Easyjet free essay sample

The aim of this report is to provide a detailed analysis of the viability of Easyjet’s current business model in the highly competitive airline industry. Easyjet’s critical success factor is built around its leading market position in European convenient airports, low fares, and exceptional customer orientated services. However, the successful growth of EasyJet has brought it into direct competition with Legacy Carriers and similar Low Cost Airlines. This Report has been divided into three sections, the first section analyses the business model using the four-box framework: Customer Value Proposition, Profit Formula, Key resources and Key processes. Easyjet’s customer value proposition is based on providing low fares with customer orientated services using key resources and processes such as standardized fleets and online booking systems to maintain its cost structure which is a crucial component of its profit formula. Together with this, to maximise revenue, a number of methods such as sophisticated yield management techniques are in place. The second section analyses the dependencies and constraints of the business model. Easyjet’s business continuity to an extent depends on IT systems, Processes at the London Luton Airport and Markets where customers value low price and quality at the same time. Macroeconomic activities outside its control such as industry consolidation, weakened consumer confidence, inflationary pressure, competition, regulatory intervention, airport charges, and the rising cost of fuel are the constraints that disrupt the viability of their business model. The third section provides resolutions to Easyjet’s current problems. Airport charges are increasing. For instance, Spain and Italy have witnessed a rise of 10. 9%, currently. This has been coupled with an increased competitive pressure from flag carriers in primary airports. To avoid these threats, a solution of moving to secondary airports within closer proximity to their primary counterparts has been examined in detail. 1 BMAN72801 EasyJet’s Business Model Analysis 1. The Business Model of EasyJet 1. 1 Theory The concept of Business Model has been identified by Johnson (2010, p. 22) as â€Å"a representation of how business creates and delivers value both for the customers and the company†. He introduced a four-box business model framework, which includes four key elements: Customer Value Proposition (CVP), Profit Formula, Key Resources and Key Processes. CVP is described as how a company creates value for a given set of customers at a given price. While, Profit Formula outlines how a company identifies its assets, cost structures, margins and resource velocity to create value for itself and shareholders. On the other hand, Key resources and processes form part of the operational model, they are the assets used by the organisation to deliver value to its customers and its business, they include employees, products, technology, brand product development, business rules and behavioural norms (Johnson, 2010, pp. 24-46). 1. 2 Easyjet’s Business Development In 1995, EasyJet was set up as a Low Cost Carrier (LCC) drawing on the business model from the American LCC– Southwest. This was due to the fact that back in those times, the European market was deregulated and low price could drive up the demand of air travel (IMD International, 2002). Compared with legacy airlines, it served passengers the same routes but charged cheaper fares, making travel by airplanes much more affordable for the masses. (Jones, 2005) Stelio Haji-Ioannou, EasyJet’s founder announced that the company’s business principle was â€Å"No frills, No extra†. (Jones, 2005, p. 3) This meant that EasyJet could maximize its revenues, avoiding extra expenses such as travel agents’ commissions and free food/drinks. For the former it focused on direct sales over telephone bookings. Figure 1 highlights the important differences of the four key elements of Business Model Framework between Legacy Airlines and EasyJet. 