When the starboard wing falls off the easyJet Boeing 737 and plummets to the ground, panic is the first sensation I experience.
Fortunately, the aircraft in question is only a model. The photographer and I are carrying it across the staff car park at easyJet’s Luton Airport headquarters. Luckily, the damage is limited to paintwork – the wings are designed for easy removal and transportation.
The safety of its real aircraft is, naturally, a more serious matter.
Despite the ‘low-cost’ ethic which the airline is built around, easyJet, and its finance director Nick Manoudakis, refuse to cut corners.
EasyJet was launched in November 1995 with just two aircraft and two routes – Glasgow and Edinburgh. Its aim, and that of chairman Stelios Haji-Ioannou, is to ‘make flying in Europe affordable for more and more people’. Beyond this, according to a recent survey of business travellers, easyJet even offers a more reliable service than British Airways, British Midland and KLM-UK.
Three and a half years later, it handles almost two million passengers a year, with 12 destinations out of London Luton, two routes out of Liverpool and a weekly service between Amsterdam and Nice.
Growth has been rapid. From the early days, when industry experts gave it little chance of surviving more than a few months, easyJet is now taking on the big players. The most famous battle to date has been between easyJet and Go, the low-cost subsidiary of British Airways.
The argument centres on the similarity of the two carriers’ business plans. EasyJet claims Go’s plan is a straight copy of its own concept – a charge BA denies.
The claim is somewhat ironic given that easyJet borrows heavily from US-based, and low-cost cousin, South West Airlines. But Manoudakis is quick to point out that easyJet has taken the South West model and trimmed even more costs.
Behind the company is Stelios Haji-Ioannou, the son of a Greek ship owner, and Manoudakis’ friend since childhood (they were both brought up in Athens). So when the venture which would become easyJet was dreamed up, Manoudakis became the natural choice for company FD.
Having graduated from Berkeley University in California in 1982, Manoudakis qualified as an accountant and went straight into public practice in the US. He stayed for 12 years before Haji-Ioannou approached him for the venture.
Aside from having a great belief in his friend’s business acumen, Manoudakis also saw the job as an opportunity to travel and work outside the US.
‘If it had been anyone but Stelios, I would not have got involved,’ he explains. ‘I had faith in his ability and he has proven it many times before and since then.’ This belief was heightened by the investment of Haji-Ioannou’s own family funds to start the airline.
The move was everything Manoudakis expected. ‘When you are involved in a venture like this, you must be focused. It is very challenging and you have to stay one step ahead the whole time. You need to focus in an entrepreneurial way. Traditional accounting approaches may not work. You have to be quick-minded and think on your feet,’ he says.
EasyJet’s finance function is designed to add value to the business. ‘We do not rely on safe, traditional budgeting.
We look at what the drivers of the business are – some are not even financial.
‘Anything we do involves asking ourselves how we can help the business to grow and remain profitable and competitive,’ he adds.
Since his arrival, Manoudakis claims not to have looked back. He foresees a bright future for the airline – it has announced plans to float on the London Stock Exchange and Nasdaq next year (see box). But if the time comes to move on, finding such exhilarating work after this experience will be hard, he admits.
‘Creating a new concept was very exciting,’ he says. ‘If I moved, I would probably try and find another easyJet to work on.’
Luton Airport is expanding alongside easyJet. A new terminal building is being constructed and the airport is receiving a facelift for the next millennium. It is also waiting for a railway station to be built to improve passenger services and attract more travellers.
As one of the UK’s most recognisable brand names – mainly due to its gaudy orange livery – easyJet has become a target for critics.
The airline has also been the subject of a fly-on-the-wall television documentary, which sought dissatisfied passengers and chose to highlight the problems that easyJet has encountered.
The programme did not reflect too badly however. Manoudakis claims telephone booking lines were jammed after each episode was aired.
Criticism has centred on the informal approach the company takes to doing business. The orange sweatshirts which crew wear have attracted particular attention.
But for Manoudakis, these attacks have been hard to swallow. He believes professionalism means more than just providing staff with a tie for work. ‘It is about instilling in staff a whole approach to work. In essence, a company culture,’ he says.
Affordability is the recurrent theme here. EasyJet has an army of call centre operators to sell seats on its aircraft. The bookings system is devoid of travel agents, no tickets are issued and distribution costs are minimised. All of which combines to keep expenditure as low as possible.
This is the formula which allows easyJet to sell its seats so cheaply – some flights are advertised for as little as #29.
So savings come from using aircraft in the most efficient way. The turnaround time for easyJet aircraft is frighteningly fast, mainly due to the elimination of the in-flight meal. Manoudakis jokes that the public sometimes thinks it has nearer 30 planes than the 12 it currently operates because they appear to be everywhere at once.
Outsourcing, particularly for aircraft maintenance, is also important in keeping costs down. As is the airline’s ‘paperless office’ approach.
EasyJet currently employs 600 people directly, has no secretaries and advocates the concept of a ‘virtual airline’ – although Manoudakis believes that as the venture grows, more functions and services will be brought in-house.
A contractor, FLS, handles maintenance at Stansted and also has responsibility for taking care of any problems when aircraft are away from base. Ground handling is also contracted out.
This is an important facet. ‘You have got to be on top of your line maintenance or you run into trouble,’ Manoudakis reflects. If aircraft fail, the firm’s reputation is at stake as passengers are kept waiting.
Steps like this have proved successful. But Manoudakis believes cheap fares have another advantage when it comes to the business traveller.
Businessmen are already regular users of easyJet routes. If the UK is entering economic decline, easyJet believes there will be even more demand for its service. This could be one business which is flameproof.
The easyJet ethic is certainly something which many businessmen appreciate. The simplicity of booking, travelling and the low cost is of tremendous advantage when competing against established carriers.
In essence, Manoudakis believes passengers get exactly what they pay for. ‘Safe, reliable, low-cost air travel.’
NICK MANOUDAKIS – CAREER HISTORY
– Born in Athens, Greece
– Moves to US to study at UC Berkeley, California
– 1982 Qualifies as a Certified Public Accountant
– 1982-94 Public practice in San Francisco, California. First with Laventhol & Horwarth, then with BDO Sidman
– 1994-present Joined venture which became easyJet as finance director
Chairman Haji-Ioannou has now announced concrete plans to float the airline on the London Stock Exchange and Nasdaq early next year. Haji-Ioannou’s family will retain majority control.
By early 2000, easyJet expects to have met the criteria it set out for eventual flotation when the company was established in 1994.
These concerned whether the company could demonstrate a record of profitability, if it was capable of growth and could weather a recession. The airline’s operating company made pre-tax profits of #2.3m last year, compared with a #3.3m loss in 1996/1997. This was easyJet’s first profit since it was founded three years ago. Manoudakis expects this year to be profitable too.
The airline currently has 12 Boeing 737s and aims to establish a fleet of 20 by next year. Manoudakis and Haji-Ioannou believe easyJet is winning business passengers from established airlines and will continue to do so during any economic slowdown in the UK.
An additional argument for flotation is the airline’s recent success in persuading customers to book flights over the Internet.
Internet bookings currently account for about 15% of sales and have topped 40% during special offers. Eventually, easyJet wants to take 30% of flight bookings electronically.
Until recently, Manoudakis had said that the capital markets were not right for a flotation, although he added it was a natural step for the company to take eventually.
‘We will do it when the time is right,’ he told Accountancy Age. ‘We would like to do well, regardless of floating the company, and, at present, we are still proving the company.’ EasyJet obviously now feels the time is almost right to float.
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