Essay About Deregulation Of The Airline Industry And Air Travel Market

Easyjet Corporate History
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. EasyJet Corporate History
Air travel is one of the world’s largest industries having generated over $300 billion in revenues in 2001 alone1. Originally, the air travel market was driven by the demand for business travel as companies became increasingly international in their activities, reflected in the rapid growth in world trade and investment. The leisure market subsequently took off as rising living standards and extra leisure time encouraged holidaymakers to travel to destinations increasingly further a field.

A further stimulus to air travel has been privatisation and deregulation of the airline industry, ending the monopolies and protection traditionally enjoyed by state-owned flag carriers and exposing them to the forces of competition. In Europe, With the expansion of the EU, and the breaking down of trade barriers, the airline industry was deregulated in 1992. This meant that any European airline could fly and land anywhere in Europe. This offered airlines the chance to expand routes across the continent and to apply market strategies with greater accuracy. One feature of this changed landscape has been the emergence of the “no frills” airlines, which have achieved rapid growth in market share in the short haul European market. A successful example of a European no frills airline is EasyJet, brainchild of Stelios Haji-Ioannou, the son of a Greek shipping magnate who founded the company, based on the low-cost, no-frills model of the US carrier Southwest, in 1995. Today, he and his family still hold the majority of the shares. The concept of EasyJet is based on the belief that demand for short haul air transport is price elastic that is that if prices for flights are being reduced, more people will fly. Traditional airline concepts are based on the assumption that airline traffic grows in line with the economy and that cutting prices will only lead to a decrease in revenues. With the introduction of the ‘nononsense’ concept to the European market, after its deregulation, EasyJet has proven this theory wrong and goes from strength to strength by actually increasing the size of the market and more recently by taking away passengers from the majors (see appendix 1, 2 and 3 for passenger figures, financial data and employee statistics).

Today, it offers 88 routes from 36 European airports (see appendix 4 for route launch dates), with Luton, Liverpool, Geneva and Amsterdam (Schiphol) as base airports2 and is operating 64 aircraft (October 2002, Go’s fleet not included). In November 1995, EasyJet starts flights from Luton near London to Glasgow and Edinburgh with two leased Boeing 737-300s with a capacity of 148 seats at a price of Ј29 one way. At this time the airline acts as a “virtual airline” which contracts in everything from pilots to check-in staff. Seats are being sold over a telephone reservation system only, thereby avoiding travel agents and their high commissions. In 1996 EasyJet takes delivery of its