Case-1

"If you create the right expectations and you meet or exceed those expectations, then you will have happy customers," proclaimed Stelios Haji-Ioannou, the 32 year-old founder and C ! of easy"et airlines# Since its launch in $ovem%er &''(, easy"et had %ecome one of urope)s leadin* low-cost airlines %y adoptin* an efficiency-driven operational model, creatin* %rand awareness, and maintainin* hi*h levels of customer satisfaction# +fter receivin* ,( million from his father in &''(, Stelios %e*an operatin* easy"et with two leased aircraft# +lthou*h -ondon)s Heathrow and .atwic/ were major international airports with hi*her passen*er traffic, Stelios chose -uton %ecause it offered lower la%or costs and close proximity to downtown -ondon, and 0har*ed lower airport fees. 1he first easy"et fli*ht, from -ondon to .las*ow, was advertised for a one-way fare of ,2'# 1he fli*ht was completely full, in lar*e part %ecause Stelios had launched an extensive pu%lic relations and advertisin* campai*n with the slo*an, "2ly to Scotland for the price of a pair of jeans3" 4y $ovem%er &''', easy"et owned and5or leased &6 4oein* 737-388s, and flew 27 routes in urope# Stelios modeled easy"et after Southwest +irlines9 one type of aircraft, point-to-point short-haul travel, no in-flight meals, rapid turnaround time and very high aircraft utilization # However, Stelios added #his own twist to the Southwest concept9 he completely avoided travel a*ents, issued- no tic/ets, and flew %rand new 4oein* 737s usin* the maximum seat capacity of &:' seats# ;oreover, he decided not to offer free drin/s or peanuts< everythin* would l&e for sale# 1he only free item was easy=ider, the in-fli*ht ma*a>ine# Company Background 1he company)s head?uarters, referred to as "easy-and," was located at -ondon)s -uton air@ort# "ust li/e the airline, easy-and was no-frills# mployees were instructed to dress casually, and Stelios sat in the same open-plan office as everyone else# He had no personal secretary, maintained a paperless office, and expected every%ody else to do the same# Because easyJet offered low fares, it sought to minimize costs where-possible. For example, easyJet saved ! per passenger by not offering meal service, and estimated that by flying into "ondon#s "uton $irport instead of %atwic&, it saved ' per passenger. (he airline also shaved costs by not offering business class seating, thus allowing for more overall seating capacity. ;oreover, easy"et encoura*ed Internet sales# 4y !cto%er &''', Internet sales had soared to A8B of revenues# Stelios offered discounted fares to customers who purchased over the Internet %ecause such

sales reduced the need to hire additional reservation agents # He avoided computer reservation systems and travel a*ents %ecause he %elieved that they added 2(B to total operatin* costs# 1he airline also turned its airplanes around faster, flying planes .) hours per day, instead of A hours,

the industry avera*e# 4ecause easy"et flew its planes more hours, Stelios claimed that he could fly just 2 planes, and do the wor/ of 3# +lthou*h easy"et had achieved profita%ility in &''', mar*ins were ?uite small< the airline earned .)' profit per passenger. ven thou*h easy"et carefully monitored costs, *telios emphasized that safety was never, compromised. 1he airline only flew %rand new Boeing +,+s, and only hired experienced pilots who were paid mar/et rates# Stelios commented9 -f you advertise a very cheap price, people expect an old airplane. But when they come on board and see a brand new plane, they are impressed. "i&ewise, many customers expect an unhappy staff because they believe they are not paid well, but they come on board and see the staff is smiling. Initially, Stelios had outsourced in any of the airline)s operations %ecause it lowered costs and increased efficiency# 1ypically, the airline provided the planes, pilots, ca%in crew, mar/etin* and sales people# Su%contractors handled all other responsi%ilities, from chec/-in to the on-site customer information des/# Competing on Service !ne of the distin*uishin* characteristics of easy Jet was its approach to customer satisfaction. Stelios flew on at least four fli*hts per wee/, and enjoyed interactin* with customers# He had even %een /nown to wor/ the phones sellin* tic/ets# Stelios was wary of mar/et research, preferrin* to cull information directly from passen*ers# /e also i0ead and replied to many of the emails he received from customers. $ll of easyJet#s fares were one-way fares and had the same restrictions. (he cost to change a flight was ' plus the difference between the two fares. 1nly !2 of customers failed to show up for their flights and easyJet offered no reimbursement for missed flights. Customers were re?uired to pay %y credit card, after which they received a six character boo&ing reference number. 1his reference num%er was the only information passen*ers needed to %oard the plane# =eservation agents were paid on a commission %asis, at a rate of '.3' per seat sold, and could sell 4' to 5' seats durin* an avera*e ei*ht-hour shift# 1he airline did not offer any pre-assigned seating, %ut instead utili>ed a priority %oardin* procedure# @assen*ers were *iven a num%er %ased on the time they chec&ed in, and those passengers who arrived late for chec&-in had to-sinn whatever seats remained.

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Csin* yield mana*ement, easy"et tried to fill as many seats as possi%le# Seats were sold in what could %e considered a lottery system< the more people demanded a particular flight, the higher the fare. @unctuality at easy"et was important# 4ecause customer satisfaction was lin/ed so closely to punctuality, responding ade6uately to the needs of customers was very important to *telios# If a fli*ht arrived more than four hours late, *telios instructed his staff to write a letter of apology with his signature and to issue a full refund. Stelios also *enerated pu%licity for easy"et throu*h hi*hly pu%lici>ed and often full scale attac/s on his competitors# (Refer to Exhibit & to view an example of easyJets attacking ads .) $ 553 industry poll indicated that the easy Jet brand had a recognition rate of 332 in "ondon7 in %eneva, brand awareness was 382. $ccording to 9hilippe :ignon, mar&eting director, 0;henever there is an opportunity to ma&e some news, we do it.0 Corporate Culture Stelios wanted to %uild a stron*, inclusive employee-culture at easy"et, which led to the creation of the easy"et Culture Committee# 1he committee, an elected *roup drawn from company staff, was responsi%le for esta%lishin* company policy on the wor/in* environment, communications %etween mana*ement and staff, and social events, such)as staff parties for the airline)s &,888 employees# very 2riday at -utoD, easy"et held a company-sponsored barbecue that the staff used to get to &now one another better. Stelios %elieved in complete transparency, and all documents had to %e scanned and placed on the computer system, so that anyone in the company could access them# 2ollowin* easy"et)s success, Stelios was ready to enter other %usinesses, includin* the creation of a cy%er cafe called easy everythin*# 1he idea %ehind easy everythin* was to offer the Internet to the masses %y char*in* as low as ,& per hour# 1he first cafe de%uted in -ondon on "une 2&, &''' near Eictoria Station and was open 2: hours a day# 1he cafe contained :88 terminals with state-of-the-art hardware, includin* flat screens and fi%er-optic communication lines# Besides ambitious growth plans for the cyber cafes, *telios was also considering launching a rental car business and an -nternet-based ban& #