2 BMAN72801 EasyJet’s Business Model Analysis Figure 1: The EasyJet’s business model compared with legacy airlines at its beginning stage Legacy Airlines Provide high quality and Provide low fare with no frills convenient service to passenger to primary airports with with one package price Customer Value Proposition EasyJet punctual, convenient, and safe flights. ? High fares ? Low fare ? Travel agents – adds on Profit Formula ? Direct sales (telephone and ? High direct costs and high overheads ? High unit margins ? Medium resource velocity website booking) ? Maximize possible revenue from each flight ? Cost structure (lower administrative and overhead cost) ? High resource velocity ? High load factor ? Market regulation ? Market deregulation ? Primary Airports ? Single type of plane ? Well trained staff ? Smaller Airport ? Brand Key Resources ? Online system (lower cost ? High quality service and better information management) ? Sub contract system Key Processes ? Medium ? Reserved Boarding ? Standardized maintenance procedures ? Rapid turn around ? Point to point services ? Non reserved boarding Source: Johnson (2010) Jones (2005) In November 2000, EasyJet announced to float on the London stock exchange at a price of 310p, valuing the company at ? 777 million. Stelio (2000) stated that this move was an exciting moment in the development of EasyJet and aimed to help EasyJet expand its capacity by purchasing 32 new 737700 Boeing jets. Moreover to expand its size rapidly, EasyJet used mergers and acquisitions as a key strategy. In 2002, the company purchased low-cost airline Go (initially set up by British Airways) for 3 BMAN72801 EasyJet’s Business Model Analysis ?374 million. With this acquisition, EasyJet combined its fleet of 35 aircrafts with Go’s 27 aircrafts, and started to operate on 89 routes between 36 airports in Europe. The aggressive expansion of fleet and routes enabled EasyJet to replace Ryanair as the biggest low-cost airline in Europe. Also, EasyJet bought GB Airways in 2007. EasyJet’s chief executive Andy Harrison is reported to have said that, â€Å"This is an acquisition which both strengthens our customer offering at London Gatwick, our biggest base with an attractive catchment area, and allows us to fully capitalise on the potential of the airport through a larger number of slots. † (BBC, 2007) 1. 3 EasyJet’s Current Business Model 1. 3. 1 Customer Value Proposition (CVP) Rae (2001) stated that EasyJet’s mission was to serve customers with low price and safe flights. It is important for EasyJet to ensure safe flights for passengers because people might be concerned about whether the low price covers safety. As a result, for CVP, EasyJet provides low fares with no frills, delivers passengers to the primary airports as legacy airlines and high safety guarantee. Having realised different customers have different demands on destinations and travelling time, EasyJet segmented its destinations into two categories which are business and leisure. The business destinations are such as Glasgow where most people usually go for a short stay for business reasons, while, leisure destinations such as Palma are where people usually go for a long stay. On the other hand, with regards to flight time, EasyJet segments the time according to the two destination segments. Weekdays, early mornings and early evening flights are reserved for business passengers. Whereas, weekends, midday and late evening ones are for leisure ad non-business purposes. (Barlow, 2000) Although EasyJet segments its market, it announces to focus more on business people since 2010. EasyJet CEO Carolyn McCall in 2010 stated they were targeting to increase its market share of the business travellers and boost revenues, marking a significant change in strategy for the LCC. (EasyJet, 2010) It launched a flexible fare option which targeted corporate travellers in that year. The campaign included preferential boarding, free hand luggage and flexibility to change flights two hours before departure. â€Å"We do leisure and we do it really well. The business traveller proposition is another kind of product. † (Bloomberg, 2011) At present, the airline industry has become more competitive with big rivals such as Ryanair and British Airways. In some routes, it cannot compete with other LCCs such as Ryanair in terms of price. (BBC, 2013) Thus, it is crucial for EasyJet to provide better customer service to counterbalance its relatively higher prices. As â€Å"customer service could be high-touch (friendly behaviour is cheap)†. (Johnson, 2005, p. 139) 4 BMAN72801 EasyJet’s Business Model Analysis Figure 2: Overall satisfaction % with EasyJet, 2008-2012 Source: (EasyJet Annual report, 2012) According to Figure 2, the overall customer satisfaction decreased in the year 2010, therefore, EasyJet announced several measures to improve customer satisfaction. As passengers were complaining about the complicated boarding procedures, finally in 2012 EasyJet allocated seating on all its flights. These were approximately more than thousand a day which shorten the boarding times for customers, not affecting the on time departing standards. To provide