Is Easyjet facing an uncertain future?
 

Whilst the recent fiesta of bitch slapping between Easyjet and Ryanair has been an amusing diversion, I can't help but wonder if things aren't all that bright in Orangeland. I know full well that margins in our business are razor thin at the best of times, but Easyjet reported a cost per available seat kilometer (ASK) of 4.04 pence in their '04 full year results compared with revenue per ASK of just 4.29 pence. Slim, yes, but in the right direction. Interim results for '05, however, show a cost per ASK of 3.96p and a revenue per ASK of 3.81p. This is a loss making airline. With 3925 staff and 92 aircraft, or 42.7 employees per aircraft, this would seem to unfavourably compare with Ryanair's 2604 employees and 91 aircraft, or 28.6 employees per aircraft. Add to this the fact that EZY are largely unhedged for the rest of the financial year, the price of oil is on steroids and likely to reach US$80 per barel by the end of the year, are Easyjet a viable company in the current trading environment? Is the future bright? Is the future Orange?

Discuss.

Yes very stable,very secure. End of discussion.
Next question.

Leo Hairy Camel is a complete menace and should be ignored....Discuss!!

While you're there Leo, I was looking at Ryanair's financials for 2004, 2005, and can't find the ASK and RPK numbers.
It is quite possible that I may have overlooked them, so could you please point me in the right direction.

Here's a way to both secure their future and blow the competition away.
Set up a Dublin base.
Result:
1. All ryanair pilots would switch over to Easy thus eliminating the competion.
Sure, O'leary would slash prices to run them off the route,but without any pilots to fly the pax, there won't be much repeat business.
2. Easyjet have crews to fill there arriving aircraft.

what a load of crap the reason easyjet makes money is there shafting all new entry pilots!

I was called for interview/assessment as a Non-Rated Direct Entry Pilot (with no expenses for travel/hotac) carried out satisfactory sim check, waited a week, then got told that they had decided not to take any Direct Entry Pilots, and that I was eligible for the TRSS (Type Rating Self Sponsor) - Oh and that would only cost me £23,000 (they even had the cheek to say we pay you it back over 5 yrs- BullS**T they take it out of your wages then give you it back!, hardly them paying for it) and to add further insult you dont get paid until you commence line training some 8 weeks later - do they think im mad!!!

That works out at about a 6% margin. I think thats inline with the rest of the industry.

What's more important is that they also managed to grow the company 25-26% and added 40 new routes in the last 12 months.

http://news.bbc.co.uk/1/hi/business/4574789.stm

Bentover,

I was told quite a few of your easyjet pilots were leaving to join Ryanair, particulalrly at Liverpool..?

Shags

A margin of 6% eh? BA's margin is is around that figure and their pushing for 10%. So it just goes to show that the LCC is not the way to make loads of money in the airline business as so many seem to believe.

Shag, I am a ryanair pilot, and I assure you , all would leave to join easy in a Dublin base.

Fockerplod
Sounds very similar to the Ryanair pilot scheme, except they dont get the oportunity to pay it back over the 5 years out of their wages. They too get no pay until line training and even pay their own HOTAC and transportation.

What is Ryanair's margin, and where is it published?

At last count....4

Hardly a stampede..

Apples and Oranges.
 

Page 9 of this may help illustrate the differences.

Ryanair is an easy situation.

You either agree or disagree with the moralistic stance taken by the company.

If you disagree and work for them you only have yourself to blame!

Mighty interesting read there Leo.
It does make you wonder if Ryanair is as creative with their financial presentations as they are with their geography?

Just had a look at the Easy financials page and whlist it grieves me to agree with The Camel, he does appear to be perfectly correct about revenue vs. cost per ASK.

oil price is the killer
 

The only way that any of the lowcosts are making money is the luck in hedging the oil price.
I think easy have a $60 cap and Ryanair got there "oil" at $47/barrel. The current market price is about $67 barrel. It is only a short term life line. Everyone is going to have to pay more for the air fare. It will only be a few pounds per pax but will hurt ryanair the most as £3 on a "99p" fare will make the biggest change. Maybe the wheelchairs users can be charged another £300, that to be fair will become an extra £3 surcharge.

