The king of no-frills flying bows out – to chant the easyMantra at other industries

Stelios Haji-Ioannou: Founder of Easyjet
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The Independent Online

IF 20 people are in a room that contains 15 chairs, but no one is sitting down, it must be the 5pm stand-up. This event has nothing to do with comedy; even mild gags are in short supply. The stand-up is the daily gathering in the boardroom at easyGroup. And every one of those standing is focusing on a single objective: getting bums on seats.

IF 20 people are in a room that contains 15 chairs, but no one is sitting down, it must be the 5pm stand-up. This event has nothing to do with comedy; even mild gags are in short supply. The stand-up is the daily gathering in the boardroom at easyGroup. And every one of those standing is focusing on a single objective: getting bums on seats.

Amid the jostle of thirty-somethings, with a globe's worth of accents, one figure is dominant. A tall, well-built man with olive skin and wiry black hair fires a rapid series of questions. "Why are there so many cars at Edgware Road?"

We are staring at a PowerPoint projection of a spreadsheet showing the numbers of cars in stock at the easyCar depots across Europe. Several hundred figures are splattered across the screen. Stelios Haji-Ioannou homes in on one. As the boss of easyCar, his main concern is getting rears on the drivers' seats of his fleets of Mercedes A-Class and Smart Cars. If a £16,000 asset is parked in London NW1 rather than being rented out, it is losing money. Like an empty seat on a £20m Boeing, this represents cash that can never be recovered.

"So you set the price too high, and by the time you realised, it was too late", he summarises. Stelios, as Mr Haji-Ioannou insists on being called (to the relief of his staff, and journalists) is not picking on the individual who seems to be responsible for this oversight. Rather, he is repeating the one crucial element of the easyMantra: yield management. This is the black art of filling every seat at the maximum price that each occupant is prepared to pay. It applies equally whether the seat is on a plane, in an internet café or behind the wheel of a Mercedes. Add the second element of the easyMantra – to squeeze costs as far as possible – and the company should thrive.

Just look at easyJet, the biggest no-frills airline in Europe. Only seven years ago this month, the first easyJet flight roared down the runway at Luton airport, destination Glasgow. The plane, which had been borrowed from an affiliate of British Airways, was full of people attracted by the chance to fly to Scotland for the price of a pair of jeans. The fare of £29 was far less than BA and British Midland were charging from Heathrow, partly because everyone booked directly by phone.

"I was only capable of cutting out the travel agents because I knew nothing about the travel business. I had no allegiances, I had no friends in that industry, I just said, 'This doesn't make sense, we will not do it'."

Dozens of entrepreneurs have started airlines, offering lower fares than the incumbents. Almost all have quickly gone bust. If you intend to launch a carrier, having a billionaire as a father is handy. Loucas Haji-Ioannou is a shipping magnate. He helped his son to build a successful shipping line, Stelmar, and then lent him £5m for a new venture.

"I was desperately trying to get rid of the 'daddy's boy' image. I had to do something away from home, in an industry that my father knew nothing about, where my surname meant nothing to anybody."

Since that overcast day in November 1995, close to 30 million passengers have beaten a path to his check-in desks. Stelios has proved a masterful showman, squeezing free publicity out of every opportunity – including the launch of a rival airline. When British Airways announced plans to start its own no-frills airline, Go, Stelios reached for his lawyers' phone number, accusing BA of using its market dominance in a bid to put his airline out of business. But he also asked his marketing director to book 10 seats on Go's maiden flight. Stelios and Co turned up in orange boiler suits, stealing the limelight from Go's chief executive, Barbara Cassani.

At around this time Stelios made an unexpected discovery about the internet, a tool that was, commercially, in its infancy. Like many businesses, easyJet had a website that was little more than an invitation to phone the company. He assigned a separate number to appear on screen, and was startled to find so many people calling the line. Stelios seized the opportunity; instead of paying call-centre staff about £1 for each seat sold, the internet offered a way to reduce the marginal cost of distribution almost to zero.

"The internet has probably had a bigger effect on people's ability to fly than the jet engine", says Stelios. "The jet engine was an improvement on the propeller, but what really made it a mass market was the ability to fly someone for £1. You can only do that with the internet."

Stelios's next venture, a chain of internet cafés, was a direct consequence of the move towards online sales. He realised that much of the travelling public had no access to the internet, so decided to enfranchise it with the world's biggest internet cafés. Month after month, a new cavern packed with computer terminals would open in a big city: Amsterdam, Munich, New York. The rate of expansion proved so unsustainable that the value of the company was written down by 99 per cent.

"I tripped over a few times in the new businesses so I have to get them back on track. I have to clear up some of the mess I made."

His next venture, easyRentacar – a name that has now shrunk to easyCar – was not an immediate success. For the first time, Stelios felt the discomfort of a series of complaints from hirers who discovered extra charges added after they had returned the car. Procedures have been improved, and Stelios is confident he can make cash even by renting out Mercedes at £1 a day. "We're still discovering levers in the business that can take 5, 6, 7, 8 per cent out of the cost." One of these levers is to "name and shame" drivers who fail to return the car on time, by publishing their pictures on the internet.

Stelios does things his way. He is also blunt about why easyJet has prospered in the past 14 months: 11 September. "The growth and the status of the low-cost airlines in Europe had dramatically increased since that tragic set of events. It affected Americans flying to Europe, so our competitors, especially BA, suffered a lot more than we did. The Europeans are more familiar with terrorism, and went back to flying much faster. So we could accelerate our growth while BA had to start retrenching."

In May, news leaked out of easyJet's bid for Go. The £374m deal made a multimillionaire of Ms Cassani and made easyJet the biggest low-cost carrier in Europe.

Hitherto, the advantage that big airlines such as Air France and British Airwayshad over the upstarts was that they could get a better deal on aircraft. Since 11 September, with orders being cancelled worldwide, Ryanair and easyJet have started naming their prices. The Irish airline ordered 100 Boeing 737s, with options on 50 more; Stelios trumped that with 120 Airbus A319s, and options for the same again. If you go shopping for aircraft with a list in triple figures, the calculators of the salespeople in Seattle and Toulouse reveal unheard-of discounts.

"The Airbus deal will give us a cost per seat which is 10 per cent lower than the last Boeing deal. Now how often do you get 10 per cent off your cost base by doing one transaction?"

Just as easyJet takes its place in the premier league, Stelios is vacating his seat as chairman of the board; from 26 November, he will be just another easyJet shareholder (albeit the largest one) as Sir Colin Chandler takes over.

He is leaving to spend more time in the converted piano factory in Chalk Farm, worrying how to put bums on car seats – and cinema seats, his latest venture. But why, when he never needs to work again, should he be arguing about cinema-going habits?

"I'm only 35. I need a job. For me, work is a need, not an optional extra or a subsistence issue. I derive a lot of pleasure from taking on challenges that people say cannot be done."

Simon Calder is author of 'No Frills: the truth behind the low-cost revolution in the skies' (Virgin Books, £16.99)

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