Case Scenario: Easyjet, British's no-frills airline
Easyjet, British's no-frills airline is officially opened for business and is set to make its maiden flight out of London on 26 June 2009. The no-frills airline, a wholly-owned subsidiary easyJet Airline Company Limited of GB Airways Limited ("GB Airways"), has started accepting bookings for its first two routes - Mykonos and Nantes. The budget airline with its orange and black will be flying to destinations that are more than five hours from London.
Backed by GB's image and branding, passengers may be expecting better quality customer service from the budget airline than from its other rivals like Ryanair and Jet2. However, Easyjet's CEO, Ms Carolyn McCall, in an earlier interview dated 6 November 2008 said that if passengers boarded her aircraft expecting GB service, they will be sorely disappointed. "We make no secret of the fact that we will be no-frills," said Ms McCall.
For a budget carrier, cost is critical, she stressed, it is equally critical that consumers are clear about what the airline will offer. For a fare 40 per cent less than what full-service carriers, including GB, charge, you get a seat; nothing more, she made clear. Everything else - food, drinks and entertainment - will come at a cost.
Ms McCall said: "It is in our interests and their (consumers) interests that they know exactly what to expect when they get on board. We will not be providing a level of service that people expect of legacy airlines." And so in the "rare event" a flight is cancelled or delayed, for any reason, travellers could end up finding out only when they get to the airport. If they are stranded overseas, they may have to make their own arrangements for a hotel stay. And when they write to Easyjet to complain about the horrific experience, they may not get a reply.
These are common grouses of people who fly on budget carriers, and while Easyjet will make every attempt to please, to offer low fares, savings must be made, Ms McCall stressed. There will be no compromise on safety and security, but is it necessary to pay 10 staff to respond to every piece of feedback? Should Easyjet have an aircraft sitting idly on the tarmac so that it can be pulled out when there is trouble with another plane?
"All of these things add cost, and that cost is eventually borne by someone, and that someone is the passenger," she said. "So there is an implicit bargain between the low-cost airline and its customer." And there is a "trade-off".
Consumers must take some personal responsibility, said Ms McCall. Buy travel insurance and "have some money in your back pocket", just in case. "We are not hiding anything. We are being absolutely honest with you... So really, it is up to you. If you do not want to take the risk or do not want to take some responsibility for yourself, then pay the extra to fly with someone else." But think of the savings, which will be substantial. The chances of a hiccup will also be rare, she said.
It is a big job. The GB group has a lot riding on the success of Easyjet. The group, which comprises GB, GB Cargo and GB Engineering, had reported lower profitability in 2008. For the six months to end-September in 2009, profits nosedived 62 per cent to $239 million, compared with the same period a year ago. Between October to December 2009, profits were dragged down by 53 per cent to $135 million.
Fuel was the main culprit, but the bottom line also suffered from flat yields and marginal growth in passenger numbers. Industry watchers said this had to do with slowing growth in the premium air travel business and GB losing market share to other full-service airlines, as well as budget carriers. Easyjet, which will compete in the growing low-cost travel sector, will fill a gap that now exists within the group.
GB owns about a third of British budget carrier Ryanair, which operates short-haul routes. Easyjet will do longer flights, to France, Spain, Sweden and eventually Asia, among other countries.
Ms McCall did not want to dwell too much on performance targets that have been set, but Easyjet will have four twin-aisle Boeing 777 aircraft in the first year, and build the fleet up to about 14 aircraft by the middle of the decade. Each aircraft will have about 32 to 40 premium seats and 370 in economy class.
The aim is to be cash-flow positive in the third year, which means at the operational level, there is more money coming in than going out. Profitability is the ultimate objective, but it is not the plan to pursue growth at any cost, Ms McCall said.
It is all about having "Easyjetitude", Ms McCall said - fun and vibrant, for the young and young at heart. The airline's media launch, held recently at retro bar Yello Jello in London, offered a glimpse of the attitude and image Easyjet wants to portray. It had orange T-shirts, orange couches and chairs, and folks on orange skate Easyjeters zipping around handing out orange smiley-faced rubber balls.
The airline's name and image may not be a hit with everyone now, but the team is banking on the brand "growing" on consumers, Mr Wilson said. Fresh Air and British Express were among the other suggested names for the carrier, he said. Easyjet did it for him. No "airlines" or "airways". Just Easyjet.
To gel with its fresh and contemporary image, the airline will be gender-neutral, and that means no GB-style marketing campaign that focuses on the British Girl. Indeed, many other international carriers often feature stewardesses although they also hire stewards, Ms McCall said.
Unlike GB, the cabin crew uniform will also sport a more casual look. The uniform will have a black and orange theme. Stewardess will wear a fitted orange dress with a black jacket, while the male crew will wear a dark bottom and a orange T-shirt, also with a black jacket.
Problem 1: Evaluate four (4) possible developments or trends in the demographic, political-legal and economic environment (at least one point must be discussed for each environmental factor) which may have contributed to Easyjet's decision to launch a budget airline service. (At least 800 words)
Problem 2: Maximising customer value means cultivating long-term customer relationships. Propose four (4) possible strategies and discuss how Easyjet could adopt these strategies to cultivate strong customer relationships. (At least 800 words)
Quote all references.