Stelios’ Greatest Hit

If you ever pick up a copy of The Stage you are bound to be see some small ads announcing that a famous comedy double-act of the 1990′s are looking forward to starring in pantomime in Crewe this winter or one of the big pop groups of the period thanking the staff at the Embassy Theatre in Skegness for their recent sell-out Sunday show. Readers of the financial press might have found the same sense of vaguely melancholic nostalgia in a series of ads run by Stelios.

“Twenty years ago Stelios created easyJet” trumpets the ad.

It then lists some of the other brands of the easy group including easyhotel, easybus, easygym, easyoffice, easyfoodstore and easymoney and asks any company interested in joining the success and licensing one of their brands to contact them.

Any entrepreneur who starts a multitude of new companies will have plenty of failures but, other than easyhotel and easybus, which are really very modest companies indeed, easyJet remains Stelios’ one and only big hit.

The ad boasts that Stelios remains the airline’s largest shareholder but that is hardly the whole story. He did a great job in getting the airline off the ground originally and was wise enough to employ some good people around him to get the nuts and bolts right. When it got to a certain size though, the company started to flounder and it has only really achieved genuine stability and growth since Stelios left. And since he left, he has been a loud critic of the management. There seems to have been a never-ending game of Stelios threatening that he would sell shares if the Board went ahead with some plans, the Board ignoring him, Stelios selling shares and the airline’s profits and share price increasing.

Maybe the easy brand has some huge new project up its sleeve that will once again propel it to stardom. Until then, I am pretty sure Stelios and his family can live very comfortably off the profits of his one big hit.

EasyJet to Heathrow? – It’s not going to happen!

Whatever easyJet’s CEO Carolyn McCall has been telling the Daily Telegraph, it is highly improbable that the airline is going to move its Gatwick operation to Heathrow. Much more likely is its consolidation of its Gatwick services all under one roof at the North Terminal. The airline already operates 45% of flights out of the airport, but they are currrently split between the North and South terminals. A move to the North Terminal would require  British Airways to shimmy over to the South Terminal to be next to LGW rivals Virgin Atlantic.

EasyJet’s Embarrassment

Many families have them – the elderly relative who is brusque at best, all too willing to vent his forthright opinions and a bit of an embarrassment to be seen with in public. The problem is he has rather a lot of money and the family hope to get their hands on it.

Then they discover that, actually, there isn’t very much money and they don’t need it anyway and his opinions have grown so extreme, and his behaviour so boorish, that enough is enough. Time to parcel him off  to a nicely remote old people’s home.

The Board of easyJet might recognise the scenario. Stelios sits broodily over his 37% shareholding and releases vitriolic attacks on the airline’s management with numbing regularity. The airline has just announced plans to buy a new fleet of Airbus aircraft (many of which will replace existing planes) so Stelios is on the warpath as usual. He insists he will vote against it, rages at the dangerous expansion and mutters darkly about “secret prices” for the aircraft.

But everyone else seems to ignore him. Other investors and the stockmarket seem very happy with the current management, the airline is profitable and the shares keep reaching new highs. In fact, it might just be coincidence, but the shares seem to go up every time Stelios makes one of his threats to sell some of his families’ shares or vote against the Board. Maybe he is much cleverer than we imagine and this is just some complicated strategy to talk-up the value of his holding.

Like a broken clock, Stelios will be right at least once in the next few years. The airline business suffers more than its share of blips and there is bound to be a time when expansion looks less wise than it does now. However, the Board of easyJet are doing a good job and the airline is probably in the best shape it has ever been. Hardly surprising that no one is concerned about other investors voting with Stelios to scupper the aircraft purchase.

If he is convinced he is right, and the airline is toying with disaster, then surely he ought to put his money where his mouth is and sell all, or most of his shares before it is too late. Then he can leave everyone in peace and concentrate on all his other companies and shareholdings – not all of which seem to be quite as successful as easyJet.

 

Plenty left for easyJet

Last week, easyJet became part of the FTSE 100 index, making it officially one of the top British companies. There are people saying that the airline has now reached a natural plateau and growth will be much more restricted in future. I think this is wrong for two reasons.

Firstly, there are still countries in Europe where easyJet has plenty of room to expand. It is a European airline now, not just a British one. Of course, growth needs to be controlled, but there is plenty of room – even in markets where they already have a large share such as Britain.

Secondly, and much more important, the airline looks to have tremendous scope to improve simply by doing what it already does, but just a little bit better. I do not mean they should cut costs (they tried that under the last management regime with disastrous results). They simply need to use their strong position more effectively.

An interview for a US business magazine with one of their senior sales executives gave a couple of examples of what they can do.

Can you guess the seventh largest country market for easyJet sales? The answer is not so surprising if you think about it – the USA. Yet it is only recently that easyJet have created a dedicated site for US sales – using the American date format and replacing words like “holiday” with “vacation”. So simple – yet it is amazing the airline has got to the size it has without doing this before.

