EasyJet is a low-cost airline based in the United Kingdom that is known as one of the leading budget carriers in Europe. The aim of the research is to evaluate the impact of EasyJet’s specific innovative pricing strategy and the used business model on customer services and customer satisfaction in the context of industry competition. The study also aims at answering the research questions regarding features of the competition in the UK airline industry, the pricing strategy used by EasyJet and its role in influencing customers’ attitudes, and the role of this strategy in achieving a competitive advantage. The secondary research supported by the qualitative methodology is selected for this study. The methods applied to achieve the aim of the research include the systematic literature review and case study. Fifteen articles were selected for the review, along with documents and reports examined for completing the case study analysis. It was found that the pricing strategy applied by EasyJet is the key component of the company’s business model, and the variety of elements included in this strategy makes it rather unique and innovative. As a result, the use of this strategy and model can add to increasing customer satisfaction and interest in the company and contribute to EasyJet’s competitive advantage.
Keywords: EasyJet, UK aviation industry, competitive edge, pricing strategy.
This chapter presents the background for the study with a focus on specific features of the aviation industry market in the United Kingdom and Europe. The aim of the study and the objectives to guide the research are also provided in this chapter. The research questions and the rationale to conduct the study are discussed in detail in order to demonstrate the significance of this research.
Background of the Study
The competition between full-service and low-cost carriers can be discussed as a characteristic feature of the modern airline market. However, what is more important, there is also competition in the market for budget airlines. It is important to note that the airline industry is influenced by a variety of external factors that include economic crises and recessions, natural disasters, and the threats of terrorism among other ones (Hilz & Clayton, 2015). As a result, the growth of the airline in this context becomes problematic, and the demand for services in the aviation industry market can decrease in spite of the fact that many people choose air transport today. In this context, low-cost airlines have the potential for growth because of their popularity among different classes of passengers and better returns (Statista, 2014). Much attention should be paid to the analysis of what specific business models and strategies can influence the progress of low-cost airlines in this particular context.
Nowadays, many people need to travel a lot due to their personal and professional goals and interests, and they often choose air transport. Furthermore, travelling by air is not discussed as a privilege anymore because the modern airline industry is characterised by the growth of companies proposing low-cost routes (Pearce, 2012). Thus, the demand for affordable routes increases, and the low-cost airline industry is regarded as highly competitive. As a result, modern airlines that provide low-cost services are focused on attracting more customers while offering them standard propositions, using different pricing strategies. According to the International Air Transportation Association (IATA), in 2013 and 2014, airlines earned a high net profit margin of 1.5% (Hilz & Clayton, 2015, para. 3). Furthermore, the number of passengers using the services of low-cost and traditional full-service airlines increased by 50% worldwide (Hilz & Clayton, 2015, para. 7). It is possible to state that significant changes in profits are typical of budget airlines, and the industry represented by low-cost carriers is regarded as highly competitive today (Airbus, 2015; Statista, 2014).
From this perspective, economists and researchers predict the long-term growth of the market of low-cost carriers. The reason is that 25% of profits are generated by low-cost airlines that took a large part in the aviation industry market of the United Kingdom (UK) and Europe, as well as the global aviation industry market (Hilz & Clayton, 2015, para. 6). Therefore, it is possible to speak about the upward trend in the aviation industry that is associated with the obvious increase in profits gained by low-cost airlines (Hilz & Clayton, 2015; Ryans, 2010). New players continue to appear in the market of low-cost carriers, and it is important to conduct research in order to determine and analyse the strategies and business models that can be used by low-cost airlines to remain competitive in the industry. From this perspective, the focus is on the analysis of the case of EasyJet, the low-cost airline, in the context of the UK and European aviation industry market.
EasyJet is one of the most successful European airlines that specialises in providing low-cost services. EasyJet was established by Sir Stelios Haji-Ioannou in 1995, and the company developed as an airline focused on the customers’ needs and the principle of service affordability (EasyJet, 2014). According to the company’s concept of air travel, customers need to receive affordable services of high quality (Koenigsberg et al., 2008). Currently, the company’s competitiveness depends on the fact that it has more than 600 routes and operates in more than 130 airports in Europe, Asia, and North Africa among other regions of the world (Malighetti et al., 2015). However, the company’s success is also based on the application of the effective business model that is imitated by other low-cost carriers in the world (EasyJet, 2014). In the UK and European aviation industry markets, EasyJet competes with Ryanair, Wizz Air, and Vueling among other low-cost airlines (Hilz & Clayton, 2015; Malighetti et al., 2015). The competition in the market is based on applying different strategies and business models in order to attract and retain more clients and guarantee customer satisfaction (EasyJet, 2014). Therefore, airlines work to improve their strategies and models according to the needs of the market. It is important to analyse the new business strategies applied by EasyJet in order to address customer satisfaction and achieve a competitive advantage in the market.
Aim and Objectives
The aim of this study is to evaluate the impact of EasyJet’s innovative pricing strategy and business model on customer services in the context of industry competition. In order to achieve the aim of the study, it is necessary to complete the following objectives:
- To review the data related to the UK and European airline industries with a focus on the industry competition.
- To review the literature related to EasyJet’s pricing strategy and business model.
- To analyze how innovative strategies used by EasyJet can influence customer services and customer satisfaction.
- To determine the role of low-cost strategies and associated business models in achieving a competitive advantage.
The study aims at answering the following research questions:
- What are the features of the competition in the UK airline industry?
- What pricing strategy and business model are used by EasyJet?
- How do innovative strategies used by EasyJet influence customer services and customer satisfaction?
- What is the role of low-cost strategies and models in achieving competitive advantage?
