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easyJet CEO Carolyn McCall speaks to World Low Cost Airlines Conference

Direct News Source

20-Sep-2011 Speaking at today’s World Low-Cost Airlines Conference in London, Carolyn McCall said:

"It is a great pleasure to be speaking here today in front of such an impressive gathering of airline people and our partners from right across the aviation industry. I have been asked to talk about easyJet's strategy and to share some of my experiences in the first year in this role.

My first reflection is that there are many more similarities than differences with my old world. If you think of a business as a group of people serving their customers well against a clear proposition, then the role of the CEO has a lot of similarities - setting a clear vision and strategy, getting the right team, focussing on people and the customer, driving implementation and delivery and delivering financial performance for shareholders.

I was told when I left Guardian Media Group that I'd miss working with journalists and their unique combination of intelligence, cynicism, independence, loyalty and ability to really deliver when it matters most. Well I soon discovered that pilots have almost exactly the same characteristics!

The other thing that becomes obvious very quickly in this industry is that disruption - whether that is from ATC strikes or volcanoes - is a fact of life for airlines. In the last 18 months alone we've had not one but two volcanoes, the worst winter for 31 years - followed, of course, by the worst winter for 50 years - and hikes in the oil price to unprecedented levels.

Clearly every business faces risks from macro-economic factors and their impact on consumer confidence. But for an airline, it is their volatility and unpredictability that make it challenging, but also so interesting.

What you realise very quickly is that this is the norm - there is always something out of the ordinary every year and all you can do is to be as prepared as you possibly can be and manage disruption well for your customers.

And whatever the disruption EU legislation means that the airline is the insurer of last resort - the 2010 volcano alone cost the industry over £1billion. We are lobbying hard for this to be amended by the EU but the pace is glacial and I do believe that the more united the industry on this, the more effective we would be.

Air Passenger Duty

The same is true for APD - as governments across Europe drive through their austerity measures and look for cash, Air Passenger Duty (APD) must not be seen as an easy option - it will be hugely damaging to the economy as it will suppress demand. There is much clear evidence for this in Germany, where this is now being reviewed.

In the UK, the government's proposed changes would cost our economy £2.6 billion. There is no environmental justification for these taxes as next year we will have to have permits for our carbon emissions under EU ETS and this will cost us £25m in Y1 effective January.

About us

I've also been asked to speak about easyJet's vision and our strategy. To do so, it's worth a short summary of where we've come from.

Since easyJet was founded in 1995 with a mission to provide safe, affordable and convenient flights, we have grown to become the UK's largest airline carrying 55 million passengers per year - that's more than BA, BMI and Virgin Atlantic put together - and we're now Europe's 5th largest.

We have revolutionised the way people travel in Europe, operating on more than 550 routes between 129 airports with a fleet of over 200 aircraft. Despite our UK roots, 60% of easyJet's passengers now start their journey from outside the UK and easyJet is a truly pan-European airline.

easyJet's advantaged network connects the most convenient airports with a wide range of exciting destinations.

Building a more resilient operation. Given the problems we had last summer the first priority for the new management team was to strengthen the integrity and resilience of our operation.

This summer from the start of May to the end of August 77% of our departures and 82.6% of our arrivals were within 15 minutes - significantly better than the 53.3% and 59.3% we recorded the previous summer.

This success has flowed through to our Customer Satisfaction scores where for the month of August we scored 81% compared with 70% for August 2010.

Our cause and ambition

Another early priority was to articulate and reinforce what is at the heart of easyJet's success and what we need to do to continue to be successful in an ever more competitive market place.

The outcome has been to define more clearly what we stand for - being passionate about making travel easy and affordable.

We're using this cause as a test in our day to day operations. It applies throughout the passengers' journey with us - from end to end If we get it right it will enable us deliver our ambition of becoming Europe's preferred short haul airline making market leading returns.

Low-cost operating model

Many of you will have noted that we are not aiming to be the biggest in Europe - you can be biggest and unprofitable - nor the preferred "low cost" airline. That's not to say that easyJet no longer sees itself as low cost. Quite the reverse - it's built into the DNA of our business model. We always aim to reduce our costs, to eliminate waste, to operate efficiently.

Those low costs are the basis of our low fares.

