Easyjet- Principles of Operations Management

The essay will firstly introduce the organisation easyJet. Secondly the essay will explain about how easyJet uses its operation strategies and its competitive priorities. Finally the essay will discuss the most important operation decision and explain it further in detail. easyJet is a well known low-cost airline which operates in several European countries and has been founded by serial entrepreneur Sir Stelios Haji-Ioannou in 1995. easyJet undertook intensive research of a United States owned low-cost airline ‘Southwest Airline’.

Most of the concepts for easyJet were adopted from Southwest airline; however easyJet added its own touch which reduced operating costs even further. EasyJet was strategically located at London’s Luton airport. Its location enabled it to take advantage of the low labour costs, close proximity to London and also low charges on airport fees. EasyJet is a low budget airline which has been operating since November 1995, where it made its first flight which departed from Luton heading towards Glasgow.

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It then achieved its first online order in April 1998. The organisation is an informal culture with a very flat structure which eliminates unnecessary and wasteful layers of management. Operation Model The airline’s operational model focuses on moving people from point A to point B in the best and cheapest possible way, eliminating all unnecessary costs. An example for easyJet’s operation model could be their online booking process. This process eliminates fees and cuts costs.

Their input process would be customers booking a flight online and then it would go through a process which will notify the consumer the destination, the time, date and give a final confirmation of the flights available. Finally the output would be the customer booking their tickets and flying to their selected destination. EasyJet’s competitive priority is to keep costs low by eliminating the unnecessary costs, which characterise traditional airlines. It currently has operating base throughout the UK and main land Europe.

EasyJet is focused on European operation, and was one of the few airlines to take advantage of the single European market. Comparing to small airlines companies which usually operates mixed fleets of old aircrafts at the end of their lives, easyJet operate on marginal routes that large airlines are not interested in. easyJet has a completely different model. It operates modern aircraft intensively on busy routes. It operates by expanding at a profit; they do this by buying new fleets of the brand new aircrafts that will drastically increase its route structure and intensity of its operation.

The organisation will try to make more capital by reducing its overheads and focusing on all aspects of its operations. EasyJet has a cost per seat model that allows it to compare with its competitors in order to offer low cost seats at the lowest possible price. Furthermore easyJet is keeping up to date with the competition with their online booking services which has attracted many customers and still is attracting new potential customers that will find it more accessible. This model is carried forward in all its operation.

EasyJet is not satisfied to only operate its aircraft to the currently accepted safety standards, but is always improving wherever the opportunity exists. Example: taking advantage of new navigation, surveillance and communication technology to provide higher safety measures for its customers. The airline industry is a very economical industry where the management of operation makes or breaks a business, especially easyJet being a low cost organisation. EasyJet operation strategy supports the above priorities in many ways.

EasyJet’s mission is to be the top low cost airline in Europe along with providing outstanding value to its passengers. This is a tough mission but the organisation uses a variety of operation strategy to achieve its mission. These strategies are analysed by the company to recognize the good and bad aspects of its strategies and also compared and contrast to what it rivals do similarly or differently. When it comes to providing low cost there are many different strategies easyJet use which help lower its expenses. These strategies are e. g. sing the internet for online booking, which reduces distribution costs, it makes an effort to utilise as many aircrafts as possible and making sure the aircrafts are full as possible and flying as much as possible. Another strategy is ticketless travel which reduces the cost printing and other cost related to it. The organisation also reduces cost by not offering free meal during the flight, applying paperless operations as most of their paper work is done online e. g. filing of paper based customer information does not have to be stored in secure places, using economies of scale to lower expenses e. . buying aircraft , fuel and food all in bulk. Efficient use of airports making sure enough planes are turning over customers, also if the aircrafts are in the hangers and not in service they are still paying the fee to lease the space from the airport authorities. And another good strategy is having few levels of management where they do not have to pay high salary to highly skilled staff. Capacity and forecasting is important operation decisions for easyJet as this creates and identifies activities within and outside the business to gain its greatest profitability .

This approach allows easyJet to develop a cost per seat model comparison with competitor airlines. Seats are sold accordingly. Seat prices start off very low, with the price increasing as more seats are sold (satisfying the principle that the early bird definitely catches the worm). Yet the passenger is always guaranteed the lowest price. The prices for the seats fluctuate depending on the demand for them at a particular time. This shows his statement towards its airlines and how it utilises its planes to the maximum. asyJet would also do seasonal flights for example more flights going to Spain throughout the summer period with more demand going to tourist destinations and throughout the winter period more flight going to ski resorts such as Switzerland and the Himalayas. Making sure the planes are as full as possible and flying as much as possible. If aircrafts are empty then there would no point for the aircraft to fly to the destination as this would be costly. easyJet would offer very low cost tickets if tickets are not demanded and there is vacates on board the aircraft. They could do this by advertising.

Forecasting is an important operational decision for easyJet because they need to have an effective approach to forecasting, to be a connected part of the business plan. Forecasting is crucial for easyJet and is inherently difficult. They have to consider factors such a competitive actions, seasonal factors, economic environment and constant fare changes they must overcome. Adding the demand from customers at a particular season make it more complicates the problem. A forecasting example for easyJet would be to determine the number of seats to make available and different fares EasyJet ollowed a forecasting strategy which was invented by the U. S. airlines in the 1980’s to improve revenue performance in the face of increasing competition ,dividing the customers into two categories based on business travellers and tourist travel. Business travellers usually are not really that flexible and only stayed at their destination for short period. On the other hand leisure passengers would be more flexible, trying to get the lowest price possible, staying longer at their destination. Also they would not really want to travel if the price was too high and then easyJet had problems of seats being left empty. asyJet lowered the prices of the empty seats to attract customers, but the high fared customers where preventing low fare customers from getting a seat until there was any empty seats available. easyJet would have to forecast to calculate how many passengers where paying the higher fee and would have to protect their seats until there were any seats available. The above diagram shows that first easyJet produces a forecast demand from censored data for a particular flight. Once that is done they optimise and calculate booking where they check based on the forecast, booking limits at the various fare levels are set.

Then reservation requests are either accepted or denied based on the booking limit. The bookings that are rejected are not recorded, therefore censored data. The censored data is then unconstrained so that it represents the true demand, and the process begins again. To conclude this essay the research the group has uncovered suggests that the easyJet has a good operation strategy and makes them to be a low cost airline that can compete with other airlines. easyJet is one of the well recognized organisations in Europe and have worked their way to a well established company with a good financial backing.

Capacity planning and forecasting have shown these methods are vital for the company and this helps them be one of the best low budget airline across Europe.

References • Galloway L. (2000) Operations Management in Context: Galloway Rowbotham Azhashemi •EasyJet – Sir Stelios Haji-Ioannou; (2008) The first “sweating the assets”, that is making sure the planes were as full as possible and flying as much as possible: http://www. icmrindia. org/casestudies/catalogue/Business20Strategy1/Business20Strategy20EasyJet20The20Easy20Way20to20Succeed. htm [Accessed: 25th November, 2009]. easyJet Operating Philosophy – For example, its online booking services are way ahead of its competitors and have firmly established it as a favourite with its customers. http://www. aatl. net/publications/easyJet-HUGS. htm [Accessed: 30th November, 2009]. •EasyJets competitive operation strategy – http://www . oppapers. com/subjects/operations-management-easyjet-page1. html [Accessed: 01st December, 2009]. •Forecasting Methods: Literate review and current practices http://www. bookpump. com/dps/pdf-b/1121415b. pdf [Accessed: 12th December, 2009].