airline industry
 But airline firms are the only source of income for these manufacturers, so their
business is significant
 Apart from this relationship with oil companies and airports are also vital
Due to all the above-mentioned dependencies suppliers exert a moderate to high
force.

Q 2) Why would EasyJet most likely survive?

Answer 2)

EasyJet had several strategies which will take it a long way and result in its survival:

1). Innovation: Broke away from usual tradition to go with a middle man for ticket
booking, instead of stuck to Internet bookings and also improved supplier-customer
Intimacy. Stelios himself flew on at least four flights per week to collect reviews from
customers directly. Stelios himself used to respond to customer’s grievances via email.
This helped to build a proper image of the company.
 2). Differentiation: Offering no-frills service and targeting non-business class of
travelers, EasyJet aimed to create a niche market for themselves as this concept of no-
meal air travel was not relevant during the 1990s. In spite of providing low-fare tickets,
EasyJet never compromised the security of passengers.

3). Better usage of aircraft: By maximizing the utilization of assets – with faster
turnaround flight.

4). Marketing: Brand awareness for EasyJet was very high. A 1998 industry poll
indicated that EasyJet had a recognition rate of 88% in London and Geneva. It was
82%. Customer satisfaction for EasyJet was very high, and, in one situation, 50%-60%
of refunded fare was paid back by customers as a donation to the company.

How can EasyJet deliver such low prices?

EasyJet was created by Stelios Haji-Ionone in November 1995. He launched his

company with an initial investment of £5 million, two leased aircraft and mainly teenager
staff. He chose to land in Luton airport, where it headquarters “EasyLand” is located,
because of its cost advantages and its proximity to London. The first flight ever made by
EasyJet was to Scotland for £29. The flight was full, thanks to its low price, as well as
the extensive public relation and advertising comparing build upon the slogan “Fly to
Scotland for the price of a pair of jeans!” Four years later, EasyJet airlines own 18
Boeing 737-300 and flew 27 routes in Europe.

Q3. How can easy Jet deliver such low prices?

Answer:

 Fast Turnaround Time of Aircraft- EasyJet has always tried to cut down its
turnaround times to 30 minutes or less. This allows it to maximize the use of its
aircraft and gain extra flight with the same aircraft over the same route. Since the
aircraft is idle for very fewer periods, it saves a lot of maintenance costs for the
airline, and the additional flights generate revenue as well. The aircraft remains in
the air for an average of 11.5 hours daily, which is almost double of the industry
average.
 Aircraft configuration enabling a higher number of seats per aircraft.
 One type of aircraft, point-to-point short-haul travel, no in-flight meals, and very
high aircraft utilization.
  EasyJet targeted three cost-conscious customer segments: travelers visiting
relatives, leisure travelers, making brief trips, as well as entrepreneurs and
managers working for small firms. Also, the company targeted route-specific
customer segments such as English teachers in Spain and the large British
expatriate community in southern France.
 Deregulations in Europe decreased fare prices.

Q4) How does EasyJet create value for the customer?

Low fares: EasyJet sought to minimize cost wherever possible and pass the benefit to
the customers

On-time flights: Punctuality at EasyJet was important. If a flight arrived more than four
hours late, Stelios instructed his staff to write a letter of apology with his signature and to
issue a full refund.

Customer value: Stelios flew on at least four flights per week, and interacted with
customers. He had even been known to work the phones selling tickets. He also read and
replied many of the emails received from the customers. The customers would also feel
valued over this fact

Customer safety: In spite of being a budget airline, EasyJet only had brand new Boeing
737s, in its fleet and only hired experienced pilots who were paid market rates.

Discounted fares: to customers who purchased tickets over the internet

Q5. Create a value chain for EasyJet?

Answer 5:

EasyJet Airlines is a low-cost carrier which provides airlines service at a meager price.
Their business process includes some set of activities that adds value to their products
and services, which is called the value chain model. It gives added competitive
advantages over other competitors and reduces the risk of substitutions. Their activities
can be divided into two stages:

i) Primary Activities
ii) Support Activities
Primary Activities: The main objective of any company is to achieve operational
effectiveness, and to do this all the primary activities would be the main concern for
Easyjet.

Inbound logistics:

Routes: Easyjet is running their operation over 27 routes throughout Europe by November
1999.

Pricing: Although Easy Jet had achieved profitability in 1999, margins were quite small;
the airline earned only 1.50-pound profit per passenger.

Fuel: They spent a massive amount of fuel so that that they can give services to their
millions of customers and recently they are trying to be fuel-efficient for the betterment of
the environment as well as cost-cutting by reducing the weights of seats and other
furniture.

Operations:

Ticket Counter: In all the destinations Easyjet operates the customers will find ticket
counters, also they emphasize more buying tickets online.

Safety Service: They keep providing high-level direction to crew management teams
around the network, ensuring the safety of the crew and passenger as safety always
comes first.

Ground Operation: They make sure that their crew is always in the right place at the right
time. Day to day operations like weather checking, traffic, and flight managements is
strictly maintained.

On-Board Service: While on board they don’t provide free food, but they have to Buy on
Board service where customers can buy foods they like, and they can also do shopping
there. For example, Electronics, dresses, accessories, and many more. There are the
only source of entertainment or passing the time is Magazines as they don’t travel long
distances, so they don’t show any movies or films.

Outbound Logistics:

Baggage System: All Customers can bring one cabin bag which includes wheels and
handles but those who are Easyjet plus or Flexi fare cardholders they can have another
small container under the seat.

Rental car and Hotel reservation: They provide rental car services from the airport to
different places what customers wish for. There are several options for the customers on
hiring cars like long time hire, one-way rentals, and many more. They also provide luxury
car services on customer’s demand as well as incentives. For domestic help, one can
book hotels, apartments, resorts, and villas for them via Easyjet. All types of price range
are available for customers.

Marketing and Sales:

About 10% of the revenues were spent on newspaper, magazines and radio advertising.
Because of its marketing approach, EasyJet’s top management believed that easy jet
was able to differentiate itself from its competitors. It enjoyed a good percentage of Brand
awareness and Brand recognition throughout Europe.

Service:

i) Approach to customer satisfaction

ii) Internet and telephone sales and no reimbursement for missed flights
iii) No pre-assigned seating, first come first-serve basis.
iv) Target groups: Travelers, Entrepreneurs, Managers of small firms.
v) Fill as much seat as possible
vi) Lottery system

Support Activities: It assists primary activities in helping to achieve a competitive

advantage over other companies.

Firm Infrastructure: Easyjet has keen brand awareness and reputation, especially in
Europe its fame is increasing day by. This helps increase its brand name reputation. Its
model is based on a low-cost model which value cost-efficiency. The only setback for
them could be customer perception about cheap services are small quality service.

Human Resources: Easyjet mainly recruits young people. They must be casually
dressed to promote Easyjet corporate culture. Job applications are taken online. They
encourage diversity and also consider its workforce as a key driver behind its success.

Some customers are unsatisfied as they think the staff should enhance their performance.

Technology: Since 1998, EasyJet has enhanced its online service, and 95% of the
bookings are made online today. This shows the effectiveness of this channel. Today
Easyjet ibis perceived as most modern airlines in Europe as its website is said to be the
most attractive of all airlines websites.