The rationale to evaluate the strategies adopted by EasyJet in order to gain its competitive edge is based on the necessity to understand what aspects of innovative business models and strategies can influence the development of a low-cost airline into a successful company and a significant competitor in the aviation industry. In this context, the analysis should be based on the evaluation of the role of adopted strategies and models in affecting customer services and client satisfaction.
This chapter presents a review of the literature related to theories that are applied in this study to support the analysis of the data. A review of the existing literature on the development of the aviation industry in the United Kingdom and Europe is also provided in this chapter.
Theories that can be applied to the research in order to provide the background for the study are related to the issues of competition and marketing strategies oriented to working with customers. This study is based on the theoretical implications associated with Michael Porter’s competitive model grounded on the Five Forces Analysis and the model known as Generic Competitive Strategies (Porter, 2008). In addition, the evaluation of the business strategies used by EasyJet to provide customer services is supported by the Relationship Marketing approach and Utility Theory (Nijssen & Herk, 2009; Palmatier et al., 2009).
The principles of the Five Forces Analysis as a model to discuss the competitive position of the firm in the industry were developed by Porter in 1980. In his book The Competitive Strategy: Techniques for Analyzing Industries and Competitors, Porter (2008) noted that the competition of the company depends on five main forces that influence the firm’s development. These forces are the bargaining power of suppliers, the bargaining power of customers, the threat of new entrants, and the threat of substitutes that, in their turn, influence the rivalry in the industry (Porter, 2008). According to Porter (2008), these forces determine how profitable and competitive the company can be in the market with reference to the level of each force’s impact on the firm’s development and operations. Therefore, if the power of customers and suppliers is high at the level of the company, it is possible to speak about the firm’s dependence on changes in relations with suppliers and changes in customers’ attitudes (Grundy, 2006; Porter, 2008). At the industry level, the competitive advantage of the company can be rather low when the threat of entrants and substitutes is high because the company needs to adapt its strategy to address the risk of decreasing the interest in its products and services (Grundy, 2006). Much attention should also be paid to analysing the rivalry in the industry in terms of comparing the effectiveness of strategies that are used by different companies in order to gain the leading position in the market. Porter (2008) notes that the model demonstrates the impact of which forces should be reduced in the case of the concrete firm in order to become more competitive in the market. In the aviation industry, the impact of five forces on the market is also important because various airlines have different strengths and opportunities to reduce the effect of this or that force on the company’s position.
Porter’s Generic Competitive Strategies is another theoretical model that is applied to support studies related to the problem of competition. In 1985, Porter formulated the model of competitive advantage that includes three specific strategies that can be used by employers in order to improve the firm’s position: cost leadership, differentiation, and focus, including cost focus and differentiation focus strategies (Ormanidhi & Stringa, 2008). If the company orients to cost leadership as a competitive strategy, it means that it proposes services at costs lower than the prices of competitors. In order to remain profitable, this company needs an effective strategy to support its cost leadership in the market while adjusting the use of resources. The minimization of expenses allows for making prices low, and this approach is relevant to attracting more customers (Ormanidhi & Stringa, 2008). Furthermore, the focus on the cost advantage guarantees the reduced effects of five forces determined by Porter on the company’s profitability and performance.
The differentiation strategy is based on the idea that a firm increases its competitiveness in the market while proposing unique services. Companies that choose this strategy are focused on developing the firm’s image and reputation in the industry to achieve customer loyalty. As a result, the company chooses to propose products and services that differ from other offers in the market, and this fact increases its attractiveness to customers (Ormanidhi & Stringa, 2008). The third competitive strategy is the focus. Companies choose a niche to operate in, and they compete while providing the services to a limited number of customers or within a limited area. The competition is achieved with the help of focusing on the needs and interests of the target audience (Porter, 2008). In the aviation industry, traditional and low-cost airlines usually choose different strategies in order to strengthen the position of the company and achieve a competitive advantage because of orienting to different segments of the market.
The discussed theoretical models explain how the company can achieve its competitive advantage. In its turn, the Relationship Marketing approach is used in order to support the theoretical implications regarding the company’s attitude towards customers in order to win a high position in the market. Relationship Marketing is a theoretical model that was proposed by Day and Wensley in the 1980s in order to explain how relationships with customers can influence the company’s performance, as well as competition (Palmatier et al., 2009). According to this theoretical framework, companies obtain a competitive advantage while building strong relations with their clients and focusing on the customer-oriented market. As a result, many modern companies choose to develop their relationships with customers in order to guarantee the firm’s profitability (Kuilman & Wezel, 2013; Palmatier et al., 2009). The company works to create an attractive image and invests in developing customer services. Furthermore, in most cases, the focus is on retaining the existing clients because it is a cost-efficient approach to supporting the current customer base instead of attracting new clients. The principles of Relationship Marketing are also used in the aviation industry because it is more efficient for low-cost airlines to retain existing customers who choose their services. The specifics of the market can limit the attraction of new customers.
The purpose of Utility Theory is to explain the decision of customers regarding the choice of this or that product and service. In the 1950s, the principles of Utility Theory became actively applied in marketing to support the idea that customers are inclined to make decisions after the evaluation of expected outcomes (Nijssen & Herk, 2009). Utility Theory is based on the principles of economics, according to which consumers make decisions after assessing possible outcomes or benefits. From this point, this theory explains the customer satisfaction associated with the received products or services from the perspective of rational thinking. In order to affect the customer and provoke its interest in the service and satisfaction, it is necessary to guarantee that he or she is able to evaluate alternatives and assess all available options (Nijssen & Herk, 2009). While referring to this theory, it is possible to assume that decisions of customers regarding purchasing this or that service are based on the complex analysis of concrete factors or features. Therefore, the decision and the following satisfaction of dissatisfaction can depend on the proposed price, physical qualities of the product, and the quality of services among other aspects. In the aviation industry, the theories that are associated with customers’ behaviours are often applied because they allow for discussing factors that can affect the clients’ choices. Consumer decision making is closely associated with the concept of customer satisfaction; therefore, this theory can be directly applied in this research in order to discuss how certain strategies oriented to improve customers’ outcomes can influence their decision-making, selection of EasyJet services, and overall satisfaction.
