BA Case

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BRITISH AIRWAYS PLC

AND

EASY JET AIRLINE COMPANY

2006

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Executive Summary

British Airways Plc and Easyjet Airline Company are two of the most recognized

airlines in Europe. However, they possess different operational and marketing strategy.

Within this paper, I am comparing and contrasting both of the companies. British Airways is

a considerably older and larger airline with traditional services that target various segments. It

gains its competitive advantage from having one of the widest airline routes in the world and

providing customers with quality premium services.

Easyjet on the other hand, is the new class of airline. It is a low cost carrier that gains

competitive advantage from providing customers with cheap tickets and on-time services.

Both companies lived in a highly competitive environment, but the market share seems to

move in favor of the comparatively new and growing airline.

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British Airways Plc and Easyjet Airline Company

I. Introduction

I.1 The Airline Industry

The airline industry is one of the most competitive industries in the world. There are

many factors that influence the operations of companies within the business. Sometimes it is

difficult to differentiate between airlines, but other times, the differences could be as big as a

plane. Nevertheless, all airlines have one similarity, which is the extent of competition they

face. In the modern industry, there is no escaping the fierce competition which influenced by

various factors.

For instance, one of the most influential factors in the airline industry today is

Information Technology. Companies must arrive and depart on time, safely and without

delays or complication (Barnett, 2003). This requires a huge amount of information being

routed to numerous stations each minute. Companies with the best use of their capacity in

Information Technology generally will lead in several aspects of the competition. On the

other hand, companies that failed to take advantage of innovation in technology will be left

behind in the dust.

I.2 British Airways and Easyjet Airline

Within this paper, we are discussing two airlines which has a considerably different

characteristic. The British Airways is one of the largest fleets in the world with one of the

widest flying routes in the industry. The company has been around for more than 60 years

and they are still dominating the industry. On the other hand, Easyjet can be considered a

newcomer compare to the British Airways. The company has a relatively new strategy which

has gain popularity after the September 11th

tragedy (Bureau, 2003).

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This paper seeks to compare and contrast both airlines and discovered the strengths

and weaknesses of each. Furthermore, this paper will provide a suggestion for the companies

to deal with existing challenges and solve existing problems.

II. Strategic Comparison

II.1 Products and Services

II.1.1 Type of Services

Both companies provide international and domestic scheduled and charter air services

for the carriage of passenger, freight and mail. The main difference within their services lies

within the way they stated themselves for the market. Easyjet is what we know now as a low

cost carrier, an airline operator which main segment is to deliver frequent fliers with

inexpensive flights (Devlin, 2002).

On the other hand, the British Airways might have segments that serve to provide

customers with cheap flights, but it does not place the segment as a core service of the

company like Easyjet does.

II.1.2 Geographical Coverage

British Airways also have a wider geographical coverage compare to Easyjet. While

Easyjet serves more than 200 routes between 65 European Airports, the British Airways flies

across the Atlantic with more frequency than any other operators. British Airways flies to

more than 140 destinations in 75 countries in United Kingdom, Continental Europe, the

Midle East and Africa.

II.1.3 Number of Segments

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Due to the wider geographical coverage, wider target market and wider range of

services offered (including professional cargo carrier, etc), British Airways also has more

business segments then Easyjet. The range of services spans from low cost flight until the

executive clubs that includes membership and premium class services. Easyjet on the other

hand, prefers to find their place in customer¶s heart by enhancing itself as the µnumber one

low cost airline¶ in Europe. It focuses on the low-cost segment and has few segments in

additions. Product/services, geographical coverage, number of market segment,

II.2 Managerial Strategies

II.2.1 Ownership

Easyjet has a relatively simple ownership history. The company was founded by

Stelios Haji Ioannou, and the family remains the major shareholder. The owner of Easyjet

also controls separate EasyGroup companies such as EasyInternetCafe, EasyCar.com,

EasyMoney and EasyValue, however, there are no cross-shareholding between easyjet and

other EasyGroup companies.

On the other hand, the British Airways has a long and considerably complicated

history, due to its existence which goes back to the birth of civil aviation in the early 1900.

The company formed from a merger of several smaller UK air transport companies, with the

support of the British government. The company was nationalized in 1939 and privatized

again in 1987.

II.2.2 Size of Operations

In terms of size, the British Airways has the obvious advantage. The company is the

largest in United Kingdom and the second largest in Europe. The main hubs of the company

are London Heathrow and London Gatwick, with wide reaching European and domestic short

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haul networks, including smaller hubs at other UK airports. At December 2005, the company

has more than 250 operational aircraft around the world consist of Airbus and Boeing.

Easyjet on the other hand, has a smaller size fleet with 82 Airbuses and 38 Boeings at June

2006.

II.2.3 Relationship to Interest Groups and Vertical Structure

As mentioned previously, Easyjet prefer to focus on small numbers of segments and

provide their customers with the highest possible value. Their partnership philosophy also

stands on top of the focused strategy. For example, in its leisure segment, the company often

partnered with holiday services companies, like the Hotelopia, in providing sets of vocational

services. Other partnership arrangements are also made in such model of serving a segment¶s

purpose. The company is vertically integrated as other low-cost carriers are ('Future

Vacations', 2003).

