Bloomberg News

EasyJet Sees Business-Credentials Boost on Moscow, Rome

November 15, 2012

EasyJet Plc Chief Executive Officer Carolyn McCall

EasyJet Plc Chief Executive Officer Carolyn McCall said, “Moscow is a business route and I think a few years ago we wouldn’t have got it because we weren’t perceived to be looking after passengers or really strong on business. And to get Linate-Fiumicino, the main business route in Italy, cannot be underestimated.” Photographer: Simon Dawson/Bloomberg

EasyJet Plc (EZJ)’s success in securing rights to link London with Moscow and Milan with Rome represents a breakthrough for its plan to win more business travelers, Chief Executive Officer Carolyn McCall said.

EasyJet was chosen by the U.K. Civil Aviation Authority to operate Moscow flights on Oct. 25, edging out Richard Branson’s Virgin Atlantic Airways Ltd., before being selected by the Italian authorities to end Alitalia SpA’s monopoly on services from Milan Linate to Rome Fiumicino a day later.

“The transformational aspect is about how EasyJet is seen, the credibility,” McCall said in an interview. “Moscow is a business route and I think a few years ago we wouldn’t have got it because we weren’t perceived to be looking after passengers or really strong on business. And to get Linate-Fiumicino, the main business route in Italy, cannot be underestimated.”

While ranked second to Ryanair Holdings Plc (RYA) among Europe’s low-cost airlines, EasyJet has dropped its early no-frills approach in favor of a model where passengers can opt to pay extra for everything from food and checked bags to lounge access and flexible tickets. The Luton, England-based carrier is seeking a bigger share of the lucrative corporate-travel sector just as network carriers including IAG SA and Deutsche Lufthansa AG (LHA) recast their short-haul operations along low-cost lines.

Stock Boost

Shares of EasyJet, which was founded in 1995 with the slogan “making flying as affordable as a pair of jeans,” have surged 62 percent this year for a market value of 2.53 billion pounds ($4 billion). Dublin-based Ryanair has advanced 33 percent and is worth 6.66 billion euros ($8.5 billion).

“For us to get both in one week reinforced all the things we’ve been doing over the last two years in positioning the brand,” McCall said of the Moscow and Italy victories.

EasyJet was selected to compete with British Airways on the route to the Russian capital after offering a lead-in fare of 125 pounds and undertaking to operate two flights a day from London Gatwick airport, where it’s the biggest operator.

Starting in the first half of next year, EasyJet will serve Moscow’s Domodedovo hub using 180-seat Airbus SAS A320 single- aisle planes, and aims to carry more than 230,000 passengers in the first 12 months of operations.

The new route could also create opportunities to link with long-haul flights following a deal last week allowing passengers at Dubai-based Emirates, the world’s biggest international airline, to use their air miles to book EasyJet tickets.

Moscow Points

Russians traveling from Moscow to the Gulf on a route to be served by an Airbus A380 superjumbo from Dec. 1 would accrue enough points to fly to London with EasyJet for free, Emirates sales chief Thierry Antinori said in an interview on Nov. 6.

In Italy, EasyJet will offer five flights a day between Milan and Rome using Airbus A319 planes, opening up what McCall said has been Europe’s “last great monopoly route.”

Around 21 percent of EasyJet’s 57 million annual passengers are traveling for work, with destinations such as Amsterdam, Geneva and Paris drawing close to 30 percent business traffic.

“They’re going ever-further in competing with the network carriers,” said Douglas McNeill, an analyst at Charles Stanley in London with a “hold” rating on EasyJet. “It tends to make you think the low-cost model is more multifaceted.”

Ryanair CEO Michael O’Leary said last week that EasyJet under McCall is as much a challenger to British Airways as his own airline, and that undercutting fares at the unit of International Consolidated Airlines Group SA (IAG) by as much as 30 percent represents “a very good medium-term strategy.”

EasyJet has also done “a good job” in targeting longer routes to countries such as Egypt, Israel, Jordan and Iceland, as well as Russia, the Irishman said at a Nov. 5 press briefing.

McCall has said four-hour flight times aren’t a departure from her company’s core strategy. The airline last year carried 5.7 million people on flights above three hours, more than the 5.4 million that long-haul specialist Virgin Atlantic attracted across the whole of its network in the 12 months ended Feb. 29.

EasyJet will post earnings figures for the year ended Sept. 30 on Nov. 20.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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