Trends in the Aviation Industry in the United Kingdom, Europe, and Globally
Numerous studies aim at discussing the causes and features of the growth in the aviation industry that is observed all over the globe during the recent five years. Researchers expect the aviation industry market tends to develop, and the rate of growth can increase by more than 4% by 2020, in comparison to the data related to 2012-2013 (Airbus, 2015; Amadeus, 2013). According to Assaf, Gillen, and Barros (2012), it is important to focus on the strong dynamics in the global market associated with the focus on advantages that can be achieved while making more airports cooperate with low-cost carriers. It is possible to expect a significant increase in the number of passengers who choose air transport for travelling (Airbus, 2015; Hilz & Clayton, 2015). Baker (2013) also agrees that the actively growing aviation industry becomes one of the most profitable business areas in spite of the negative impact of the economic and social crises on its development.
The European airline market also faces the challenge of developing competitive low-cost carriers that are characterised by a comparably aggressive strategy in order to win gains and increase the competitive advantage (General Aviation Manufacturers Association 2014; Mason & Alamdari, 2007). Kuilman and Wezel (2013) note that the industry shifted its focus from high-quality and luxury services to addressing the customers’ needs without proposing any additional frills. This tendency made the low-budget airline industry develop actively in this specific environment and create a new tendency (Hilz & Clayton, 2015; Salanti et al., 2012). Pearce (2012) states that, currently, more customers choose low-cost airlines if the proposed services are standard and of high quality.
In the United Kingdom, the airline market has a long history of its development, and it became more dependent on changes in economic conditions (Trend, 2015). Furthermore, Bottasso et al. (2013) pay attention to the fact that the UK aviation industry became more customer-oriented. In this context, the impact of customer satisfaction on the industry’s progress is important (Barros & Couto, 2013; Kuilman & Wezel, 2013; Lucintel, 2012). Bush (2010) also supports this idea, and he notes that, in the UK market, all services proposed by airlines are oriented to addressing customers’ needs and interests. In this context, the strategy followed by low-cost carriers can be regarded as controversial as the basic need that is satisfied with the reference to the provided services is affordability. Budd et al. (2014) state that low-cost airlines competing in the UK market should pay more attention to developing innovative strategies in order to convince customers to use these particular services instead of referring to the offers of full-cost carriers.
The researchers also note that the economic crisis and recession of 2007-2009 made airlines become more loyal to customers’ expectations (Akamavi et al., 2015; Airbus, 2015; Trend, 2015). However, according to Ryans (2010), this process also resulted in significant cost reductions to continue operations and remain competitive under new circumstances. Researchers pay attention to the fact that airlines can develop effectively when they are able to propose strategies and services that are difficult to be imitated, and this situation creates a competitive advantage for the organisation (Barros & Couto, 2013; Lucintel, 2012). In order to gain more profits, each carrier needs to develop a model that can guarantee the increases in revenues because of provoking the customers’ interest in the proposed services. It is possible to expect growth in the context of tough competition when the company’s proposition can be regarded as rather innovative (Hilz & Clayton, 2015; Salanti et al., 2012). These basic principles are used by low-cost carriers when they focus on proposing effective price reduction strategies and refer to the cost leadership in the market.
The low-cost airlines in the United Kingdom are EasyJet, Flybe, Monarch Airlines and Jet2 (Hilz & Clayton, 2015; Trend, 2015). Mason and Alamdari (2007) state that the main feature that unites these low-cost carriers is the application of the efficient way to allocate the resources that are used to reduce the costs of the operations. These resources are also used in order to guarantee that the planes work properly, and all technical services are provided. Still, according to Graham and Dennis (2010), low-cost carriers try to use each opportunity in order to reduce all possible costs associated with operations, and these companies require effective strategies in order to balance the propositions of low prices and high-quality services. A systematic approach is necessary in order to meet these conditions.
In this context, EasyJet is one of the actively growing airlines in the United Kingdom. According to Trend (2015), EasyJet is characterised by the continuous rise in the number of customers, and this process is supported by the regular revision and improvement of the used strategies. Malighetti et al. (2015) explain the popularity of airlines similar to EasyJet with references to the dramatic increase in the demand related to travelling due to personal and professional reasons. As a result, the high rates of popularity among customers lead to increased sales and revenues in the aviation industry, and in the sector of low-cost carriers in particular (Koenigsberg et al., 2008). Therefore, it is possible to observe the intense rivalry between different well-known low-cost carriers, such as EasyJet and Ryanair. Cattaneo et al. (2016) suggest that the secret to EasyJet’s competitiveness can be in the yield management system among other important factors. Mason and Alamdari (2007) assume that EasyJet uses a specific algorithm in order to calculate the prices in relation to the demand. This system also allows for concluding regarding the customer’s interest in the proposed services.