On the contrary, British Airways has a less vertical integration structure and a rather

vast range of network. The company cooperates with other airlines forming different types of

alliances to extend the number of destinations and benefits offered to customers. The

alliances are divided to three segments, the One-World Alliance program, the Codeshare

Carriers, and the franchise programs. The One World Alliance consists of members like the

Aer Lingus, American Airlines, Cathay Pacific, Finnair, etc. The company franchises its

services under the following brands, British Mediterranean Airways, Comair, GB Airways,

Loganair, and Sunair.

II.2.4 Technology and R&D

Generally, all low-cost carriers vouched to never put passenger safety second after

cheap prices. Most of them, including Easyjet, have gone through evaluation stages due to the

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previously loud gossip of insecurity in low-cost carriers. However, due to their policy of

keeping prices low, technological facilities inside the aircraft cabin as well as inside the

aircraft¶s machinery are not to be compared with the premium services like the British

Airways. Easyjet has been accused, among other low cost carriers, of contributing to global

warming through the high carbon emissions of aircraft.

The British Airways on the other hand, had never been addressed with such

accusation, despite several accidents and incidents that involves aircraft¶s machinery.

Moreover, the company has advanced check-in stations in airports that provides customers

with various services like choosing seats electronically and choosing baggage handling

systems (Leonhardt, 2003).

When it comes to R& D, both companies has considerable share of their resources

devoted to research and development. However, the goal of their research is somewhat

different from one another. While the British Airways are focusing on finding improved ways

to deploy their premium services, Easyjet¶s researches are designated to discover ways to

deliver cheaper prices to customers.

II.2.6 Capacity Management

In terms of capacity, Easyjet has the higher efficiency level. Because the airline serves

only the route that contains economics of scale within it so EasyJet is able to survive with

low flight charges. The company has strategies that will put their planes in the most profitable

routes in Europe. On the contrary, The British Airways strives to expand its services to new

regions across the Atlantic. The company has more flight numbers that serves to cross the

Atlantic more than any other airlines in Europe. Because of that, having less than full

capacity in some number of flights is common for the airline.

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II.3 Financial and Marketing Strategies

Easyjet and British Airways have considerably different marketing strategies. The

most obvious is their pricing policies. British Airways has the more common pricing policy

with a range of price from economic to premium classes. On the other hand, Easyjet, is

performing a pricing strategy that many considered as the future of the airline industry. In one

of their reviews, the company stated that they intend to make flying as affordable as a good

pair of jeans. They intend to achieve that by eliminating unnecessary costs and frills which

characterize traditional airlines, like using the internet to reduce distribution costs, maximize

utilization of aircraft, ticket less travel, no free lunch, efficient use of airports, etc.

Easyjet uses internet as its main distribution channel. The company has received

awards for the best internet services facility in the industry. More than 90% of the bookings

in Easyjet are made via the internet. Other channels are through business and leisure travel

agents. British Airways on the other hand, uses its wide range of network as their ultimate

distribution channel. The company takes pride in its worldwide affiliates. Corporate slogan is

µThe world¶s favorite airline¶ The Company provides internet services also, but most flight is

booked through telephones rather than internet.

Financially, Easyjet has the upper hand compare to the British Airways. Despite the

smaller scale of total asset, Easyjet has a better liquidity structure compare to British

Airways. Easyjet has a lower gearing ratio and a lower debt-to asset ratio compare to the

British Airways. This is due to increasing market share that goes to the low cost carriers

business within the last decade.

III. Corporate Analysis

III.1 Operational Efficiency and Quality

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Both companies have a considerably different views regarding customer value. British

Airways and other premium airlines have once filed a protest to the FAA regarding the low-

cost carriers and security issues. The protest is about decreasing standard of service and

security in low-cost carriers¶ aircraft. They claim that the low cots carriers are degrading the

standards of flying by placing such low fares (Jenkins, 1995).

On the other side, the low cost carriers, with Easyjet among them, denied the safety

claim by displaying that their planes are operating within international requirements of safety

and security. Furthermore, they stated that delivering value to customers means a lot more

than providing customers with expensive meals and wine during flight. They believe that

µprice¶ is an important component of the value of flying. Providing people with low fares

means providing them with greater customer value (Skytrax, 2003).

Thus, taking account of the arguments above, there is a sound necessity to view

quality in the larger perspective. The perspective should include routes and area coverage, the

quality of services within the cabins, costs, booking services, on time services, etc. The

British Airways has a good quality in the range of coverage category. The company has a

wider coverage and they continue to grow as corporate affiliates enhance. The company also

has a better quality of service in terms of in-cabin facilities. The average services include free

lunch, snacks and drinks; and the premium services provides one of the highest class of flying

services in the industry.

Nevertheless, British Airways has a higher degree of late services or cancelled flights.

Some of these delays are due to supplies management that takes extra time to prepare for the

next flights and has larger chances of encountering problems that require delays. On the

contrary, Easyjet put their on-time reputation in high regards. Despite having no special in-

flight bonuses or services, the company is known by its on time management. Low cost

carriers are recorded to have the lowest rate of delays or cancelled flights in the industry.

