THE

LOW-COST
AIRLINES:
easyjet

Gabriel Prada | CCU Stratford | May 25th, 2023

Introduction

EasyJet was established in March 1995 and launched its inaugural flight in November of the
same year along the London route from Luton Airport to Glasgow (10th) and then Edinburgh
(24th). The airline's advertising campaign, "Making flight as affordable as a pair of jeans - £29
one way," accompanied the launch.

Thus, the inaugural low-cost airline in history, christened Peanut Airlines due to their monetary
policies, achieved significant success in 1995. This triumph prompted the attainment of two
critical landmarks, one year later in 1996, which served as pivotal moments for the organization,
boosting its future expansion.

According to founder Sir Stelios Haji-Ioannou, British consumers were seeking a budget-friendly
travel option. In response, he expanded his company's European offerings by introducing a
London - Amsterdam and Barcelona route, marking the next phase of growth. The company's
inaugural promotional flight in August of that year generated an overwhelming response, with
over four million calls pouring in over just four days. Thus, a major player was born.

EasyJet achieved positive outcomes in 1997, when the company proactively launched its very
first website, aimed at streamlining flight bookings up to a year ahead. Simultaneously, a
secondary website was introduced, providing a direct air bridge to Amsterdam and consolidating
the route from Liverpool Airport. This signalled EasyJet's shift towards the internet industry.

In December 1999, EasyJet won the "Best Low-Cost Airline" award by Business Traveller
magazine and sold over one million seats.

On its fifth anniversary, EasyJet was listed on the London Stock Exchange and has since
experienced a 36.01% increase in value, which includes various stock splits and a peak of nearly
£1900 per share in the primary market.
Business Organisational Purposes

According to the Annual Report (Annual Report

2022), the company's objective is to generate value by
utilizing a low-cost business model. The company
achieves its objective by taking advantage of the low-
cost airline's business model with network and service
differentiation.

The mission
Picture 1 of EasyJet, as defined by Economipedia (Economipedia 2020), is the purpose of the
company's existence. Therefore, we can deduce that EasyJet's primary goal is to fulfil the
demand for cost-effective travel among a segment of the market that was previously overlooked
by other players. It achieves this by
delivering a straightforward and all-
encompassing service for its users.
(Picture 1)

EasyJet's long-term vision, according to

Economipedia's definition (Economipedia
2020), is the ideal long-term goal for a
company. In this case, EasyJet aims to
expand its network as much as possible
and become the dominant provider in the
European market. (Picture 2)
Picture 2
The means to accomplish these objectives include.
Utilising fuel purchasing systems backed by futures contracts to secure stable prices, and placing
considerable focus on technological efficiency, with their primary aircraft being the Airbus A320
NEO, which boasts a 15% improvement in fuel efficiency compared to its predecessor.

In summary, this strategy aims to increase profit margins through reduced costs, adjusted pricing
structures and enhanced technological exploitation.

Organisational Structure.

EasyJet is a rapidly expanding international company that requires a specific organisational

structure to meet the unique demands of its industry. For instance, it must be able to make swift
decisions in the face of unforeseen circumstances without the need for extensive consultation,
which could lead to delays that are unacceptable in the airline industry. Moreover, such decisions
may need to be made in different time zones, further emphasising the need for a streamlined
process.

Picture 3
According to UNIR (UNIR 2021)(Picture 3), the matrix structure is the most suitable for the data
presented in the annual report (Annual report 2022), enabling departmental specialisation and
geographical distribution of middle management (Annual Report 2022, pp. 82 & 89, point 2).
The matrix structure mirrors the full company's layout, where the upper hierarchy cannot extend
its reach. This structure results in several managers overseeing marketing, sales, or legal
compliance. However, they all answer ultimately to their department's director at the company
headquarters, who, in turn, establishes the general guiding principles.

One of the benefits of using a matrix structure is the ability to arrange teams for particular
projects, such as creating tailored marketing for the German market with a department
knowledgeable about their culture and preferences. This approach would be difficult to develop
with other organizational structures. Additionally, the matrix structure allows for quick decision-
making in unforeseen circumstances without the need for time-consuming and inefficient
consultation with a central department in another country.

One drawback of this structure is that the CEO requires a system to obtain information about
events in other geographic regions or risk lacking sufficient data to make optimal decisions when
necessary. Nonetheless, in well-established, mature companies such as EasyJet with established
protocols and a skilled workforce, sacrificing that level of control for enhanced responsivity and
overall efficiency is worthwhile.

Organisational functions

The following departments will undergo meticulous examination in this segment of the analysis:
Finance committee, Security committee, and Remuneration committee.

The Finance committee, led by Mr Kenton Jarvis as described on the corporate website's (annual
report 2022), is a department with six core responsibilities, as outlined on the company's
recruitment webpage (careers.easyjet.com).