The initial rise in fuel cost was offset by a rise in load factor by those who did not rise prices. This cannot rise much more as most sensable timed flights must be farely full and 6am takeoffs on midweeks must always have spaces.

Show me an airline taking 33 brandnew Airbuses in 12 months and still posting a net profit.....:hmm:; Until all airplanes are properly dispatched on the routes (replacing older 733´s partly) it definitely has an impact on cost. Remember, the airline is rolling over the fleet to 120 buses within 5 years. At no impact on costs ? Hardly....

Just my 2 cents :E

The shove that dare not squeak its name.
 

Well, not Airbuses perhaps, but does 27 brand new Boeing 737-800's this year count? Capacity 189 versus 156 on the minibus? What about 29 more in '06, and 25 more in '07. Then its 20 brand new –800’s every year until 2011, and yes, profit is forecast every year throughout.

Its not only the absorption of new aircraft acquisitions, TLT, but EZY's unhedged exposure to the 'perfect storm' of relentless upward pressure on the oil price, demand driven rather than supply driven this time, simultaneous to declining yields, crucial boardroom departures (not to mention one crucial return!), and a determined, capable competition....and no, I don't just mean Ryanair. Air Berlin are hot on your heels, as too are German Wings, exacerbating already under performing bases in Berlin and Dortmund. Don't forget Sterling and what about the FL Group's (Icelandair) 11.5% interest in the company?

The unthinkable seems plausible, all of a sudden. Remember Ansett?

Me thinks you are feeling uncomfortable there Leo. Why else would you feel the need to highlight Easyjet's situation.

Is all not what it seems in FR land?

@ Leo Hairy-Camel


What is your intention of your thread?

All of your figures are not precise!

-FL Group owns more than 13% i. e.

- Aircraft number at EZY more than 100 ( you said 92)

- 6% profit margin for the time being is satisfactory. I know GERMAN WINGS would love to make 6%!
And AIR BERLIN? If you know any profit figure from AIR BERLIN, youn are the master!!!

Leo Hairy-Camel

This is a pathetic attempt to make something out of nothing. Judging by your previous posts, your loyalty to Ryanair under any and all circumstances is touchingly reminiscent of Joseph Goebbell's support of Hitler until the bitter end. You may recall that both those gentlemen, despite a promising start from their perspective, ran into a spot of bother towards the end of their tenure.

As a Ryanair manager (in your mind or in reality - who knows?), your job is to ensure that having alienated your own staff to the maximum possible extent, you slag off every company who stands in your way. I am delighted you find it necessary to question the state of easyJet - it is a sign we are causing you hassle. You simply do not know the profits or otherwise that we are making. What I know is that we will produce a profit this year (as we have every other year) and that every airline in the world is being seriously affected by the fuel price. If you are so foolish as to think that Ryanair is not being hurt by fuel prices you are even more blinkered than your other posts could lead us to believe.

I have recently flown on Ryanair - out and back in 2 half-filled 189 seater 737-800's. Nothing to base a master plan on but enough to say that you are facing the same issues as the rest of the industry. We bought our 319's a whole lot cheaper than you bought your 800's and someone has to pay for it. Despite you offering two pence trips to some place in the middle of nowhere that you call somewhere else, your load factors are virtually identical to ours (I think ours are actually slightly higher but there is nothing in it). You can sit there pouring cold water on everyone else but right now no one has a divine right to make money. EasyJet is doing great - and is a million times better employer to work for than Ryanair. As one of your own pilots has said - every single Irish-based pilot would leave for easyJet if we opened a base there. Your loyalty to MOL is like having a cobra for a tie - it looks pretty but one day you will wish you had placed your trust elsewhere!

I am one of those who believe that there will be a 'shaking' in the coming months and that both easyJet and Ryanair are among the few who will survive intact. With the forthcoming round of pay negotiations coming up - you could almost be a manager at easyJet!

