The stock market got excited about the boost in revenues which was apparent in easyJet's half-time results published on Wednesday, whereas what it ought to have done is taken a long, hard look at a bit of research which came out a couple of days earlier.
It said that by the time a typical family had paid £9 per bag to check luggage in the hold, £9.50 to have speedy boarding so they could sit together, then paid £5 extra for using a credit card to buy the tickets and £9 extra for what the airline calls an administration charge, it would have been cheaper to use a traditional carrier. And that was before incurring any extra charges like £25 for putting sports equipment in the hold, or buying a coffee and a sandwich on board, or the extra costs incurred waiting in the terminal when, as so often happens, the flight is seriously late.
It is all interestingly reminiscent of what happened in the United States in the 1980s, when low-cost carriers first came into being after President Reagan deregulated the US airline industry. In the beginning the low-cost carriers swept all before them, particularly on popular runs like New York to Boston. But then in response to stock market pressure to keep growing revenues, they began to tamper with the model – adding charges not unlike those listed above. In some cases they even created a premium class and fare for business travellers – something easyJet has hinted at but not actually done.
The result, predictably enough, was that the public realised it was no longer getting a bargain because the airline was not low-cost any more. So they took their business back to traditional carriers, who had meanwhile become leaner and cut their costs and fares. In time the loss of business was so great that a large number of those low-cost carriers collapsed.
Far from applauding easyJet for pushing up revenues with all these extra charges, the stock market, and indeed the company's management, should actually take fright. What they are doing with each extra stealth charge imposed on passengers is undermining the brand, and ultimately they will destroy it because they will have departed too far from its core values. If they carry on along the current path they will wake up one day and find they no longer have a business.Reuse content