 Purchase ledger: This department monitors stocks, processes and projects, maintains
ground relations with.
  Ground operation & accounting: It pertains to establishing relationships with various
airports on the ground and exercising financial control over the entire network.
 Procurement: Its members negotiate future multimillion-pound contracts for fuel and
stationery and act as a bridge between the commercial and banking sectors. They also
monitor financial activities to ensure that operations run without any issues or financial
losses.
 Treasure: The department oversees the company's relationships with airports and
exercises direct financial control over the entire network. Its members negotiate future
multimillion-pound contracts for fuel and stationery and act as a bridge between the
commercial and banking sectors.
 Internal Audit: Its members negotiate future multimillion-pound contracts for fuel and
stationery and act as a bridge between the commercial and banking sectors. It is
noteworthy that companies enlist the services of external audit firms to bolster the
trustworthiness of their reporting to investors, despite having internal auditing.
 Financial reporting: These firms ensure that all activities carried out by the relevant
departments are presented in a clear and transparent manner in both the annual and
quarterly reports, and that the board and executive management team are regularly
apprised.

Security commitee: The safety committee of the cited company is accountable for implementing
and enforcing safety regulations and guidelines throughout service operations. Certain
regulations and guidelines are (ESG factsheet 2022) this is why safety regulations are
exceptionally strict in both Europe and the USA. Aviation safety is crucial as even the slightest
of oversights can lead to catastrophic accidents. However, safety barriers are in place through the
implementation of internal safety departments, governmental audits, and airport inspections to
ensure passenger safety remains a top priority.

Based on data collected by aeroinside (aeroinside.com), it is evident that easyJet has not
experienced any fatal accidents and all operational incidents have been minor, such as small
decompressions or radio failures. Such occurrences are commonplace in typical commercial
aviation, and do not pose significant risks to passengers, given the clarity and effectiveness of
safety protocols in such situations.

Picture 4

 Operational risk: Encompassing all aspects related to ground operations, aircraft, and
facilities.
 Security risk: This involves managing threats, including anti-terrorism protocols.
 H&S risk: Responsible for ensuring compliance with the respective occupational risk
prevention regulations in each country.
 Enviromental risk: The aim is to prevent operational safety hazards both in the cabin
during flight and on the ground.
 Management system risk: The Department responsible for managing systems and
processes collects information to monitor and enhance operations.

Remuneration committee: The remuneration committee has been entrusted with providing a
range of suggestions to The Board regarding the most appropriate and optimal means of
compensating senior executives and entry-level staff fairly, while prioritizing accountability and
individual performance. The Remuneration committee report of 2019 highlights the significance
of considering fair pay, accountability, and individual performance. (Remuneration committee
report 2019)
Discuss:

In this instance, three committees perform specialised tasks independently which are of crucial
significance to the company. Each committee enjoys an appropriate working environment with
effective information exchanges and adequate rewards. In my opinion, these departments
function like organs in a body: working alone, they accomplish little, but when operating
together, they form a highly productive mechanism that yields results.

Organisational culture

According to Indeed's career guidance consultancy (Indeed 2023), corporate culture comprises
"the values that steer the conduct of its members; shared customs, ethics, worldview, and both
written and unwritten codes."

Corporate culture can be defined as a company's collective mindset.

EasyJet reflects this with five key themes in its corporate culture, which can be summarised as
follows:

Picture 5

1. Safety: Is of utmost importance to us and we strive to promote this feeling to our

customers.
2. Cost saving: We are constantly searching for ways to improve upon our expertise, as we
believe that the journey to being the best is never-ending.
 3. Warm & welcoming: We aim to provide a warm and friendly experience for our
customers. Ensuring customer satisfaction is vital to the success of any company. This
emphasises the significance of paying attention to the smallest details, which can make a
positive impact.
4. Positive difference: This emphasises the significance of paying attention to the smallest
details, which can make a positive impact.
5. Orange spirit: The "orange spirit" encapsulates this ethos.

Corporate culture comprises a set of values that evolve over the lifespan of the organisation.
Initially abstract and general, these values become increasingly distinct and precise as the
company grows. Early on, a company typically adopts a horizontal culture where roles are
broadly defined, cross-functional skills are valued over specialisation, and technical terms are
explained when first used. However, as a company expands, it can undergo a change in culture,
resulting in a shift towards a horizontal culture which is prevalent in the banking and credit
industry, where adhering to norms may become prioritised over client satisfaction. On the other
hand, a progressive culture arises when a company experiences constant changes due to mergers
or shifts in the market. This is relevant to law firms, for instance.

Within the various categories of corporate culture, it is evident that EasyJet's aligns more closely
with the Elite or team-oriented category. This is because the company focuses on maximising the
potential of each team member, while simultaneously incentivising growth and excellence
through internal promotion processes. This creates a workforce equipped with problem-solving
methods that align with the desired corporate identity. This approach involves straightforward,
easily remembered phrases that are applied in everyday tasks.