better customer services, EasyJet asked its staff to concentrate on five promises which are safety first, on your side, a big smile, make it easy and open upfront (EasyJet, 2013) Moreover, in order to attract more customers, EasyJet offers a special Fearless Flyer course which can help those nervous flyers to conquer their fears of flying. In addition to this, EasyJet has benefited a lot from the development of internet. Its user-friendly website is highly efficient and uncluttered, providing users with an open and short booking process, and has now become the top UK website. (Tnooz, 2013) The average time of internet user surfing on EasyJet’s site is the longest time compared to its competitors (Figure 3). Furthermore, EasyJet developed an online check-in system via website and a mobile boarding card. Both are widely used to reduce the operational costs and simplify the boarding process. 5 BMAN72801 EasyJet’s Business Model Analysis Figure 3: On-site Engagement comparisons in April-June 2013 Source: (SimilarWeb, 2013) However, to keep its key principle of no frills, EasyJet manages its partnership with alliances closely to provide variety of ancillary services. These alliances enable users to make use of services such as Starbucks coffee, travel insurances, car hires, hotel bookings and even charity donations. To avail these services, users have to pay separately. These ancillary earnings also represent a significant part of EasyJet’s supplementary revenues. 1. 3. 2 Key Resources and Key Processes To contribute to its CVP, EasyJet has adjusted its key resources and processes so as to sustain in a highly competitive market. For instance, it keeps the principle of using a single fleet to lower the maintenance costs. At the beginning, EasyJet only used Boeing 737 aircrafts, but in 2002 purchased 120 airbus A319 aircrafts plus 120 options. (EasyJet, 2002) Since then, the Boeing planes have been phased out through wet leasing or sales. Now, EasyJet’s fleet is only from the Airbus A320 family, and is the largest operator of Airbus A319. By using single fleet, same standardized plane, the maintenance cost is relatively lower compared to other airlines that use a mixture of different aircrafts. Apart from using a single fleet, EasyJet uses a young fleet as well. In 2007 EasyJet called on the EU to ban the use of planes which were made before 1990, after 2012. This will ensure the safety of the flights which is EasyJet’s foremost principle. It will also reduce its maintenance cost of aircrafts and improve cost efficiency in terms of fuel. As a result, the average age of EasyJet’s aircraft is just 5 years (Airfleets, 2013) while Southwest’s fleet age is approximately 11. 9 years. (Airfleets, 2013) To ensure safe flights, EasyJet has collaborated with Airbus and Nicarnica Aviation for high altitude testing of AVOID1, a volcanic ash detection technology (EasyJet website, 2011). 1 AVOID: Airborne Volcanic Object Imaging Detector 6 BMAN72801 EasyJet’s Business Model Analysis To reduce overhead and operating costs, EasyJet adopted a sub-contracting system. Apart from providing an aircraft, pilot, cabin crew, and sales people, rest of the tasks were assigned to subcontractors (Sull, 1999). Moreover, in 2012, EasyJet created a Lean Program to save the budget around ? 35 million in 2013’s financial year. EasyJet used three main strategies to achieve this. Firstly, it optimised the crew cost. As EasyJet engaged with unions, it was difficult for them to lay off employees. Thus, the efficiency of crew planning was required. For example, EasyJet spread times of flights from five to fifteen minutes in order to reduce number of crew from seven to four which helped in lowering costs. (Mohanty, 2013) Moreover, EasyJet drives cost efficiencies through strict controls of overhead costs, procurement processes and improvement of operational performance. (EasyJet, 2012). As staffs are providing services through each step of the way, EasyJet stated that their people are one of their key resources. (EasyJet, 2012) Therefore, it puts more effort in training its staff to guarantee the quality of the services such as punctuality and safety. It has launched apprenticeship schemes to train its successful applicants through an Advanced Apprenticeship in Aeronautical Engineering. (EasyJet, 2012) With its excellent staff and crew, EasyJet has the capability to provide quality services. To ensure the improvement of services, EasyJet rewards its employees based on performance only, no seniority system . This means that each employee will be paid differently and this system