Specialist
Former Head at EasyJet plc
Agenda
- EasyJet's (LON: EZJ) breakeven load factors, including on a cash basis, and comparison with historic levels
- Potential breakdown of traditional load-factor analysis given widespread spare capacity and reduced marginal cost of adding seats
- EasyJet's yield management – comparison vs peers
- EasyJet's fleet management in light of declining EBIT per aircraft since 2015 –wider market capacity assessment
Questions
1.
What are your high-level thoughts on EasyJet?
2.
It seems revenue per ASK [available seat kilometres] went to GBP 0.057 in 2015 from about GBP 0.044 in 2006. Since then, it has stalled and EBIT on a per-ASK and a per-aircraft basis has fallen. Do you think EasyJet went too far in building out capacity in those years up to 2015 and afterwards, and there is too much capacity in the market even besides coronavirus?
3.
You mentioned EasyJet has transitioned from low-cost in 2010 to something slightly different. Ryanair and Wizz Air are close on a fares-per-passenger basis, but EasyJet seems to be about GBP 13-15 more expensive on fares than the other two. Is that a conscious decision on EasyJet’s part, and what is the philosophy of the total take per passenger at EasyJet and how ancillaries fit into that?
4.
Do you think money is being left on the table where other airlines such as Ryanair and Wizz Air could pick it up, or do they simply not have the product quality that EasyJet has that would allow them to? Even if a customer is willing to pay GBP 45, if EasyJet is charging GBP 40 and Wizz Air is charging GBP 30, Wizz Air may be inefficient in its pricing, but if it is still the lowest cost, that would be the choice. Do you think EasyJet overcomes that by having a better experience for the customer, or do you think this pricing efficiency goes through the whole market when one player is being inefficient?
5.
Wizz Air makes a huge amount on ancillaries on a per-passenger basis. In the last few years, it seems to be charging about GBP 26-27 per passengers for ancillaries and GBP 37-39 for fares. Why is that so different to EasyJet and Ryanair, whose ancillaries are growing and are important, but they are still definitely in the minority. Wizz Air seems to have been unbundling this spend much more. Do you think that’s the right strategy and should EasyJet be doing something similar?
6.
I think the revenue per passenger from EasyJet to Wizz largely the same, but EasyJet is taking much more from fares. Was there ever a ceiling as to the maximum amount that EasyJet could charge per passenger?
7.
What market position do you think EasyJet has in value prop to the customer? If EasyJet is charging GBP 60 on a flight, what do you think Ryanair would be charging for exactly the same flight and what do you think BA and Air France and Lufthansa, the full-service carriers, would be charging? Is there a consistent pricing difference between the really low-cost carrier and the full-service carrier?
8.
To what extent do you think EasyJet is a competitor to Ryanair and Wizz Air and some of the other low cost players, and to what extent do you think some of these people on the EasyJet website will have come from BA or Air France?
9.
It sounds like EasyJet’s pricing mechanism and revenue management system is extremely efficient. If in 2019, the average take per passenger was GBP 66, would you say that GBP 66 was the maximum EasyJet could get? Therefore, when we project pricing and revenue per passenger, do we have to think about what passengers are willing and able to pay full stop rather than how much more of what the passenger is willing to pay can EasyJet get?
10.
To what extent do you think pricing needs to decrease to stimulate demand post-coronavirus? I’ve heard that pricing will need to stimulate demand, but you could surely make the case that demand is already there and demand could be even more price inelastic than ever, it’s just a case of whether people are allowed to fly.
11.
EasyJet and Ryanair released extremely low pricing for some flights. I think EasyJet has been offering seats from about EUR 13-14. To what extent do you think passengers have been taking these offers up? I guess the risk is that, if airlines put on all these extremely cheap flights, the yield will go down. To what extent do you think passengers are not booking for the longer term and are booking a week or a few days in advance and they will pay more normal ticket prices?
12.
In a scenario where a lot of capacity has been grounded and the marginal cost of putting on another flight is probably quite small, should we think about load factors in a different way? If load factors go below what we would usually call the break-even load factor, around 70-80%, should we be that concerned?
