For Subscribers

Get the complete article now!

TWST: Can we begin with an introduction and historical sketch of easyJet (London: EZJ.L)?

Mr. Walton: easyJet is currently Europe’s largest low-cost airlines. It was IPO’d, having been formed in 1995. It was formed by an entrepreneur, literally with one aircraft and now flies 69 aircraft throughout Western Continental Europe. It is a little like Southwest in the US; it is only a short haul airline and we make money from carrying passengers; that’s our core business. We are low-cost which means very low fares, and at this stage we are, together with the other low-costs in Europe, I think the only sustainable part in the aviation industry in Europe. In terms of where we go from here, we are certainly still in the shadow of 9/11. While it has had a big impact in various parts of the industry, it also allowed us to increase our growth rate immediately post 9/11 and to make structural changes, basically taking share from the flag carriers. So, while these are hard times for us, it is also a time of opportunity.

TWST: Are you concerned when you see some of the flag carriers trying to get into your markets?

Mr. Walton: The key to success for low fares is actually low-cost, and at the moment an airline like easyJet has a cost structure which is magnitudes lower than a flag carrier. So, while the flag carriers can imitate, the key, frankly, is the cost base. And in that, not only do we lead, but we’re taking proactive measures to make sure that we continue leading. Are they learning? Yes, they are learning; nothing stands still in this world. But, about 90% of all of our sales are online through the web. We do not use middlemen and the normal distribution the airlines use, and frankly that technological edge is something which we aim to maintain.

TWST: What are the key objectives you want to accomplish over the next 12 to 24 months?

Mr. Walton: Our growth is based on increased frequency, not new destinations, which is quite different from many other low-costs. Once we have increased frequency, then we join the dots between existing cities in our network and only then do we fly to a new city. That means over the next 12 to 24 months there will be very, very slow growth of the network, but you will see increased density.

TWST: How does one go about increasing the density, what initiatives are available to you?

Mr. Walton: We play a yield and volume game. As we fly in a market and as a route matures we measure very sensitively the maturing of the yield in that market. What we do is we will add frequency and capacity to dampen down that yield. So we very much play a volume and price game on existing routes that we fly.

TWST: What are your thoughts on further non-organic growth?

Mr. Walton: We do not overtly chase M&A activity. Like all companies, we keep our eyes open but we make our management concentrate on organic growth.

TWST: What are you hearing from investors at the moment? Is there a tendency for people to color you with the same broad industry brush, or are some of the nuances being appreciated?

Mr. Walton: On this side of the Atlantic, in Europe, the story is understood. In the US, you’ve had Southwest for around 31 years, so I would say the story is understood there also. However, we are in a bear market and that absolutely colors investors’ perception.

TWST: What are a couple of compelling reasons you would give for those investors to take a close look at easyJet?

Mr. Walton: The first is our competitive positioning, which is our cost structure. Against flag carriers in this industry, we have a magnitude of advantage. The second is that in Europe there is a capacity and a market for growth, and we are in an ideal position to take advantage of that.