encourages employee to perform more efficiency (EasyJet, 2013). McCall 2013 explains that EasyJet leads pan-European short-haul network with the highest presence on Europe’s top 100 market pairs. (EasyJet, 2012) It operates routes between primary airports which most people want to fly to, so the unique network is also one of a key resource of EasyJet to build up its competitive advantages. However, it does not recognise the importance of secondary airports in closer proximity that can actually reduce costs without effectively damaging its established clientele. However, to further enhance its network expansion, EasyJet opened new bases in France, UK and Portugal. It has also launched new routes between London -Moscow and also won the rights to fly the last great monopoly route in European aviation between Milan-Linate. At the moment, EasyJet is providing services with 605 routes, 23 bases and 214 aircrafts. (EasyJet, 2012) These key resources and key processes all support EasyJet’s CVP to provide a more differentiated service to customers which in turn generates sufficient profit and satisfaction for the company and its stakeholders. 1. 3. 3 Profit Formula Taking advantage of key resources and key processes towards CVP, EasyJet experienced a steady growth in number of passengers flown over the period 2000-2013, and has achieved more than 60 million passengers by the end of September 2013 (Figure 4). 7 BMAN72801 EasyJet’s Business Model Analysis Figure 4: Number of passengers in 2000-2013 Source: EasyJet Annual Reports (2000-2013) Figure 4 shows a self-generated graph for the increase in passenger numbers. It identifies EasyJet’s growth rate year on year. 2002 and 2003 witnessed the most dramatic rises in passenger numbers, 60% and 79%, respectively. This was due to EasyJet’s rapid expansion through acquiring small airlines and purchasing new aircrafts. However, after 2008, especially in 2009 and 2013, the growth apparently slowed down as a consequence of the ongoing European Debt Crisis which made negative effect on the business of travel market. EasyJet’s attractions to huge number of passengers mainly depend on its affordable price. This also partially explains why in Figure 5, EasyJet successfully improved its load factor and indicated an upward trend, especially after 2007. Figure 5: EasyJet Load Factor Trend in 2001-2013 Source: EasyJet Annual Reports (2001-2013) Normally, the more passengers and higher the load factor in flights, the more likely an airline will get large revenues. EasyJet’s revenues (Figure 6) mainly base on passenger revenues, which are 8 BMAN72801 EasyJet’s Business Model Analysis generated by ticket prices multiplying passenger numbers. EasyJet adopts a yield management 2 system to control ticket prices. Figure 6: EasyJet’s Operating Revenues (? million) 2002-2013 Note: 2012 and 2013 passenger revenues and ancillary revenues are not disclosed. Source: EasyJet Annual Reports (2002-2013) The operating revenue contains Passenger revenues and Ancillary revenues. Passenger revenues shared the majority, so operating revenues roughly increased. Ancillary revenues increased gradually with time. Figure 7 below represents the revenue per seat rose steadily in 2008-2012, which implies EasyJet has improved its revenue model over time. Figure 7: Revenue per seat since 2008-2012 Source: EasyJet Annual Report (2012) 2 Yield management explains why customers pay different prices with same products and services. In EasyJet, the earlier the passengers book a ticket, the less they will pay. 9 BMAN72801 EasyJet’s Business Model Analysis EasyJet focuses on cost leadership, so apart from the revenue model, cost structure is also significant to the business model. In order to investigate the efficiency of the company, Figure 8 analyses its operating costs excluding fuels, while total cost by category is presented in Appendix 4. EasyJet’s main costs were airport and ground handling charges, together counting for 29% by average, and then followed by fuel price counting for 25% of total operating cost. The rises in airport charges are now a concern. (Mohanty, 2013) Figure 8: EasyJet’s Operating Costs excluding fuel charges from 2002 to 2013, ? million Note: Operating costs includes ground handling, Airport charges, Navigation, Crew, Maintenance, Advertising, Selling, Marketing and other costs, excluding fuel charges Source: EasyJet annual reports (2002-2013) Figure 9 compares the growth rate of operating revenues and operating costs. In the recent five years, the growth rate of operating revenues was smaller than what it was prior