Forgas et al. (2010) note that customer satisfaction depends on such factors as trust and loyalty. Akamavi et al. (2015) state that customers choose airlines after the evaluation of the proposed services and prices. However, customers can also make decisions regarding the carrier with reference to previous experience and financial factors. Barros and Couto (2013) assert that low-cost airlines, including EasyJet and its competitors in the United Kingdom and Europe, are popular and actively selected by potential passengers because of the price factor. Cattaneo et al. (2016) develop this idea and state that the reason can be in options that are proposed by these airlines in addition to high-quality onboard services. It is important to note that those services that are provided for customers onboard are not unique. They are standard, and full-cost airlines can propose a larger variety of options (Amadeus, 2013; Cattaneo et al., 2016; Kuilman & Wezel, 2013). However, the reason is in accepting the services that are not connected with the flight. Toh et al. (2012) pay attention to the fact that it is important for clients to receive the opportunity to buy tickets or other necessary documents online, and they are also interested in the loyalty and discount programs. Grigolon et al. (2012) state that, under the impact of negative circumstances and modern trends in the airline market, such approaches used by low-cost carriers can guarantee an increase in the competitive advantage for these companies. From this point, the main trend that can be observed in the modern aviation industry is the development of low-cost carriers that gained popularity globally in the recent ten years.
This chapter presents the discussion of the research design selected for the study and the description of methods and techniques that are used in the research in order to collect and analyse the data according to the research objectives. The focus is on the description of principles of secondary research and such qualitative research methods as a systematic literature review and case study.
In marketing, business, and management, investigators use both types of research, including primary and secondary research. Primary research is conducted by a researcher who collects the data directly from the study participants (Bryman & Bell, 2015). The data is gathered in accordance with the research aim and objectives. Secondary research is based on searching the data that were collected by other researchers or specialists in a certain area (Wilson et al., 2009). According to Zikmund et al. (2013), the data required to complete the research aim can be found in journal articles, company and industry reports, governmental databases, and statistical reports among other sources. In spite of the fact that both types of research are actively used in marketing and management, the choice of the design depends on the purpose of the study (Bryman & Bell, 2015). Wilson et al. (2009) note that primary research is appropriate when an investigator aims at collecting the data with the help of surveys, questionnaires, and interviews in order to answer the research questions and test the set hypotheses. On the contrary, secondary research is appropriate when it is necessary to concentrate on the analysis of the existing information related to the topic in order to answer the research questions (Baxter & Jack, 2008; Bryman & Bell, 2015).
For this study, secondary research can be discussed as the most appropriate method to collect and analyse the data in order to achieve the aim and answer the set of questions. The reason is that the methods of secondary research allow for accessing a large amount of data that can be retrieved using limited resources (Baxter & Jack, 2008; Wilson et al., 2009). This type of research allows for searching and evaluating a lot of data in order to select the most appropriate information and use it in the study. As a result, these data can be organized and analysed, and then, the information is summarized to address the aim of the research and present the findings of the study (Bryman & Bell, 2015). In this study, it is important to answer the research questions and complete the aim after analysing a lot of information regarding the new strategies used by EasyJet in order to increase the company’s competitiveness and influence relationships with customers. The aim can be achieved after accessing reports, studies, and statistical data that allow for conclusions regarding the effectiveness of EasyJet’s strategies. From this perspective, secondary research is more appropriate than primary research which is limited in terms of data that can be gathered with the help of its methods.
Secondary research is based on the analysis of literature and information regarding the research topic. Bryman and Bell (2015) note that this approach is associated with the principles of qualitative research. Wilson et al. (2009) agree that qualitative research is used in secondary studies when it is necessary to collect the data while utilising the available literature. Much attention should be paid to the analysis of data related to the company’s strategies and operations in the market with a focus on relations with customers (Baxter & Jack, 2008; Zikmund et al., 2013). Quantitative research is not appropriate for this study because the researcher does not collect the primary numerical data that should be analysed with the help of statistical methods. Instead, the quantitative or numerical data that are used in this research were analysed by other researchers, and the available findings are evaluated in this study.
Therefore, it is important to note that, for this study, the analysis of both qualitative and quantitative data is appropriate in order to answer the questions regarding the company’s strategies and competitiveness in the market (Zikmund et al., 2013). In order to collect and analyse these data, it is necessary to use such research methods as a systematic literature review and case study. It is important to note that, according to Bryman and Bell (2015), a systematic literature review allows for evaluating the qualitative data and findings presented in journal articles in order to conclude regarding the effectiveness of innovative strategies and business models used by EasyJet. The case study is a method that allows for focusing on both qualitative and quantitative information related to the company in order to conclude about its competitiveness and attractiveness to customers (Zikmund et al., 2013).
Systematic Literature Review
A systematic literature review is selected for this research as a method to collect, integrate, and evaluate the qualitative data for the purpose of answering the set of research questions (Baxter & Jack, 2008). Systematic reviews allow for evaluating the literature on the topic critically, focusing on the problem and specific research questions. As a result of conducting this review, it is possible to determine what viewpoints prevail in the literature, contradictions in ideas, and gaps in discussions of the certain problem (Zikmund et al., 2013). Crossan and Apaydin (2010) agree that, while using this method, it is possible to find out the specific answers to research questions that are based on the critical analysis of the literature in the field. In order to conduct the systematic literature review in this study, it is necessary to:
- Identify research questions that can be answered with the help of this approach;
- Determine selection criteria for the literature (sample) with a focus on inclusion and exclusion criteria;
- Choose the research strategy;
- Select, assess, and extract the data for further analysis.
- Systematise the analysed data in the form of a table.
Research questions for the systematic literature review: The systematic literature review aims at answering the following questions: (a) What are the features of the competition in the UK and European airline industry? (b) What pricing strategy and business model are used by low-cost carriers and EasyJet in particular?
Inclusion criteria: The articles that have the following features are included in the review: (a) articles that discuss the aspects of the UK and European aviation industry market with the focus on low-cost carriers; (b) articles that discuss EasyJet’s business model, strategies, and competition; (c) articles that focus on low-cost carriers and customers’ behaviours and attitudes; (d) articles published between 2007 and 2016 (past ten years). The rationale for using these inclusion criteria is the necessity to provide the researcher with a lot of evidence related to the topic of the study.
