Cheeky high-flyer takes on Dutch giant

Date: 23/01/1997

By Tim Jones

FORMER monopolies have always hated 'cherry-pickers' more than anyone else.

Companies which have spent decades and piles of cash developing infrastructure and maintaining loss-making services in the public interest resent the loss of their best business to cheeky upstarts.

They do not come much cheekier than easyJet offering flights for the price of a pair of jeans.

Founded only two years ago by Stelios Haji-Ioannou, the company has taken a novel approach to air travel.

To cut costs, seat reservations can only be made by calling a number printed in bold orange on the side of the company's fleet of Boeing 737s or published in the daily press, planes are not cleaned between flights and no meals are on offer.

Steering clear of London's expensive and congested airports, Haji-Ioannou chose to operate out of Luton a small charter airport north of the UK capital starting with flights to Aberdeen, Glasgow and Edinburgh, then expanding to Nice and Barcelona.

Everything went well until last spring when he began services to Amsterdam Schiphol at a 48-ecu single fare. KLM Royal Dutch Airlines responded with a massive cut in its standard return fare to 90 ecu, while Schiphol Airport itself wrote to easyJet suggesting that it would not be able to compete on the London-Amsterdam route.

“Schiphol, which is basically in the pocket of KLM, tried to force us into Rotterdam,” says Haji-Ioannou. “The trouble with that is that a destination like Rotterdam is hard to sell at the London end. Not only would passengers have to come to a secondary airport in Luton, but they would land at one as well.”

KLM argues that it was trying to do easyJet a favour. There were already five airlines operating the London-Amsterdam route at highly competitive rates. Haji-Ioannou, said KLM, would have been better advised to serve another airport.

But unlike many other new airlines, easyJet does not want to serve regional airports.

“The smaller you get, the more difficult it is to make it work,” claims

Haji-Ioannou. “We are not in the business of flying small aircraft. I want routes where we can fly 737s. Some airlines go to smaller airports using smaller planes, but we are not into that business.”

Haji-Ioannou filed a complaint against KLM with the European Commission.

“As a flag-carrier, KLM has extremely strong pulling power among its own nationals its natural target audience is Dutch people. So, when it decided to virtually halve its fare, it was definitely targeted at us. It even advertised it as 'Easy Choice to London', in English! We felt it was abusing its power,” he explains.

As he headed for a meeting with Transport Commissioner Neil Kinnock in mid-December, easyJet's chairman was pleased to learn that KLM had withdrawn its cut-price fare.

“I joked with him that this was probably the first time that a complaint like this had been made to the Commission by a company which survived to see the end result of it they have usually gone bust.”

Haji-Ioannou's relief was short-lived. Earlier this week, KLM launched a new product - a 45-ecu unrestricted one-way fare to Heathrow from Schiphol as well as Eindhoven and Rotterdam.

“This is the most serious attack yet by a big airline on a small one because it matches our strength, which is the one-way fare,” he says.

Haji-Ioannou is considering a further complaint but, in the meantime, is offering all his airline's Luton to Amsterdam seats at the lowest 48-ecu fare.

Since passenger traffic for the route has expanded by 20&percent; since the arrival of easyJet, Haji-Ioannou had been planning to provide one extra flight per day while also increasing frequency to five times a day to and from Glasgow and Edinburgh.

“We have noticed that as we increase frequency on the routes, we are tending to get more and better business. Businessmen look at two things when it comes to choosing flights their time and frequency,” says Haji-Ioannou.

After KLM's latest salvo this week, easyJet may have to reconsider its plans.

With all these attractive fares on the market, passengers could be forgiven for squealing with delight. However, if the result of KLM's action is to blow easyJet off this route and thereby reduce competition, prices might yet go back up.