to 2008, however, relatively more stable. While the growth rate of operating costs generally decreased, showing an improvement of cost disciplines. The little sudden increase in costs in 2012-2013 was because of higher airport charges. Figure 9: EasyJet Operating performance from 2002-2013 Source: EasyJet Annual Reports (2003-2013) 10 BMAN72801 EasyJet’s Business Model Analysis Based on the above analysis of operating revenue model and cost structures, Figure 10 outlines the trends of operating profit in the years 2002 to 2013. Figure 10: EasyJet Operating profit3 2002-2013 ? million Source: EasyJet annual reports (2002-2013) In general, EasyJet has improved its operating profit to 500 Million in 2013, 5 times as much as in 2003. The operating profit decline in 2008 and 2009 was affected by oil price crisis, but it increased steadily afterwards. Figure 11: EasyJet Profit before Tax Margin from 2004-2013 Note: In 2008- 2009, oil price crisis Source: EasyJet Analysts’ presentation (2013) Ryanair Annual Reports (2008-2013) Figure 11 reveals the trend of Profit before Tax Margin (PBT Margin)4, indicating that EasyJet was undergoing profitability in past years and also possibly, this trend will be continued in the future. The 3 Operating profit is calculated by total revenue (passenger revenue + ancillary revenue) minus operating costs including fuel and ownership costs. 11 BMAN72801 EasyJet’s Business Model Analysis development of PBT margin is out of better cost control, improvement of revenue model, and continuous improvements in yield management systems. Margin is very useful when comparing companies in similar industries. Therefore, Figure 11 also compares EasyJet PBT Margin and Ryanair Operating Margins5. They almost had the same margin pattern, but Ryanair’s margins were always higher, which built a competitive competency in the company’s cost management and revenues. This is one of the main reasons why EasyJet cannot set lower prices on the same routes than Ryanair. In order to see how well the company can generate a return on the accumulation of assets, it is important to identify return on assets (ROA)6and return on capital employed (ROCE)7 ratios. Figure 12 shows total assets and ROA for the years of 2001 to 2013, and Figure 13 represents the development of ROCE during 2008 to 2013. Figure 12: Total Assets and relevant ROA from 2001-2013 Source: EasyJet Annual Reports (2001-2013) 4 PBT Margin is a companys earnings before tax as a percentage of total sales or revenues. The higher the pre-tax profit margin, the more profitable the company. 5 Operating Margin represents operating profit as a percentage of total revenues. 6 ROA is the percentage figure describing how efficient management is at using its assets to generate earnings, calculated by dividing a companys annual earnings by its total assets. 7 ROCE is a financial ratio that measures a companys profitability and the efficiency with which its capital is employed, calculated by dividing a company’s Earnings before Interest and Tax (EBIT) by Capital Employed. 12 BMAN72801 EasyJet’s Business Model Analysis The total assets roughly increased over time. Although, ROA was less than 10%, it had increased steadily after reaching the lowest points in 2009 and reached a peak in 2013. Figure 13: ROCE (including operating leases adjustment) in years of 2007-2013 Source: EasyJet Annual Reports (2008-2013) With the introduction of a dividend policy and the needs to maintain a strong balance sheet, EasyJet introduced ROCE as a key performance indicator and â€Å"The director of the airline was paid on the basis of the performance of ROCE † ( Mohanty, 2013, p. 11). The board targeted at an average ROCE of 12% through the five years planning cycle since 2011(EasyJet, 2012). However, in Figure 15, only the year of 2013 achieved that target. Nonetheless, ROCE has continually increased since 2009, which implies efficient utilization of capital employed by EasyJet, and less risks for shareholders to invest in. In particular, ROCE leaped from 11. 3% in 2012 to 17. 4% in 2013, indicating a stronger performance of EasyJet. In conclusion, EasyJet shows a strong performance in terms of revenue growth, capital discipline, return improvements and operational excellence. However, its profit is constrained by such uncontrollable costs as oil prices, airport charges and the exchange rate. Besides, given that the airline industry is highly competitive, the growth rate of passengers and revenues may not be able to boost further as the previous levels. Thus, further analysis of EasyJet’s business situation and feasible solutions to its existing problems will be carried out further in the report. 