Then the executive mentioned their weekly sales email sent to all their customers. In the past, a fairly standard email was sent to all passengers giving news of new routes and special offers. The email was translated into other languages but was otherwise standard. Now, personalised emails are being created based on the regular airports used by the customer.

Again, another obvious way to get better sales at hardly any extra expense.

What the executive did not mention though is just as important. The current system used by easyJet to maintain its mailing list is hopelessly inefficient. I heard (maybe incorrectly) it was outsourced to an Indian company which has not done a good job. Whatever the case, an awful lot of passengers do not get regular emails and even those who try to sign up often fail to get their names added.

When easyJet started, it grew rapidly and became very successful but its back office and management was often shambolic. The period of cost-cutting under the last management made this worse. Implementing an efficient mailing list is just one example of many and the gains to be made could be substantial. Now that it is under sensible management, I am sure there is plenty of room for the airline to improve its profits just by growing at a reasonable pace and doing what it already does – but just a little bit better.

Stelios makes tempting offer to easyJet

Ever since Stelios left the easyJet board, he has concentrated on being a thorn in the side of the company. Informed and intelligent criticism is one thing but Stelios has gone far beyond this. His public spats with the board have become increasingly bitter and childish – and lost him respect from other financial backers of the airline. 

The airline is actually doing very well without Stelios. The airline’s board acted swiftly to replace an unsuitable CEO and, since then, passenger numbers, customer satisfaction and profits have soared. You might imagine that a man whose family still owned 37% of the airline’s shares would be happy and reluctant to wash any dirty linen in public.

His latest broadside offers the airline a very tempting solution to the problem. On Monday, Stelios announced that he has sold 1% of his shareholding as a public warning to the board. If they follow a strategy of increasing the fleet, rather than concentrating on paying out more to shareholders, he and his family will sell the rest of their holding.

The board has actually been very cautious in its growth strategy but there are some opportunities for budget airlines to keep growing in the difficult European market and easyJet would be foolish to walk away from them just to please its troublesome founder.

It must be very tempting for the board to call Stelios’ bluff. Announce a fleet expansion, get him to sell his shares as he has promised and then reduce the order to a more sensible level.

That could be a very neat solution.

One battle easyJet must win

Next month, the CAA will decide who is to take over BMI’s right to fly from London to Moscow. The deal between the British and Russian governments means that two airlines from each country can fly the route. As part of the deal to take over BMI, BA had to give up BMI’s rights on the route. The two contenders are easyJet and Virgin Atlantic.

This really should be an open-and-shut case. EasyJet is the only choice that will actually bring something new to the route and be a genuine benefit for passengers.

I am not a big fan of Russian airlines but it has to be said that both Aeroflot and Transaero offer high quality service on their flights to London. It is a prestigious and profitable route and they know they have to work hard to fight British Airways.

If Virgin were allowed to take over BMI’s rights on the route, all they would do would be to bring more of the same. Another full-service carrier charging similar fares and offering much the same type of service. Virgin constantly claim they will “shake up” businesses they move into but the reality is different. – they are good at publicity, adding a little stardust and charging high rates.

On the other hand, easyJet can genuinely bring something new to the Moscow route. Fares are high, partly because of demand but also due to high costs and restrictions placed on airlines by the Russians so EasyJet’s scope for reducing fares is limited but it surely exists.

Virgin love to use the “public interest” argument when pushing their businesses. We must hope that the CAA are not intimidated by Virgin’s frequently-used tactics of public intimidation and legal threats. There is no question that in this case, the public interest can only be served by easyJet being given the route.

EasyJet’s curious ad campaign

The new BA campaign might be a little cheesey for some, and it is unlikely to win over those who view the airline as hopelessly elitist, but there is no question that it brings out the strengths of the airline. The same could be said for Virgin Atlantic’s campaign last year. Now easyJet have launched their first major brand-awareness campaign for a long time and what a mess it is!

Watch one of the BA ads and you are certain to remember which airline is the subject. You can sit through a whole series of the easyJet ads and you might still have difficulty working out what they are supposed to be advertising. Are they saying the airline has good value fares and is friendly? That would be a fairly obvious statement but they manage to avoid passing on any message at all. A few destinations, some smiling people and a brief name-check of the airline at the end. What is it trying to say?

The campaign was premiered during an ad-break in Downton Abbey a couple of weeks ago. Within minutes, someone had tweeted to easyJet to say what a change it was to the BA ads because it actually focused on the passengers, rather than the airline. One might imagine that rather helpful tweet came from someone at the advertising agency or within easyJet. The whole point of a brand-awareness campaign is that it is all about the airline! Mentioning the name of the company as an after-thought at the end is not the idea at all.