SWOT Analysis

SWOT analysis: As per Kyle Peterdy's definition (CFI 2023, corporatefinanceinstitute), a SWOT
analysis is “a framework used to evaluate and comprehend the potential opportunities or risks
for an organisation from internal and external factors. It assesses the strengths, weaknesses,
opportunities, and threats that the organisation faces.”

Strength
EasyJet's key strength or competitive advantage is its fuel depot network, which allows it to
purchase fuel well in advance at a large volume, providing protection against price fluctuations
that typically affect competition in the air transport industry.

Furthermore, all of its aircraft feature winglets and sharklets, cutting-edge systems that achieve
fuel savings of up to 15%, thus adding to its already impressive efficiency.

Weaknesses

According to Easy Jet's annual reports (Stadista COVID19 Easy-Jet), the company is currently
facing a significant weakness due to its exposure to debt resulting from the shutdown of its fleet
and operations during the COVID-19 pandemic. This has led to a substantial 77% reduction in
profits and a debt level of GBP 1,125 million in 2023, as stated in the B.1.2 prospectus
(summary report in Spanish). The company is still in the process of remedying this issue.

Opportunities

EasyJet covers most of Europe, but there is scope for expansion in East and North-Eastern
Europe, as well as North Africa. The airline has a great opportunity to tap into areas where
migrant workers or students are returning to their home countries (Consilium migratory routes)
and are seeking affordable fares.

Threats

The legislation stemming from the agenda 2030 (agenda 2030 website) sustainable development
goals and green policies presents a significant challenge to Easy-Jet. In particular, the company
aims to achieve net zero carbon emissions by 2030, which is currently unfeasible given existing
technology. Consequently, governments like France are implementing restrictions, such as
banning flights under 2.5 hours if an alternative by train exists. This impacts EasyJet as France
represents a significant portion of its market and its route system operates on a point-to-point
basis, placing it firmly in this category.

PESTLE Analysis

According to the BBC, PESTLE analysis is defined as "A critical way of analysing the external
factors that can affect a location, organisation or business".
Political Factors

As previously stated, the uncertainty regarding the durability of the regulations leaves EasyJet in
a complex position when strategizing future investments. If the prospect of the airline's business
being short-lived continues to prevail, it is unlikely that they will invest in upgrading their
equipment.

Economic Factors

The economic impact of the COVID-19 pandemic and alterations in consumers' spending habits
have decreased the company's capital inflows somewhat. Yet, with the implementation of a
suitable action plan and restructuring, this should not pose a substantial issue. Despite the
challenges that accompanied the COVID-19 pandemic, the company has managed to persevere
and is currently reducing its debt.

Social Factors

As green politics, environmentalists and even eco-terrorist movements criticize the reputation
and attempt to discredit the usage of air transport, there is a potential for flying by air to become
socially negative, leading to less desirability within the market. To avoid this scenario, it is
essential to practice corporate social responsibility and promote the company's ethos of respect
for the planet while optimizing resources.

Technological Factors

The introduction of a hydrogen-powered aircraft is vital for air transport companies to maintain
flights beyond 2030 (unless there is a change in political attitudes). However, significant
obstacles exist, primarily the requirement to hold much more hydrogen than Jet A-1 or SAF
(presently used in commercial aviation due to its low emissions). This will result in a significant
reduction in cabin capacity for passengers (30% as shown in Picture 6) and an increase in the
cost per seat.
 Green tanks are the minimum amount of space needed
to compare with conventional fuel

Picture 6

Legal Factors

Currently, the aerospace industry, alongside banking and the military, stands as one of the most
regulated industries worldwide. Therefore, legislation does not represent a threat to the company.
At the present time, EasyJet adheres to all the industry's regulations and shows no signs of failing
to comply with them in the future.

Environmental Factors

Considering the conceivable outcomes of "Climate Change" and the practicability of services by
Easy-Jet, it can be inferred that a higher occurrence of storms and hurricanes in their flying zones
could have a detrimental impact, as aircrafts are more severely affected when flying in turbulent
weather conditions than in placid ones.

Conclusion

In conclusion, EasyJet is an established company with a range of point-to-point routes serving

various destinations and hubs, sound financial accounts, and significant prospects for growth
through international expansion.
However, it faces a number of risks, both political and environmental, that its board of directors
must address sooner or later to protect the interests of its investors.

The endeavor of some population groups to reduce utilization of passenger planes is a crucial
matter that requires prompt attention through corporate advertising and other targeted measures
to either enhance that perception or contain it as much as possible. This issue offers a prime
opportunity for the company to take assertive action.

To summarise, assuming EasyJet and its board of directors prioritize financial consolidation,
territorial expansion, and corporate social responsibility, the company appears to have a
promising future. It is expected to continue as the predominant model for low-cost point-to-point
routes in Europe, provided it can maintain this position.

However, given the imperfect financial situation, this company should be regarded as cyclical
with potential, but in a delicate position due to the possibility of unforeseen events causing a
cascade effect that could significantly worsen its current situation.
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