Exclusion criteria: The articles that were published earlier than the year 2007 and the articles that are not focused on discussing the aviation industry with reference to the sector of low-cost carriers are not included in the review.
Research strategy: Several databases, including EBSCOHost, ProQuest, Science Direct, and Emerald Insight were selected for conducting the search and finding peer-reviewed articles related to the UK aviation industry, the European market, and EasyJet. The search process was limited to including the articles that were published in journals between 2007 and 2016 (the past ten years). Combinations of the following keywords were used for the search: ‘UK aviation’, ‘European aviation industry market’, ‘low-cost carriers AND competition’, ‘EasyJet’, ‘EasyJet AND competitive edge’, ‘EasyJet AND competitive advantage’, ‘EasyJet AND strategy’, ‘EasyJet AND pricing’, ‘EasyJet AND customer services’, and ‘EasyJet AND customer satisfaction.’
Selection and assessment of the data: During the search procedure, 89 studies were retrieved for further assessment. It was important to assess the articles’ titles and abstracts according to the set inclusion and exclusion criteria. 15 articles were selected for further review because of their relation to the topic of the research. The data presented in the selected articles were analysed with reference to the following criteria and aspects included in the summarising table:
- The authors’ names and the date of publication.
- The study’s methodology.
- The author’s findings related to the specifics of the European and UK aviation industry.
- The author’s findings related to EasyJet’s innovative strategies and business models.
This information was included in the summarising table, and it was analysed with a focus on the aim of the research and set questions.
The case study is a qualitative research method that allows for collecting information that is related to the concrete person, object, phenomenon, or event (Zikmund et al., 2013). According to Gibbert et al. (2008), when the research aims at answering questions regarding ways, reasons, methods, and tendencies related to the company’s development, the case study can be regarded as an appropriate method to use. In this study, the case study analysis is applied in order to collect the quantitative information, as well as the specific data related to EasyJet’s performance and implementation of the competitive strategy, in order to attract customers. The case study is effective to concentrate on the analysis of the statistical and qualitative data related to EasyJet’s progress in the aviation industry.
The first step to conducting the case study is the collection of evidence related to EasyJet. According to Gibbert et al. (2008), the data that can be used in case studies usually include documents, reports, archival records, and investigators’ records. In order to conclude regarding the features of EasyJet’s business model and its role in influencing customers’ loyalty and competitiveness, the case study is based on the data retrieved from the UK aviation industry reports, EasyJet’s reports, market reports, statistical data, company’s cases, and industry-related documents. The second step is the analysis of the gathered data with a focus on the research questions and aims of the study. While describing and analysing the case, it is necessary to categorise the answers to the research questions found in the data and present them in the form of a table.
This chapter presents findings related to the conducted systematic literature review with a focus on the relevance of the extracted data to answer the research questions. The chapter also provides the results of the case study analysis.
Systematic Literature Review
The thematic analysis of the data presented in the selected articles demonstrates the specific features of the competition that are typical of the UK airline industry in the context of the European aviation industry. Moreover, the focus is also on the factors that attract consumers and make them choose low-cost carriers instead of airlines of the higher class. It was found that the economic aspect plays a key role in influencing the competition in the market, and today, airlines develop their competitive advantage while focusing on adopting different pricing strategies (Bottasso et al., 2013; Bush, 2010). The researchers found that those airlines that propose simple pricing structures and a variety of discounts have more opportunities to attract consumers and address their expectations (Koenigsberg et al., 2008). As a result, low-cost carriers are discussed as having a high position in the modern European airline market because of their orientation to proposing advantageous prices and flexible cost schemes (Budd et al., 2014; Mason & Alamdari, 2007; Ryans, 2010). In this context, the features of the competition that can be observed in the UK aviation industry, as well as the European industry, are the active growth of low-cost carriers (Barros & Couto, 2013; Ryans, 2010) and the reference to price variations typical of full-service and low-cost airlines (Salanti et al., 2012). The features also include the use of price discrimination strategies (Cattaneo et al., 2016; Grigolon et al., 2012), market transformation tendencies (Malighetti et al., 2015), as well as the focus on the customers’ loyalty, trust, and satisfaction (Akamavi et al., 2015; Forgas et al., 2010; Graham & Dennis, 2010; Kim & Lee, 2011).
The review of the literature also allows for concluding regarding the specific innovative pricing strategy and business model used by EasyJet in order to affect the company’s competitive edge. It was found that EasyJet started by cooperating with secondary airports (Bottasso et al., 2013; Bush, 2010), and the company proposed the innovative low-cost model based on using flexible prices and discounts associated with advance and last-deal booking (Budd et al., 2014; Koenigsberg et al., 2008; Malighetti et al., 2015; Salanti et al., 2012). Moreover, the company regularly reduces costs and fares (Mason & Alamdari, 2007); it proposes dynamic prices associated with selected routes (Cattaneo et al., 2016); and the proposed services are of high quality to win the customers’ loyalty (Forgas et al., 2010; Kim & Lee, 2011). Table 1 provides a detailed summary and synthesis of the information related to the set of research questions.
