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Former EasyJet chief warns of complacency among low-cost carriers

A period of good economic conditions has led to complacency among low-cost carriers that is ripe for a "correction", in the view of former EasyJet chief executive Ray Webster.

Speaking at the Routes Europe conference in Bilbao today, Webster – who was chief executive of EasyJet between 1996 and 2006 – said that the outlook for low-cost airlines was "quite worrying" as they were unprepared for future economic shocks.

A period of "very good" economic conditions has been punctuated by the lack of a "serious downturn or runaway fuel prices", he states.

As a result, carriers have not been put under "pressure" and so have "incrementally added costs" and lost efficiencies over time, while not experiencing the typical "peaks and troughs" of the market.

"We have been through that in the past but I think some of those lessons have been forgotten," he warns.

Webster forecasts that oil producers in particular could raise prices, which would have a "dramatic" impact on airline bottom lines.

Commenting on a possible takeover bid for Norwegian by IAG, meanwhile, Webster suggests the two companies must ensure there is "direct compatibility" between their business models and cultures.

"If you don’t get the two of those right, I wouldn’t do it," he says, adding that integration can lead to "loss of control over the business".

Webster states that at its inception EasyJet benefited from being the "right idea at the right time" as the European airline industry was being deregulated. The UK carrier also had "first mover advantage", which allowed it to grow quickly.

He reveals that the first "issue" he had to deal with when he took the helm at EasyJet was owner Stelios Haji-Ioannou's tendency to "manually" price tickets.

"In the early days we were pricing manually – he would have a look at the flights several times in the morning [and] several times in the afternoon," Webster recalls, adding: "If he thought one flight wasn't selling quickly enough he would drop the price."

After convincing Haji-Ioannou to give him control of pricing, Webster says he wrote a programme to automatically set fares. "That was the start of our automation," he adds.

In the early years, EasyJet took a "trial and error approach" to route development as there was no "textbook" on how a low-cost carrier should grow its network at that time.

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