EasyJet’s flying high thanks to a rethink on how to run a budget airline

 

OUTLOOK: EasyJet is flying. Sure it lost money in the first half, but that’s what airlines like EasyJet do. It’s in the summer, when people travel, that money can be made.

All the same, in what amounts to a reverse profit warning the company says it now expects to lose between £55m and £65m in the first half, comparable to last year’s figure and down sharply from the £70m - £90m deficit the company had forecast a couple of months ago. 

Virtually every metric has since moved in its favour. Costs per seat will be lower than feared, revenue will be quite a bit higher. 

Right on cue, the City’s scribblers are sharpening their pencils, and firing up their spreadsheets so they can upgrade their full year forecasts (although one or two might wait until they’ve seen the numbers on summer bookings). 

Which is bad news for founder Sir Stelios Haji-Ioannou. His annual campaign against the board, and the high-cost bonuses awarded to the low-cost airline’s executives, is going to fall on even more deaf ears than usual. The chief of those executives, Carolyn McCall, will be presenting the numbers to happy investors and they’ll back her. 

It is true, as Sir Stelios will probably point out, that she and her colleagues hardly deserve all the credit for company’s high altitude cruise. The winter weather was benign this year, at least as far as airlines were concerned, so cancellations were rare. Moreover, fuel costs have proved less onerous than expected. 

But credit MMs cCall with waking up to some of what irritates passengers about her airline’s business model and stealing a march on rivals by updating it. Flying with EasyJet still isn’t always a lot of fun (check out last year’s squeeze on hand luggage) but you can now get allocated seating, and flights can be changed if necessary (a nod to business customers).  

It’s taken years for low cost carriers to wake up to the fact that making modest tweaks to their procedures like this can pay more dividends than simply advertising ultra low cost flights and finding ever more irritating ways to tack extra charges on top. 

Of course, now EasyJet’s done it, the past master at the latter Ryanair has been hurrying to catch up. The latter’s chief executive Michael O’Leary (who’s been an asset to McCall) has even admitted that his brash style might be hurting business. But even if he’s a leopard that can change his spots, he’s got some catching up to do. 

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