1. 4 A Circle of Success In a nut shell, all of the four elements come together to create competitive success for an organisation. Interacting with each other, they significantly affect a firm’s business model. Because of their complementary nature, failure in one could break down the whole model, resulting in organisational failure, altogether. To maintain success, EasyJet uses a combination of these elements together. Key 13 BMAN72801 EasyJet’s Business Model Analysis Resources and Processes are linked to its Customer Value Proposition which in turn are related to its financial success. For instance, its standardised and young fleet together with continuous improvement of facilities ensures flight safety, punctuality of service and high brand recognition. This in turn results in higher profitability inherent in its profit formula. Together with this, using a no frills approach enables them to concentrate on maximising seat revenues with supplementary support from ancillary revenues. Their main success lies through a strong network in Europe, facilitating both business and leisure passengers. This in turn again results in overall customer satisfaction and through that sufficient financial viability. EasyJet shows a strong performance in terms of revenue growth, capital discipline, return improvements and operational excellence. However, currently they have started to face a lot of complications. The industry is highly saturated together with high competitive pressures and increased airport charges may not be able to boost further growth of passengers and revenues. To maintain success even in these difficult times, it may be necessary to suggest some minor changes in their business model after rectifying the current problems in the next section. 14 BMAN72801 EasyJet’s Business Model Analysis 2. Dependencies and Constraints 2. 1 Internal and External Dependencies According to Philips and Czaban (2013, P. 61) Business models create particular dependencies that influence competitive success†. Dependencies could be internal or external to the business, some primary (strong) to the success of the business while others are secondary (weak) to the success of the business. Primary internal dependencies arise from the organisations resources, activity systems, control systems and competence, on the other hand, primary external dependencies arises from the product, service and customers (Philips and Czaban, 2013). 2. 1. 1 Internal Dependencies EasyJet creates and captures value via its activity system; some of its activities are done in-house while others are sub-contracted to third party representatives. EasyJet’s business continuity to an extent depends on IT systems and Processes at the London Luton Airport and other designated business areas. Network disruption8 such as loss of systems and access to facilities would have an adverse effect on productivity, reputational and financial performance (EasyJet, 2012). In October 2013, thousands of EasyJet’s passengers faced lengthy delays and cancellations as a result of a Europe-wide system failure†. Gatwick airport faced the worst disruption with 14 flights to and from London Airport cancelled. The technical problem prevented passengers from booking and using online check-in facilities. Stranded passengers were left with no other option but to lodge into a nearby hotel or spend a night at the airport. Passengers booked on the cancelled flight were eligible for compensation, they had the option to either re-book a ticket or claim a refund (Reynolds, 2013). In the first half of 2013, EasyJet cancelled 436 flights which appears to be 12% higher than 2012. Disruption cost has risen by ? 1. 4 million due to the increased pressure from the EU261 passenger compensation payment scheme; in addition, the cost of de-icing created by bad weather is ? 6. 3 million higher. This unforeseen circumstance has an adverse effect on EasyJets brand reputational, operational and hence, financial performance (EasyJet, 2013). A decent proportion of EasyJets activity system depends upon third-party9 service providers. EasyJet is in a contract with third party representatives that represent a significant proportion of its cost base and operational activities. The inability to effectively manage third partys performance, loss of 8 Network disruptions are caused by epidemics/pandemics, forces of nature (extreme weather, volcanic ash etc) and acts of terrorism 9 Third party suppliers are any or all owners/providers of the following: hotels, apartments, villas and other accommodation; transfer services; insurance; car rental; or any other travel services listed on the Website. 