1

EASYJET   COMPETITIVE ADVANTAGE IN TERMS OF TRADITIONAL COMPETITOR

Easyjet stakes its claim in the market as a low cost airline operator. Yet easyJet operates quite differently from most other low cost operators. Traditional low cost airlines fly old aircraft on routes that the major airlines are not interested in. Old aircraft may be cheap to buy, but they are not cheap to operate. Flying uneconomic routes doesn't help either. This traditional mode of operation makes profit margins very thin, simply because operating costs are so high.

Easyjet has now sales ticket on the web. At present over 82% of its sales are sold directly through the website www.easyJet.com. This is all the more remarkable, given known consumer hesitation about buying anything online. Booking is offered in three languages (English, French and Spanish) reflecting the core of easyJet's current route structure.

What easyJet offers on its website is choice. This choice is offered 24 hours a day, seven days a week. When booking a flight, the passenger is not only offered a choice of flights, but the best fare available on each flight. Not only are the offered fares lower than the competition, they can even seem ridiculously lower. Fares are quoted one way. That means that the best price for the most convenient flight can be obtained both ways, optimizing the round trip cost for the passenger. This approach compares very favourably with the inflexible pricing and ticketing structures offered by conventional airlines. Further reductions are offered for booking on the web.

For illustration purposes only, typical fares booked on the web could cost either of £27.50, £47.50, £87.50 and £117.50 compared with competitor fares of, say, £400 to £600 (e.g. usually at the lower end i.e. 10% to 50% of the

2

conventional fare) on the same route. These are real price comparisons and not just worst-case examples.

3. Substitute products and services

Substitute goods are goods which, as a result of changed conditions, may replace each other in use (or consumption). A substitute good, in contrast to a complementary good, is a good with a positive cross elasticity of demand. This means a good's demand is increased when the price of another good is increased.

The airline industry has a medium substitute risk level. There are several substitutes in the airline industry . Potential travelers can choose other means of transportation such as cars, buses, trains, or boats to go to their destination. However, there is a cost to switch. Sometimes, forms of transportation can happen to be more costly than a plane ticket. The major cost is time. International routes distances are usually very long for trains or a car, which now is much easier and quicker, from London to Paris, which now can be reached by Eurostar.- Minimal threats from other means of transport like cars and trains on domestic routes. The disadvantage in that case is time as well as cost, as the route from Luton/London to Glasgow in 6 hours costs around £80 but with EasyJet it costs £29 in one hour.

We know Aircraft are by far the quickest mean of transportation available in the market. Airlines outperform any other forms of transportation when it comes to cost, convenience & service. Customers sometimes do choose other methods for diverse reasons like cost if they are not traveling very far which raises the risk.

3

4