It's the consumer who finds the titles of "legacy" or "low cost", "traditional" or "budget" increasingly irrelevant. People don't say "I want to fly with a flag carrier on holiday" any more than they say they want to fly with a "low cost" airline. Our passengers make their choices - as do all consumers in all markets - on a combination of value and price, destination and schedule. Different consumers look for a different balance, depending on whether they travel on business or leisure.

Some will buy always by the cheapest available regardless of the level of service. Many more demand great value and expect good service.

That's why they fly with easyJet. They like the friendly helpful service they get on board.

Our people

They like the range of food you might actually want to eat and are happy to pay for. And they want us to do the right thing for them when things go wrong. For example, when we know there's going to be disruption we communicate to the people affected and tell them what we're doing to try to sort it out or to help them out. This isn't just a philanthropic gesture - it's easier, simpler and cheaper to manage the effects of disruption away from the airport.

The cost of disruption to easyJet has fallen by 10% per passenger since we took a more proactive approach. We are improving our customer relationship management capability, segmenting our customers and engaging with them as effectively and efficiently as possible. The service we offer is reflected in the demographic profile of our passengers which closely matches that of airlines like BA and Air France. You can see it when our passengers board our aircraft - 18% of them for example, are travelling on business.

Business Travellers

A key element of our strategy is to increase the number of business travellers flying with easyJet. On some routes, like London - Glasgow, the figure is around 40%. The key building blocks in attracting such passengers are punctuality, reliability and schedule. We fly to 40 of Europe's 50 largest airports - more than any other airline - because that is where our customers want to fly. Much of our recent capacity growth has been thickening routes between Europe's biggest cities to give business travellers the choice they need. Good examples include operating 12 times a day between London and Amsterdam and 8 a day between Paris and Milan.

Building on this platform, we now offer a flexi fare product. These tickets will give passengers unlimited flexibility to change their flight up to two hours before the scheduled departure time and within a four week time window around the booked travel date. Passengers will also get free speedy boarding, no booking fees and a checked in hold bag at no extra cost.

However, although the flexible fares "bundle" features that we know business travellers value we will stay true to easyJet's commitment to offering this at a fare lower than prices charged by the legacy carriers.

I'm pleased to say that sales have taken off since we made flexi fares available on easyJet.com The next phase is to drive more sales through GDS and corporates - but that's a story for another day.

Our new business passenger offer

Here is our new offer to business travellers - you are the first to hear about it. If you are on an easyJet flexi fare ticket and if your flight arrives more than 15 minutes late you will get a free leisure ticket anywhere on easyJet's network. Terms and conditions apply - although the only flights excluded are those delayed by significant external factors like volcanoes, ATC strikes and the like. It shows our confidence in our operational robustness and that we believe that flexi fare as a product will do well.

New bases

Our new base at Southend Airport has caught the imagination. In part, that's because for many the only way IS Essex. In part, it's the excellent links into London for Summer 2012. Given LOCOG's careful stewardship of the valuable Olympic partnership rights I really shouldn't point out that passengers flying into Southend will only be a 45 minute train journey to Stratford and the Olympic stadia. To avoid any confusion, I'd also like to make it clear that we chose Gold Medal winner Sally Gunnell to help launch the route because of her well known ties to the county of Essex.

Furthermore, it was a happy coincidence that our first flight from Southend will be to Barcelona - the scene of Sally's greatest triumph.

Lisbon: We plan to open in April, when the new terminal is complete. We see Portugal, despite its economic troubles, as an opportunity. We are already no. 2 there to TAP's no. 1

Airports

Airports are central to easyJet achieving our goal of making the end to end travelling experience easy and affordable for our passengers. Efficiency is at the heart of our business model and drives everything we do - but this still needs to be better reflected by many airports. Too many airports still focus on serving the old business models. Not only do these airports cost more than they should, they also lead to less efficient, and less desirable passenger journeys. Airports which charge by passenger rather than by use, something which is badly out of date, given the amount of traffic easyJet generates to airports. One of our largest headwinds is airport inflationary cost increases which we will resist.

Conclusion

The future is hard to read given the macro economic uncertainty. One thing that is clear is what easyJet has to do - we know that we will deliver our strategy and our cause; we are taking a cautious approach with a flat fleet for W11 and W12; and we have the ability to adapt to the European economic environment by maintaining that or growing modestly and profitably. That is why we believe we will be a winner in what will inevitably be tough times ahead."