15 BMAN72801 EasyJet’s Business Model Analysis contract, failure to re-new contract or negotiate favourable terms would have a negative effect on its future operating cost (EasyJet, 2013). 2. 1. 2 External Dependencies EasyJets external dependencies come from its product/service mix and its customers. EasyJet depends on markets where customers value low price and quality at the same time. Easy jet’s differentiated service is one of its critical success factors. However, Incumbents are beginning to adopt the low-cost business model which appears to be a threat on its value proposition (EasyJet, 2013). The successful growth of EasyJet has brought it into direct competition with Legacy Carriers and Charter Operators. In October 2011, Legacy carrier British Airways (BA) reduced its fares by up to 20 per cent on its short-haul routes from London Gatwick airport. British Airways also introduced one way flights to nine European destinations (Malaga, Amsterdam, Bologna, Bordeaux, Verona, Marseilles, Naples, Turin and Genoa) with prices starting from just ? 39. The introduction of cheaper fares by British Airways and other Legacy Carriers poses a threat on EasyJet’s differentiated service (Mawer, 2011). LCC compete mainly on cost, there is minimal or no customer loyalty since most passengers are price sensitive and would travel with whichever airline that have the lowest fare with reliable services. LCC have been criticized because they use sophisticated yield management; they price the most cost sensitive item as low as possible then charge extras for additional services (McCoster, 2003). Figure 14: Price comparisons for flights from London in April 2013 Source: BBC News (2013) 16 BMAN72801 EasyJet’s Business Model Analysis Due to sophisticated yield management techniques used by LCCs, tickets purchased few days before departure are not cheaper than those available from Legacy Carriers. BA’s fare on the London to Barcelona route appears lower than EasyJet for most of the period. Customers who purchased tickets six weeks before the flight and few days before take-off got the best deals (Gornal, 2013). The competition in the European Airline is becoming overwhelming, Legacy carriers are beginning to adopt the low cost business model are competing on with LCC on short haul routes. According to Bloomberg (2013) BA is looking to expand its capacity by 8 per cent in the next two years, aided by introducing short-haul jets to fly short haul routes. EasyJet responded quickly to competition in the market by offering flexible fare 10 options to woo business travellers away from Legacy carriers. However, the price of the ticket is more expensive than EasyJet’s normal fare: travelling from Gatwick to Malaga between 5th and 12th December’s return flight’s quote came up as ? 476. 98 (Mawer, 2011). Figure 15 shows EasyJet and Ryanairs initial ticket fare appears lower than BA’s fare; however, after including the cost of additional services, BA’S ticket was ? 37. 48 cheaper than EasyJet and ? 50. 68 cheaper than Ryanair (Mawer, 2011). Figure 15: London-Malaga Fare Comparisons Source: Daily Mail (2011) British Airways provides free seat reservation, inflight tea and coffee, debit card usage and holdbaggage allowance weighing up to 23kg, which is 3kg more than EasyJet’s standard allowance. Sport 10 Flexi fare option allows business customers passengers make unlimited date changes, the price of the ticket includes free hold-luggage, priority boarding with no booking fees 17 BMAN72801 EasyJet’s Business Model Analysis equipment’s are also free if it is part of the checked baggage allowance. On the other hand, EasyJet’s passenger would have to pay ? 22 for priority boarding, ? 8 debit card fee, ? 10 for inflight tea and coffee, ? 50 for sport equipment’s on a return trip (Daily Mail, 2011). 2. 2 Constraints EasyJet’s success is created by its business model and its ability to control the assumed dependencies. Dependencies come from organisational routines and resources. It is evident that an organisation’s constraints are derived from its dependencies. A constraint is anything that limits a company from reaching its goal. Philips and Czaban (2013) defines constraints as the casual forces at work that disrupts the viability of a business model, thus, restricts the business in getting the right level of investment to grow and maintain its business activities . In a nut shell, constraints slow down volume. According to