Table 1. Systematic Literature Review
|Author(s)||Date of Publication||Methodology||Findings Related to the European/UK Aviation Industry||Findings Related to EasyJet’s Strategy/Business Model|
|Bush||2010||Qualitative||The competition in the aviation market depends on the strict regulation of its economic aspect.||EasyJet applies regulatory measures while working in the UK airports.|
|Bottasso, Conti, & Piga||2013||Quantitative||Competition of low-cost carriers depends on their prices and turn-around times.||EasyJet entered the market while focusing on secondary airports with a lower number of customers.|
|Budd, Francis, Humphreys, & Ison||2014||Qualitative||The UK market is based on supporting traditional and low-cost airlines.||EasyJet is a pioneer in the low-cost carriers’ market and the first user of the innovative low-cost model.|
|Koenigsberg, Muller, & Vilcassim||2008||Quantitative||When the fare structure is simple, there are more opportunities to attract clients.||EasyJet utilises the pricing strategy based on proposing the lowest prices and the last-deal approach.|
|Mason & Alamdari||2007||Qualitative||Consumer demand depends on the possibility to choose airlines and compare proposed prices.||EasyJet builds capacity while reducing fares depending on the tendencies in the market.|
|Salanti, Malighetti, & Redondi||2012||Quantitative||Price variations can attract consumers and influence their demand.||EasyJet is inclined to apply the method of dynamic pricing.|
|Malighetti, Paleari, & Redondi||2015||Quantitative||The transformation tendencies are typical of the industry, and they are associated with changes in consumers’ interest in the proposed services.||EasyJet improved the pricing strategy, and the company provides discounts related to advance booking.|
|Cattaneo, Malighetti, Morlotti, & Redondi||2016||Quantitative||Low-cost airlines provide the same services for all passengers, and the competition is based on the price discrimination strategy.||EasyJet applies different prices and discounts for short and long routes.|
|Kim & Lee||2011||Quantitative||The aviation industry depends on customer satisfaction and changes in purchasing behaviours.||Low-fare airlines can provide services similar to those ones provided by full-service airlines at lower costs making them more attractive to customers.|
|Akamavi, Mohamed, Pellmann, & Xu||2015||Quantitative||In the aviation industry, the consumers’ loyalty depends on prices, services, satisfaction, and the feeling of trust in relation to low-cost carriers.||EasyJet uses the business model that becomes popular because of the growth of the company’s profits.|
|Grigolon, Kemperman, & Timmermans||2012||Quantitative||Students are inclined to choose airlines that are attractive in terms of the proposed prices and provided services.||Low-fare airlines are regarded as attractive alternative choices.|
|Barros & Couto||2013||Quantitative||The European aviation industry experienced a recession during the period of 2001-to 2011, but low-cost carriers overcame the associated barriers.||EasyJet is among the leading airlines that experience productivity growth even in the context of recession.|
|Forgas, Moliner, Sánchez, & Palau||2010||Quantitative||Satisfaction and trust are the aspects to influence the customers’ interest in the airline.||EasyJet attracts potential passengers developing affective loyalty.|
|Graham & Dennis||2010||Quantitative||The UK airline market depends on the development of tourism in the European Union and the opening of new routes.||EasyJet applies specific criteria while selecting airports to work with.|
|Ryans||2010||Qualitative||The competition in the aviation industry became tough because full-service airlines try to address the economic threat associated with the growth of low-cost carriers.||EasyJet chooses to compete directly with full-service airlines, not only with the other low-cost carriers.|
Case Study Findings
The analysis of the company’s documents and industry reports allows for discussing the case of EasyJet with a focus on its business model and strategy. EasyJet is a UK-based airline that operates in airports in the United Kingdom, Ireland, and other European countries, including Italy, France, and Spain (EasyJet, 2014; Statista, 2014). Today, the company grows actively, but it entered the market as a low-cost carrier oriented to working with secondary or non-expensive airports (Airbus, 2015). The company chose to work in low-cost airports because of economic advantages, and only in a year, did EasyJet initiate routes in Heathrow and Gatwick among other reputable airports (Amadeus, 2013; Cattaneo et al., 2016). Still, it is important to note that the number of airports that work with EasyJet increases each year, and currently, the company provides its services in airports of London, Nice, Milan, Toulouse, and Lisbon, among other cities (Amadeus, 2013). EasyJet entered the market and won the position in it while focusing on low-cost routes. In 2012, the number of routes completed by EasyJet became more than 1300 routes in comparison to about 600 routes typical of 2007-2009 (EasyJet, 2014; Statista, 2014). The length of routes also continuously increases, and EasyJet’s low-cost aeroplanes can cover more than 1150 km today (Amadeus, 2013; Cattaneo et al., 2016).
The changes in routes influenced the popularity of the airline among the public, and the number of customers increased proportionally, “from 37.2 to 58.4 million,” as it is noted by Malighetti et al. (2015, p. 691). It is possible to note that EasyJet succeeded in proposing more routes for each airport with which the company cooperated, and the number of routes per airport became more than 9 in 2012 (Airbus, 2015; Cattaneo et al., 2016; Statista, 2014). Still, it is possible to observe fluctuations in weekly frequencies typical of the period of 2007-2012 (EasyJet, 2014).
The company pays much attention to stabilising its performance, and it prefers using only an aircraft like Boeing 737-500 in order to reduce operational costs and increase efficiency with the focus on the plane’s capacity of 159 seats (Amadeus, 2013; Cattaneo et al., 2016). According to Malighetti et al. (2015, p. 691), the percentage of seats that are offered by EasyJet “in direct competition with other carriers” increased significantly “from 43.4% in 2007 to 69.2% in 2012.” Therefore, the capacity of the standard low-cost carrier used by EasyJet is about 160 seats. EasyJet uses additional approaches to decrease costs or apply cost drivers. Costs are also reduced because EasyJet does not use the services of travel agents, and it does not apply inter-connected routes (Airbus, 2015; Statista, 2014). The work with the same suppliers and partners according to the developed scheme of operations guarantees fast turnarounds (Cattaneo et al., 2016; EasyJet, 2014).
EasyJet is one of the first airlines to apply the methods of e-commerce in its operations. The company does not use the ticket system, and it is possible to book e-tickets online at lower prices that differ depending on the time when the ticket is ordered (Amadeus, 2013). The introduction of the e-ticket system also contributed to improving customer services because passengers have the opportunity to check their flight status easily. Minimal attention is paid to providing unique services. On-board services are standard, and they are often regarded as limited, but they are of high quality (EasyJet, 2014). The focus is on addressing the expectations of students and young travellers who use the company’s services, and this category of customers is regarded as price-sensitive (Amadeus, 2013; Cattaneo et al., 2016).