@ Norman Stanley Fletcher

Good posting and 100% agree. :ok:

sorry LHC,

but if you buy your shiney new 800s at a discount then do a sale and lease back deal on a few each year (several million cash back on each) then count said payments as profit / revenue (it actually is technically - and cleverish too ) then your figures can look very healthy.

unfortunately you're then in the position that you have to keep doing the same thing over and over again. eventually the bubble will burst.

head to head I don't think easy could compete with FR route for route. however I don't think they ever want to as the model is different.

at it's most basic EZY pay through to nose for it's choice of airports. FR doesn't. If it was my toy box and I ran easy I'd keep the CDG's and LGW's etc but put some focus on the wee airports like FR has done.

But as far a solvency goes the best indicator will be if the new buses stop arriving. each one is subject to some kind of finance agreement. the big lessors are far to clever to let them keep coming if there's any doubt about the money being there to pay for them.

We're all as bad as each other. Wake up and smell the coffee guys, we are both crap and long overdue a good drubbing from the market. Low cost air travel is and always has been a myth - what you save on direct costs you end up paying double on indirect costs, workforce issues, legal costs and so on.....!

But as appalling as it is, at least EZY doesn't have an odious four-foot tall one-boll0cked creep like Leo H-C fearlessly defending his company's inadequacy on a public forum. Honestly pal, is MOL your Mum or something?

er, Leo....

why are you comparing sleazy full year '04 figures with interim '05 figures? Easy make a first half loss (as reflected in the interim figures), but a full year profit (as shown in the full year figures).

Discuss

Leo,

Are you the "Leo" check-in supervisor on the Airline TV show?

LHC=Michael O Leary.

Mr O'Leary has a problem recruiting pilots at the moment. Therefore Mr. O'Leary is trying to scare some away from Easy and towards Ryanair.

By the way, the dat he provides is from an investor roadshow document and the revenue he quotes includes a stack of non flying related revenue.

The acounts show Ryanair's margins on flying related activities between 04 and 05 went from 9.2% down to 6.3% - a decline of 33% in one year.

LHC is just trying to sow Fear Uncertainty and Doubt (Called FUD in the computer industry) to divide and rule and keep you all scared and uncertain.

"but if you buy your shiney new 800s at a discount then do a sale and lease back deal on a few each year (several million cash back on each) then count said payments as profit / revenue (it actually is technically - and cleverish too ) then your figures can look very healthy.

unfortunately you're then in the position that you have to keep doing the same thing over and over again. eventually the bubble will burst"

- Wasn't Harry Goodman very succesful at this kind of leaseback?

LEO - What are you and I doing here
 

Leo,

You and I belong somewhere else but as we're here let's chat.

Easy are a different outfit........ you identify a failing in their cost base. I'm fairly sure that no Easyjet Capt. is getting paid €22,000 a month on a short term fill in. Perhaps even with problems with their 5254 they still can crew their aircraft, unlike us.

We need 10 Captains a month until 2011, and you're slagging Easyjet about their costbase. The board will want to know why we have so many $35,000,000 billboards parked around Europe next year.

Leo, we all know your fondness for Oscar Wilde's writings and the like:

In 1894 Lord Alfred published a poem, "Two Loves," in the controversial British literary magazine The Chameleon, which also featured works by Wilde. The romantic poem, probably Bosie's best effort, ends:

What is thy name?' He said, 'My name is Love.'
Then straight the first did turn himself to me
And cried, 'He lieth, for his name is Shame,
But I am Love, and I was wont to be
Alone in this fair garden, till he came
Unasked by night; I am true Love, I fill
The hearts of boy and girl with mutual flame.'
Then sighing, said the other, 'Have thy will,
I am the love that dare not speak its name.'

Leo, just between you and me can you tell me who bulled the cow?

Leo, I still can't find Ryanair's ASK, RPK, or any of the parameters by which airline operational economics can be really compared.
Surely if the humble Easyjet can produce them, you would want to show yours to be bigger and better.
Your glossy roadshow thingy does not seem to contain them, so where are they?

