Barcelona – easyJet founder and major shareholder Stelios Haji-Ioannau outlined his belief more modest growth during current conditions offers a better return for shareholders than chasing market share he told the World Low Cost Airline Congress in Barcelona taking place this week.

A well-publicised boardroom spat at easyJet over the pace of future growth was settled earlier this summer when the airline adopted a new medium-term growth rate of around 7.5%. Delivering the keynote address to the conference Haji-Ioannau played down talk of a boardroom rift saying people should not believe everything they read in the newspapers.

Setting out his view as to why he supports more modest growth plans Haji-Ioannau said: "I generally believe the growth rate of any company, not just an airline, is something that needs to be debated. Growth comes from capital investment. There was a time when people thought you could grow without investment. That was during the dot.com era and that you could set up a £100 million company for next to nothing. That was crazy and the bubble was sure to burst and it did.”

Instead, he says, the more modest growth rate plans for easyJet will provide a better return for shareholders and, alluding to continued strong growth plans from other carriers such as budget rival Ryanair, he questions the merit in chasing market share.

"It remains to be seen which growth rate will provide higher returns for shareholders,” Haji-Ioannau added. "Is market share in Europe that relevant? You need to concentrate on market share from A to B, preferably A being somewhere people live and B being somewhere someone wants to go. If you go for passenger count and market share, there is a risk. I think our business model is safer because we have lower risk."

Again, referring to his arch-rival, he wished Ryanair Chief Executive Michael O'Leary "the best of luck" in the next few months as the search for additional revenue steps up.

“easyJet’s approach is more resilient, safer and lower risk than Ryanair's,” he told delegate. “Risk is a key factor for investors, which might put them off Ryanair's high-growth, passenger-number-boosting strategy. I am a lot happier I am a shareholder in easyJet and happier with their strategy."

But Haji-Ioannau complimented O'Leary for his innovation in raising ancillary revenue. "Michael was the first to charge for the first bag and we followed,” he said, adding. “There is nothing wrong with following something which worked.”

But, while easyJet and Ryanair watch one another very closely, there are some things which easyJet will not be duplicating. "There is only so much you can push through,” said Haji-Ioannau. “My personal view if Michael tries to charge for toilets it will be one step too far.”

Cutting Out the Travel Agent
He believes easyJet's best decision was to cut out the travel agent, although the airline only became listed on the GDSs once it had built up huge passenger volume.

"The best time to negotiate with someone is from a position of strength,” he said. “The preparation pays the fee," he said.

Haji-Ioannau – who prefers to be known as Stelios, the Serial Entrepreneur – is best known for creating easyJet in 1995 at the age of 28. He said it is unlikely he would establish an airline on the same basis as he did back then.
"Given the way the world is today, I wouldn't start an airline again,” he admitted. “I was lucky, I had a rich father and that helps enormously in the aviation industry," he said, drawing a ripple of laughter from the audience and echoing Former Continental Airlines CEO Robert Six, who said “if you want to make a fortune in the airline business you have to start out with two fortunes.”

“Can you imagine going into a bank these days and tell them I want to start an airline to fly between London and Glasgow and charge the passengers just £29, the same as the price of a pair of jeans at the time,” he asked. “That’s what we did and now you can fly easyJet between the two cities for less than that.”

Since 1995 the airline has grown from just four Boeing 737s into one of Europe’s leading airlines with about 170 aircraft in its fleet, mostly Airbus A319s, flying over 400 routes between 103 airports in 26 countries carrying 45 million passengers each year.

“We have changed the way people travel,” he said. “We have seen people fly with us for holidays, on business. We have attracted every sort of passenger to our flights. Some people fly on easyJet and then stay at the Ritz, which is not what I expected.”

He told the conference his holding company, easyGroup, would not be allowed" to start a new airline in the UK or overseas under the "Easy" brand unless it is through easyJet. "We have an arrangement between ourselves (easyGroup) and the airline which wouldn't allow it, unlike Branson (Virgin Group found Sir Richard Branson) who kept the rights to set up different airlines around the world," he explained.

Although easyGroup have expanded into other travel related industries such as car rental and hotels, Haji-Ioannau does not plan an expansion into high speed rail. “That would be one step too far I think,” he said. “We don’t have to serve everybody. But perhaps we should look at the way people travel to and from the airports. Those fares, on trains and buses, are far too high.”

Reflecting on the aviation industry in general, Haji-Ioannau claimed the airline industry was “incredibly inefficient” in reducing costs. “The economy is a very Darwinian place,” he told delegates. “It is the survival of the fittest. The airline industry in many ways is non-Darwinian because the dinosaurs won't die. Most airlines are former national flag carriers who were owned by the government and who have now been sold off to the private sector. Now, years after easyJet was founded, even British Airways have worked out you need to cut costs to be efficient and profitable."

He concluded by suggesting the next breed of aircraft will “fly slower, be more fuel efficient and be more environmentally friendly.”