Ryanair and Lufthansa can be discussed as the main competitors of EasyJet in the UK and European markets (Amadeus, 2013; Cattaneo et al., 2016). However, EasyJet preserves its leading position referring to the pricing strategy. Fares typical of EasyJet are inclined to be dynamic, and they change depending on the season and such factors as the opening of new routes among others (Amadeus, 2013; Cattaneo et al., 2016). Malighetti et al. (2015, p. 697) analysed the impact of the competition on the company’s pricing strategy, and they found that EasyJet applied “lower average fares per kilometre” for those flights in which “it had a smaller direct market share.” EasyJet keeps prices comparably low because of cutting down costs associated with frills and unique or luxury propositions (Airbus, 2015). Customers report interest in using the services of EasyJet because of the attractive pricing policy and available online options associated with e-marketing (EasyJet, 2014). As a result, the reduced cost strategy is viewed as the basis for determining the position of EasyJet in the market. The case study analysis demonstrates what pricing strategy and business model are used by EasyJet and how this innovative low-cost strategy influences customer satisfaction and the overall competitive advantage. The results of the case study analysis are presented in Table 2.
Table 2. Case Study Results
|Principles of EasyJet’s Business Model||Aspects of Innovative Pricing Strategy||Effects on Customer Satisfaction||Determinants of Competitive Edge|
|1. Cost or price leadership |
2. Focus on lowering operating costs
|Focus on performance||Low-cost pricing strategy with elements of the innovative approach||Fares are low and reduced regularly||Customers are price sensitive||Customers’ demands are lower|
|Focus on basic customer services||Prices are promotional and flexible||Focus on young people/students/travellers as the target audience||Cost advantage|
|Focus on cost drivers||Dynamic pricing||Focus on retaining customers rather than attracting them||Maximisation of sales|
|Work with non-expensive airports||Provision of discounts for advance ticketing||Tourism-related propositions|
|E-ticketing and online booking||Discounts for last-deal booking||Minimum of provided services and maximum cost reduction|
The purpose of this study was to evaluate EasyJet’s specific business model and innovative pricing strategy in terms of their impact on customer services and satisfaction in the context of the competition typical of the UK aviation industry. According to Forgas et al. (2010), loyal customers are important for any airline regardless of the prices it proposes to passengers. Still, the airline can be discussed as having a competitive advantage when it is popular among customers (Cattaneo et al., 2016). However, the analysis of the literature related to the competition in the UK aviation market in the context of the European market also demonstrates that the UK industry has specific features and rules according to which low-cost airlines can compete with full-service airlines. The importance of designing cost structures, following price variations, and addressing the market transformation tendencies in the development of the aviation industry competition is also supported by Graham and Dennis (2010), Kim and Lee (2011), Salanti et al. (2012), and Malighetti et al. (2015) in their studies.
The analysis of EasyJet’s business model and pricing strategy indicates that the company chose to add elements of innovation and proactiveness to its pricing approach. As a result, the business model is based on all principles that are discussed as effective to attract customers and satisfy their needs by economists, researchers, and specialists in marketing (Bush, 2010; Koenigsberg et al., 2008). According to Fox (2013), each low-cost airline chooses models and strategies that can guarantee profitability in a certain context. The uniqueness of EasyJet’s approach is in the fact that the company is a pioneer in the industry, and it is the first low-cost airline that applies the latest trends in the market (Malighetti et al., 2015). From this perspective, the business model of EasyJet is based on its effective pricing strategy is often regarded as innovative in its nature since it unites all principles of the effective low-cost strategy followed in the aviation industry (Graham & Dennis, 2010). Thus, EasyJet is one of the first UK and European companies that applied dynamic pricing, e-commerce, and cost reduction in its model and united all these features in one effective strategy. This approach allows for speaking about EasyJet’s model as pioneering in the industry and based on innovations in the field.
While referring to Porter’s analysis of five forces, it is possible to state that EasyJet is inclined to reduce the impact of customers while proposing a cost strategy that is dynamic and attractive to the target audience, and the company addresses the impact of suppliers while choosing the work only with those partners whose services are low-cost (Malighetti et al., 2015; Ormanidhi & Stringa, 2008; Porter, 2008). The threats associated with the entrance of substitutes and new competitors are addressed by EasyJet with the focus on applying new techniques and methods in providing discounts and simplifying the rules of online booking (Cattaneo et al., 2016; Grigolon et al., 2012).
The findings of the research also allow for answering the questions regarding the role of innovative strategies and the selected business model in influencing customer services and customer satisfaction. According to the principles of the Relationship Marketing theory that provides the background for this research, customers are attracted and their loyalty increases when the company focuses on customer-oriented services and offers (Palmatier et al., 2009). This principle works for EasyJet because customers have the opportunity to use flexible prices, receive discounts, and plan their travelling according to their possibilities and needs (Koenigsberg et al., 2008). The findings of the study correspond with the ideas stated by Malighetti et al. (2015) who note that EasyJet is popular among passengers because of the company’s pricing strategy which is rather complex, but it can address a variety of demands. As a result, there are more opportunities for increasing the customers’ loyalty and even attracting new customers (Akamavi et al., 2015).