Leo, your figures in your first posting on this thread are distinctly suspect. You quote Ryanair as having 28.6 employees per aircraft. As I understand it RYR operate mostly a 5 on/3 off crew roster. That can be a very efficient roster but as an absolute minumum it requires 4 crews per aircraft before any leave, training, sickness stand by etc. At 2 pilots and 4 cabin crew that totals 24 people per aircraft as an absolute minimum. It is impossible to see how all bases can be equally efficient, particularly in view of the small number of aircarft deployed at some of them. So I suspect that the real crewing ratio will have to be at least 4.5 crews per aircraft. That makes 27 people per sircraft and at this level it would still make RYR stunningly efficient. There is no possible way that RYR can possibly operate their airline with only 1.6 iother people per aircraft (147 people in total). There are things that they simply have to do that will quickly gobble up far more than that. Accounts, marketing, maintaining and developing the website, engineering, crewing, negotiations with suppliers, customer relations, MOL and his directors, call centre, etc.

In any event the total employee and employee per aircraft figures are irrelevant. What really matters is the number of full time equivalents required to support and operate the total operation and this includes man-hours bought from all suppliers. When you get that figure you can make real comparisons.

It is worth pointing out that any positive return or margin achieved makes any airline far better than the industry average. Remember that the entire airline industry (that is airlines and not including suppliers) throughout its entire history is still in net defecit.

Finally BA had a better margin than 6% last year.

Faq and Dawn Raider

You both are hitting the target. In fact Ryanair sold and leased back 10 aircraft last year. Perhaps LHC can tell us how much that contributed to the bottom line because the accounts shine no light on the subject. My guess is that all of Ryanairs profits last year came from this financial tactic - Easyjet may well have done the same.

Strangely the Stock Market Analyists haven't hit on it yet; are we looking at another Air Europe?

Lease-back props up the business (for now at least). This forces growth, and growth encourages lenders to invest in.... more new aircraft.

So growth is not a bonus to trumpet, it is an essential element.

So what happens at "level-out"? No more lease-back and all your costs are higher than they could have been (leases).

The loser will be the first one to level off. They will have higher costs, and all the investors getting twitchy because the growth has stopped. The winner will be the one who continues growing just long enough to mop up the remains of its big competitor just prior to raising prices to a sustainable level.

So which, of the 2, has a plan that allows the longest, most stable and sustainable growth? That is the real question.

The winner will have a rock solid reputation and public perception, the right level of well trained and willing crew, and a good product taking people where they want to go.

If Easy see off Ryanair, they'll be the new BA. Then new "easyjets" will come along, with a lower cost base and advantage of being able to expand!

All these figures must be very confusing to BA people. As I have a little understanding of them they look good to me and reflect lean and mean management. All the better as both outfits are investing all the time and have a very young fleet. Our 737's are crap and should be long gone and it should not escape both companies that BA is looking to make LGW a low cost unit and place much of the new routes with LGW. Perhaps a compliment, as BA sees rapid route expansion and cannot respond.

C'mon guys, everyone knows Leo Hairy Camel is Michael O'Leary, even a book on Low cost airlines points it out!

Did Ryanair enjoy the truck load of toys receieved from EasyJet? Maybe you could throw some more out of the pram.

Leo, I'm still gonna board first!

MK

The Ryanair and Easyjet models are completely different. Ryanair rarely competes head to head with anyone, first because they fly to bum'8$% places, and second the behave like any other monopolist and engage in anti-competitive behaviour to drive others out of the market. They are hostile and belligerent towards their customers and employees (the opposite of the so called Southwest model) and their growth depends totally on finding new airports to blackmail and the willingness of customers to spend a fortune and hours trying to get from the airport to their actual destination. Because there are loads of these airports desperate to pay them, they can continue to expand and play their dodgy financial games. When this levels out, MOL will pay a heavy price. I know many passengers who actively avoid FR unless absolutely necessary and many many more who are will to pay a premium to fly EZ or BA as an alternative. Ryanair will pay heavily for this, and when new routes are at a premium and Ryanair finds itself facing competition on its routes, you will see that customers will pay a premium not to fly them. EZ already attracts many many more business passengers than Ryanair and if it would drop the cattle scramble for seats would attract many more. Any company which treats its staff and customers with such contempt is not a good long term investment.

PS...MOL's presentation of stats illustrates their dishonesty. Much of the income is not generated from flying, their hidden charges for wheelchairs etc are a disgrace and their customer complaints stats are a fantasy. Ryanair make it almost impossible to lodge a complaint...