Both BA and easyJet have spent a lot of money on their campaigns. BA’s is winning praise from all quarters, including within the advertising industry. By the side of it, easyJet’s attempt looks dreadfully inept.

Time for a new advertising agency for easyJet!

Goodbye Stelios

For the last couple of years Stelios has been conducting an increasingly acrimonious dispute with the board of easyJet. It has to be said that easyJet’s management did go through a serious blip but that seems to be behind it now. Stelios has continued to pick fights with the board over a range of subjects. Nothing they can do is right and they are subject to public lambasting by the truculent founder.

The Board has made many efforts to appease Stelios, not least agreeing to the payment of a large dividend but Stelios is not finished yet.

Now, he says, he is going to start his own airline, Fastjet.

So far, little work seems to have been done on this or, if it has, it has been kept remarkably quiet. It could be just another spoiling tactic in the on-going battle.

Without knowing the precise deal between the airline and the owner of the easy brand, it does look very much as if Stelios is out of order in this. Surely you cannot charge a hefty fee to a company for the right to use your name whilst you are secretly setting up your own rival?

Margins are tight in the airline business. I have long thought that the fee the airline pays to easy group was a waste of money. Now, maybe it gives the airline a chance to walk away, paint their aircraft green or some other tasteless colour and call themselves “Simple Jet”. They will save unnecessary expenditure and lose a very irritating and negative presence.

Stelios seems to think that the name easy stands for something valuable. In fact, few of the easy-branded ventures have been a success – and several were dismal failures. To the public, “easy” means the airline. If the airline changes its name, Stelios loses income and the value of his cherished brand diminishes.

There is clearly no point in trying for a peace agreement because war will only break out on another front in a few weeks. The Board of the airline should say good-bye to Stelios and his over-hyped brand name. And if he really does start his own airline, what are the odds on its survival?

Well done BMIBaby!

In the last few years, virtually every consumer company you can think of has latched on to the idea of bundling products. From packages for mobiles with landline, “free” internet and satellite television or just simple “buy two get one free” deals in supermarkets, companies are fighting to give consumers more so they can increase their revenue.

Remarkably, airlines have been going the other way. They have unbundled their product to such an extent that on a budget airline everything costs extra.

They really need the extra revenue they get from these add-ons and it is amazing that so few airlines have come up with attractive packages that actually encourage their customers to buy, rather than making them pay what feel like fines.

Both Germanwings and Jet2 have produced worthwhile packages but easyJet has remained with its head stuck firmly in the clouds. Their latest wheeze of selling flexible fares at astronomic prices, often bearing no relation to what full-service carriers charge, shows just how far out of touch the airline still is.

BMIBaby has shown more sense and has now come up with two attractive packages which include several extras at an attractive price. The airline has realised it will only sell these packages if the price is sufficiently below the total cost of all the extras if purchased separately. FlyPlus is aimed at business travellers and includes baggage, credit card charges, seat reservations, ticket changes and the use of an airport Lounge. FamilyFly costs less but does not include the Lounge or change facility. Our only quibble is that the “FamilyFly” name is rather silly since the package is as attractive to individual passengers as it is to families.

The price for both packages looked interesting on fares we checked. Let’s hope that BMIBaby have a good response because it might show other budgets that one of the ways of increasing your revenue is to offer passengers more. That way the airline gets more income and the passenger gets more and still feels he has a good deal.

www.bmibaby.com

EasyJet no longer cheap

According to an interview in yesterday’s Sunday Times, easyJet are trying to re-position themselves towards the middle of the market. They now avoid using the terms “budget” or “low-cost” airline.

That is fair enough. Increasing fuel prices are hitting all airlines but they affect the budget carriers more than traditional carriers. An airline like easyJet has the same cost of aircraft, the same insurance costs, the same airport charges and almost the same staff costs as traditional carriers. The small saving they can make by squeezing more people on to an aircraft becomes a smaller percentage as the cost of fuel increases. Quite simply, the budgets are going to find it tougher and tougher to compete.

It is all very well saying you want to move the airline into the middle of the market and go out to attract business flyers but passengers still want value.

EasyJet’s attempt to offer flexible fares has produced some laughably high fares (£750 return to Glasgow anyone?). A recent move to increase the charge for card payments has provoked wide criticism but it is just another in the list of charges the airline makes that the traditional airlines either do not charge for or charge more modestly.

As prices increase and easyJet declares itself a “mid-market airline”, will passengers still accept long queues to check-in, queues to board, no pre-assigned seating and no free service on board?

Easyjet have a fairly simple task on flights from the regions – if you want to fly from Bristol to Barcelona then there is no competition. However, when they are flying from London airports, it is a very different question.

If they are not going to be so competitive on fares they will have to be more competitive on what they offer.

So far, they have only come up with half the plan.

Fares have to increase but they need to offer more. You cannot survive as an airline charging mid-market rates and offering budget service.