Since EasyJet will be cutting back at Stansted this winter (again) with no press release or announcement to say why they have reduced traffic by 30% in 2 years, along with the cancellation of such major routes like Alicante, Barcelona and Faro, I emailed them last week to ask them to reconsider some of the cut backs and cancelled routes in recent years. I got a response yesturday and this is what they had to say:
"I am sorry that you are disappointed with the route portfolio from Stansted. Aircraft are expensive assets and we need to ensure that we use them in a way which maximises share holder return. Therefore we have to make some fairly tough decisions about the routes on which we will operate. Just because a flight is full does not necessarily mean that it is profitable as our revenue management system will adjust pricing to fill a flight.
Stansted has also seen a significant increase in charges in recent years which has put added pressure on already weaker yields.
We believe we have a good range and selection of routes from our London market as a whole but do recognise for some that this is not as convenient anymore.
I hope this helps to explain our rationale and do recognise that this is not the solution you are seeking."
Let’s just pick the bones out of this:
"Just because a flight is full does not necessarily mean that it is profitable as our revenue management system will adjust pricing to fill a flight."
That’s true, but they are not challenging the fact that Stansted has high load factors and often full flights. We know from personal experience, passenger numbers and it only takes a quick look at the reserved seating section of the booking system to see that the vast majority of seats are filled.
It seems highly suspicious then why they fly to more expensive airports with similar fares and load factors all across Europe but are growing. The only possible reasons therefore why Stansted would not be making as good a profit would be because:
a) The price for customers is too low (full planes but low yields from each passenger)
b) The operating costs are too high (leads to same outcome, full planes but low yields)
c) The competition is too strong (full planes but competition and price wars leading also to lower fares than needed to make a healthy profit)
All these options closely relate, but option B appears to be their explanation but it comes straight back to point A. If you have high operating costs and lower yields yet your planes are being filled well, then it suggests the price customers are paying is lower than it could be and should be raised to improve yields whilst still operating with high load factors.
There is however strong competition from Ryanair but why would they after so many years of competing just pull the plug and let them win all the Stansted passengers?
After all they are in the same boat. Ryanair is equally unhappy about high costs and have no major advantage over EasyJet on the effected routes, but they have remained loyal to Stansted’s customers by offering more choice of routes rather than less despite cutting back.
“Stansted has also seen a significant increase in charges in recent years which has put added pressure on already weaker yields.”
Which goes back to point B but it seems very odd considering that the largest cut back in EasyJet traffic was actually in 2012 (coincidently when the Southend base opened) and had been no change in Stansted’s charges since 2007. Why did they continue to use Stansted as one of their largest bases up until 2011 if they were so unhappy about prices?
Perhaps it yet again comes down mainly to help promote Southend. People (even within Essex and the London market) who would have chosen Stansted are forced to go to Southend for any availability on routes such as Alicante, Barcelona and Faro with EasyJet.
The local and international media attention that EasyJet going to Southend has bought is a great
PR stunt! Rarely is it ever mentioned though that they have actually just shifted capacity further east, further away from much of the existing customer base at Stansted. Some
PR that would be, but hey, that’s the truth!
Improved yields at Southend therefore are dependent on not duplicating the same routes or flights from Stansted. On top of that, this damages their more distant customer base and market share of passengers at Stansted and its much larger catchment area, a godsend to Ryanair!
I’ve known people (including myself) who have switched to Ryanair because the convenience of going from Stansted prioritises over flying with EasyJet. They seem to admit this to some extent, but how oblivious are they about how many customers they are losing by this?
“We believe we have a good range and selection of routes from our London market.”
Well then, pretty oblivious it seems! Yes what they say may be true but all things considered, I don’t think Southend is a much better option than Stansted for much of the London market itself. The expression “think outside the box” should quite literally be applied here! What about those outside the London market but still in the catchment of its one or two of its airports?
"for some this is not as convenient anymore."
Oh, well that’s the answer to that! Perhaps they should rephrase to the truth: "for our catchment of Norfolk, Cambridgeshire, The Midlands and those in Essex and London who are closer to Stansted, this makes EasyJet a less convenient or unfeasible option, so they instead fly from Stansted with Ryanair". The only people who it’s more convenient for are those in Essex and East London who are closer to Southend Airport.
How many customers do they define as
“some”? How many customers do they admit they are losing or maybe in their eyes, making it
“not as convenient” for? But most interesting of all, Do they really expect customers to be that loyal and still fly with them now they are
“not as convenient anymore”?For many millions of passengers, the convenience of travel (that is heavily based on the origin/destination airport) is more of a consideration than the airline and its fares.
I completely understand that any business has to maximise the potential of its assets and return to share holders however I don’t see this to be the case, or only case should I say.
They may well be currently enjoying better yields at Southend, but it doesn’t look so good when that requires cancelling routes from Stansted or indeed that Ryanair once flew Stansted to Faro once a day, but now flies up to three times a day and also now serve Barcelona-El Prat Airport and with Alicante on sociable flight times and increased frequencies also.
The termination of such well established and popular routes from a major UK airport is not a sustainable approach to cut costs and increase yields. In business, it has to be about sustainability nowadays to remain competitive into the long term future.
Throwing customers away to rival airlines and scaling back/cancelling routes from a major airport to shift them to a more locally based airport with much weaker market share, power and recognition is an unsustainable and a risky long term strategy.
If your attempt to increase yields involves downsizing your catchment area and losing customers to a larger rival like Ryanair (because they can’t get the great yields at Southend without downsizing Stansted) then that is a highly unsustainable way to manage your assets and your target market.