The review of the literature and case study analysis also provide answers to questions regarding customers’ behaviours in the context of Utility Theory. It is possible to state that passengers who use the services of EasyJet often act according to the principles of Utility Theory (Nijssen & Herk, 2009). The reason is that consumers make their decisions regarding the choice of airline while assessing the potential outcomes (Solomon et al., 2013). The competitiveness of EasyJet increases when customers conclude that their travelling with the help of low-cost carriers will be cost-efficient, comfortable, and fast. According to Koenigsberg et al. (2008), Cattaneo et al. (2016), and results of the case study analysis, potential passengers of EasyJet aeroplanes are inclined to assess the company’s services in terms of flexibility in booking tickets, accessibility of the information regarding available routes, pricing and discounts strategies, and the information regarding the time or speed of covering routes by aeroplanes and providing the associated services. Following Utility Theory, it is possible to note that when customers conclude that the airline can meet their expectations regarding services and outcomes, they choose EasyJet because of its flexible pricing and high-quality services (Nijssen & Herk, 2009; Solomon et al., 2013).
The analysis of the data received with the help of reviewing the literature and conducting the case study indicates that low-cost strategies can have a direct effect on achieving a competitive advantage. This business model and the approach to setting prices in EasyJet are correlated with the principles of Porter’s generic competitive strategy as cost leadership (Ormanidhi & Stringa, 2008). From this perspective, EasyJet is one of the evident examples of companies that achieve their competitive advantage while setting low prices and flexible cost structures. The results of this study are consistent with the findings by Barros and Couto (2013) who assert that low-cost aeroplanes have the potential to become more competitive than full-services aeroplanes because the profile of modern passengers is different, and young people often choose accessibility in terms of prices and flexibility in terms of services while selecting the company. From this perspective, EasyJet can be regarded as the market leader because its unique pricing strategy and the business model based on the principle of cost reduction made the company profitable in the context of recession for the aviation industry in the United Kingdom and Europe. The findings of this research can be discussed as being in line with the results of the studies performed by Barros and Couto (2013), Ryans (2010), Salanti et al. (2012), Cattaneo et al. (2016), and Akamavi et al. (2015). The results are also explained with reference to Porter’s theories of competition, the Relationship Marketing model, and the Utility Theory.
Conclusion and Recommendations
The purpose of this research was to evaluate the impact of EasyJet’s specific pricing strategy and selected business model on customer services and customer satisfaction in the context of industry competition in the United Kingdom and Europe. While referring to the study findings, it is possible to focus on four main conclusions related to the research questions set for this study. The first conclusion that requires a detailed discussion is the fact that the competition in the UK aviation industry is influenced by the appearance and development of low-cost carriers. The problem is in the fact that today, the UK airline market can be divided into the sector of full-service airlines and the sector of low-cost carriers. Therefore, the competition is characterised by the following important features: the active growth of low-cost carriers, the focus on price variations, the choice of price discrimination strategies by full-services and budget companies, the reference to market transformation tendencies, and the focus on attracting customers to win their recognition and loyalty. All these factors can be taken into account while discussing the uniqueness of the UK aviation industry market.
The second important conclusion is associated with the identification of specific pricing strategies and business models used by EasyJet. The findings of the study indicate that EasyJet focused on applying the cost leadership competitive strategy and the specific business model that is based on the application of e-commerce and continuous cost reduction in terms of operations and prices. The pricing strategy that supports this business model has the following specific features: the proposed fares are comparably low, and they are reduced regularly; prices tend to be promotional and flexible; the principles of dynamic pricing are also applied, and the provision of discounts for different types of ticketing and booking is guaranteed. The combination of all these elements in one strategy allows for discussing it as rather innovative because the competitors can imitate only separate aspects of this approach, and their gains are not so high.
The third conclusion to discuss is related to the identification of strategies that are used by EasyJet in order to influence customer services and customer satisfaction. It is important to note that EasyJet remains to be attractive to customers because the proposed prices are appropriate for the wide range of target passengers; the company works to provide services that are attractive to young people, students, and travellers; and the retention of customers, trust, and loyalty play the key role in the relationships with clients. Furthermore, the minimal basic services provided by EasyJet are compensated with the help of focusing on the high quality of services and cost reduction initiatives. The aspects and points are discussed as playing a key role in guaranteeing the leading market position for EasyJet.
The fourth conclusion is associated with the discussion of the role of low-cost strategies and the specific business model used by EasyJet in order to achieve a competitive advantage. The findings of the study demonstrate that all strategies and techniques that are used by EasyJet in order to attract and retain customers, as well as to remain profitable in the market, can be regarded as the components of its competitive edge. The theory explains the approach followed by EasyJet with references to the principles of cost leadership. As a result, the business model and pricing strategies applied by EasyJet play a key role in developing its competitive advantage. Therefore, it is important to note that the competitiveness of the company depends on the fact that customers’ demands in the market of low-cost carriers are lower than in the market of full-services airlines, and the price reduction strategies can address the clients’ expectations. From this perspective, the cost advantage is associated with the maximisation of sales that are influenced by the practice of reducing prices regularly.
Recommendations for Further Research
The current research is limited in terms of resources to conduct the primary research and focus on the detailed investigation of EasyJet’s strategies and models in the context of the competitive market. Therefore, it is important to provide recommendations for further research in order to cover the gaps in this study. First, it is important to find out how EasyJet competes not only with airlines representing the low-cost carriers’ sector but also with companies that provide full services. In addition, it is also necessary to examine what aspects of EasyJet’s pricing strategy directly lead to increasing the company’s profitability. In this case, the statistical analysis of the quantitative data should be applied. Finally, it is relevant to study what other particular aspects of the company’s strategy can influence its popularity among other airlines in comparison to competitors’ achievements in this area. While following the proposed recommendations, it is possible to study the case of EasyJet not only with the help of secondary research tools but also with reference to primary research instruments. The current research provides the answers to the set questions, but the more detailed discussion of the problem requires another approach, and the use of more tools can be appropriate if the focus is on analysing the quantitative data.
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