Jackie Gallacher

Two startup carriers, two philosophies. Ironically, while EasyJet and Debonair have a lot in common, their differences are at the root of the strong rivalry between their chairmen, respectively Stelios Haji-Ioannou - the young and wealthy owner of a Greek shipping company - and Franco Mancassola, an Italian-born American whose extensive experience stems from various senior positions in the US airline industry.

The brash orange of EasyJet's livery and its no frills, direct sales-only approach clash hopelessly with Debonair's more conservative dark blue and pink colours, greater emphasis on serving the business traveller, and carefully cultivated relationship with travel agents. Debonair's direct sales are only 38 per cent of the total compared to 100 per cent for EasyJet.

Mancassola likes to set Debonair apart from EasyJet by saying his carrier is 'low cost but definitely not no-frills'. Drinks and pastries are served on board and the airline's mantra is its 33 inch seat pitch. On the other hand, EasyJet packs 148 seats into a Boeing 737-300 and sells passengers onboard refreshments. Debonair claims its costs are lower than EasyJet's, though its emphasis on comfort gives it a break-even load factor of some 57 per cent compared to EasyJet's 50-55 per cent.

EasyJet has expanded relatively slowly in the two years since its launch in October 1995, though its decision to buy new aircraft has now freed it from the constraints of the used aircraft market and considerable expansion is planned from August next year. Meanwhile Debonair has raced to occupy the marketplace, establishing a network of small hubs in Luton, Munich, Barcelona and, to a lesser degree Rome, which it believes brings the critical mass needed to reap essential cost benefits.

Yet both carriers have opted to launch at undeserved, uncongested and low-charging London/Luton airport. Both are short-haul operators which specialise in charging low, unrestricted, one way fares and reject expensive interlining agreements. And both have kept competition with the majors to a minimum, opting instead for secondary airports and destinations.

Challenges from majors

Where there has been competition with a major national carrier, the two startups have had similar troubles. EasyJet has had to complain to the EU Commission against KLM's pricing policy, while Mancassola wrote directly to Lufthansa chairman Jürgen Weber after Lufthansa challenged its Atol (Air Transport Operators Licence) in Germany by apparently pressuring the transport ministry to declare it invalid. The German CAA intervened on Debonair's behalf, but not before Lufthansa staff had approached Debonair passengers at Munich airport offering them the option of switching to Lufthansa services. Mancassola says Debonair received a 'half-hearted apology' from Lufthansa's chief executive Frederick Reid.

Which carrier is most likely to be around in five years' time? A close look at both carriers' strategies throws some light on their chances of survival.

Undoubtedly both airlines are innovative and quick to respond to competitive opportunities - neither plans new routes very far in advance. Both aim to build presence quickly in any new market by replicating the same batch of destinations out of any new cities that are added. The resulting web of routes automatically creates a number of small hubs.

Debonair has established this type of network more quickly than EasyJet, but the latter expects to add more hubs very soon. Nice and Amsterdam were launched out of Liverpool in October but the airline's decision on whether to continue to develop Amsterdam as a hub will hinge on the outcome of its complaint against KLM.

The financial futures of both EasyJet and Debonair are assured, for now at least. Privately owned EasyJet can rely on the wealth of the Haji-Ioannou family, although the carrier is already claiming a 'modest' profit in its second year of operations to September 1997 and says it is considering a flotation before the first of 12 new 737-300s arrives in August.

And, despite losses of US$24.9 million for the nine months of operations to 31 March 1997, Debonair successfully raised over £25 million ($41.9 million) in a public flotation on the Easdaq pan-European stock exchange in late July.

Both carriers have now met the financial fitness and operational criteria needed to secure their own Aircraft Operating Certificates (AOCs) and the accompanying EU operating certificates. This brings further savings as they no longer need to wetlease aircraft from third parties in order to use their operating licenses. EasyJet began operating on a GB Airways licence, later switching to Air Foyle, while Debonair has been operating under the British World Airlines AOC.

And, while incumbents like British Airways and Lufthansa analyse whether they should launch their own low-cost airlines, both startups are confident that the majors cannot replicate an EasyJet or a Debonair without damaging their existing business.

With the exception of the Luton-Barcelona route, EasyJet and Debonair have so far successfully avoided stepping on one another's toes. But EasyJet has been in dispute with the local authority which is looking to sell Luton airport but has refused to entertain a bid from EasyJet, citing a probable conflict of interest. EasyJet had threatened to shift some of its services to nearby Liverpool or even London/Stansted if the authority did not reconsider.

Nice for £39

Without waiting for the final outcome, Debonair - which had strongly opposed EasyJet's move to control Luton airport - announced that it would begin services on Luton-Nice with a one way fare of £69 in mid December. EasyJet responded quickly with a special discounted fare of £39 one way until 15 December, and three return flights each weekday, a 300 per cent capacity increase over last winter. Debonair's one weekly return flight, with two in the summer, will still go ahead. Too much of this rivalry would significantly reduce the chances of both carriers having a long-term future.

Source: Airline Business