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In terms of effective use of aircraft, Easyjet also has the lead. The company has a way

of designing their flight routes to cost the least and obtain the highest amount of passengers.

Unlike premium flying services, low cost carriers like Easyjet uses most of their aircraft in

crowded routes to provide customers with frequent travel in a single day. For example,

Easyjet flies from London-Gatwick to Amsterdam 5 times a day, to Berlin 2 flights a day, to

Madrid 4 flights a day and Athens 11 flights a day. Other strategy is by charging customers

only half price in a late night going-home trip. A going-home trip is when an aircraft fly

home from its destination to its main airport. Analyst considers this as a good strategy to gain

the most out of the fleet.

III.2 Innovation

As mentioned previously, both companies invest considerably in efforts of enhancing

corporate services. However, their desire for innovation is directed into a different goal. The

British Airways gain recognition by its high tech booking services in numerous airports in

United Kingdom, while Easyjet strives to discover new ways to cut cost. Overall, Easyjet has

more innovation in its cost cut efforts compare to the British Airways. Quick internet

booking, ticket less flights are examples of corporate discoveries to support corporate

performance philosophy (Esler, 2003).

In terms of looking into the future, Easyjet is considered to have the advantages over

British Airways. The philosophy of flying cheap is gaining increasing market share and

analyst predicted the concept to be the way of flying in the future.

III.3 Customer Responsiveness

In comparing which company has the best µear¶ to listen to customer¶s needs, there is

a dual perspective among analyst. The traditional way of flying tends to be in favor of the

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British Airways because the company provided better in-flight hospitality services. This is in

tune with the classic modern taste for luxury and convenience in flying. However, after the

September 11th

tragedy, the low cost carrier has become the new trend of flying. The new age

is not like the old ones. People are more concern of price compare to premium services. Thus,

in terms of price, analysts often stated that Easyjet is better in-tune with customers¶

preferences (Eugene, 2000).

In other respect, Easyjet also has the better side of customers¶ opinions. As mentioned

before, the company is very proud of its on-time services and strives to maintain it. It turns

out that the on-time quality is very important in consumer¶s preferences. Most of Easyjet¶s

passengers are frequent fliers satisfied with corporate services.

IV. Strategic Adjustments Suggestions

The companies live inside of a single industry but a different realm of competition.

The British Airways is generally a premium airline in competition with other large and

multinational companies like the United Airlines, while easyjet is often compared to other

low cost carriers like Ryanair and Southwest ('Yahoo', 2003). In the premium segment, The

British Airways should pay attention to its worse qualities that could encourage people to

shift to low cost carriers. For instance, low cost carriers generally have a better management

of their time that allows them to provide better on-time services. Some low cost carriers

invest a considerable share of its resources for Information Technology equipment to

maintain all aircraft within their schedule, or quickly change to substitute aircraft in case of a

problem.

Other qualities of the low cost carriers that must be paid-attention to is their ability to

provide customers with easy and short ticketing and checking-in process. They have high

regards upon practicality and how the business should provide the quickest way to obtain

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corporate services. The British Airways has several innovations that supported its customers

the same way, but the extent of the creation is insufficient to compete with the practicality

provided by Easy jet and other low cost carriers.

For easyjet, the highest challenge is its competition with Ryanair, its biggest rival, and

other low cost carriers. The company should perform a more aggressive marketing strategy in

order to gain increasing market share from customers of the low cost carriers. Furthermore,

the company must be superior from Ryanair and other low-cost carriers in every aspect they

can. For instance, Easyjet has frequently been protested due to its aging aircraft and

'environmentally unfriendly' jets. Managing this issue along with other problems will enhance

corporate image within the society.

V. Conclusion

British Airways has a larger area coverage and larger number of segments. The

company has a wider range of services and one of the largest fleets in the industry. Easyjet on

the other hand, has a smaller area of coverage and smaller fleet. The company also has fewer

segments and narrower range of services.

The British Airways gain its strength in the market because it flies across the Atlantic

more times than its competitors. The company also has a high-tech ticketing and checking

mechanism in most airports of the United Kingdom that provides customers with convenient

processes

Easyjet, on the other hand, gain its strength from its pricing policy. The company

provides one of the cheapest airplane tickets in the industry. Moreover the company has the

highest reputation for ensuring easy-via-internet ticketing activity and maintaining on-time

flights. The company won several awards or the best technological innovation in the airline

industry.

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Bibliography

Barnett, A. 2003. Airline security¶s false hope. An MIT Enterprise Technology

Review. Retrieved August 5, 2006 from

http://www.technologyreview.com/articles/print_version/wo_barnett072803.asp

Bureau of Transportation Statistics. 2003. Air traffic statistics and airline financial

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http://www.bts.gov/oai/indicators/top.html

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http://www.maa.org/devlin/devlin_09_02.html

Eugene Airport. 2000. Projections of aviation demand . Retrieved August 5, 2006 from

http://www.eugeneairport.com/masterplan/5projections.html

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http://www.airlinequality.com/main/aqm_02.htm

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