Stelios Haji-Ioannou knows his limitations. Despite his privileged background and immense personal fortune, the 33-year-old founder of the easyGroup family of discount brands has made it a point to "walk the talk to the extent that I fly easyJet and avoid flying business class in Europe." But, he says, shifting in a plane seat whose dimensions are unforgiving to his burly frame, "I'm a big person and I just can't fly economy class long-haul."
Given the means, who wouldn't opt out of cramped economy quarters on red-eye flights? And luckily for Haji-Ioannou, he is unlikely ever to have to subject himself to such discomfort out of loyalty to his brand. In 1995, inspired in part by the success of the U.S. regional airline Southwest, he launched easyJet and decided it would fly short-haul routes exclusively. "Part of the process of keeping costs down is keeping the business very simple," he explains. "You should have only one kind of aircraft, which in our case happens to be the same as Southwest's the Boeing 737 and that aircraft sets the limits of your range."
Aside from restrictions dictated by body and plane size, these days Haji-Ioannou's prospects seem virtually limitless. He is preparing to float up to 25% of easyJet on the London Stock Exchange later this year, with industry analysts forecasting a total valuation of about $500 million. The company is expecting such heavy demand for its stock that, hoping to avoid the frenzy that accompanied the overhyped flotation earlier this year of the online travel service Lastminute.com, it will restrict shares to institutional investors. Haji-Ioannou will, however, offer employees a chance to buy a stake in the company.
In anticipation of the IPO, in July for the first time easyJet raised the offshore veil of secrecy the company has been registered in Jersey which has shrouded its financial performance. It predicted a pre-tax profit this year of $30 million, up from 1999's break-even figures. The airline has 18 aircraft, with 32 on order, and summer business has been so brisk that the company was forced to lease an additional plane to meet demand.
Although they have yet to turn a profit, Haji-Ioannou's other brands, the easyEverything Internet cafe and easyRentacar with a reservations system that is entirely Web-based are also growing rapidly. An easyEverything flotation is in the works for sometime next year and the chain, which currently has nine outlets in the U.K., the Netherlands and Spain, will expand into Belgium, Germany, Italy and France by the end of the year. The first U.S. store opens in November near New York City's Times Square. Haji-Ioannou is also setting up an online price comparison shopping site, easy.com, and an online bank to be called, you guessed it, easyMoney.
The unifying theme for Haji-Ioannou's growing Easy empire, aside from the garish and instantly recognizable orange-and-white logos, is to provide discounted service to the masses. An unlikely mission for the scion of a wealthy Greek shipping family, perhaps, and one that did not immediately spring to mind when Haji-Ioannou was exploring business opportunities. His first venture after leaving his father's firm was a shipping firm of his own bankrolled with $30 million from Haji-Ioannou pθre. Athens-based Stelmar Tankers now operates a fleet of 12 and, looking to raise $54 million to purchase eight to 10 more ships, recently applied for a listing on the Cyprus stock exchange. In 1994, after Haji-Ioannou had relinquished day-to-day management of Stelmar and was setting his sights on the next challenge, he met Richard Branson, the flamboyant founder of Virgin Airlines, who "infected" him with the airline virus. Haji-Ioannou's initial impulse was to create an upmarket business class airline which, he acknowledges, "would have gone bankrupt for sure by now."
Instead, he decided to focus on low-fare flights and founded easyJet. From his father he borrowed another $7.5 million in start-up funds. And from Branson, he appropriated a penchant for staging profile-raising publicity stunts. In 1998, when British Airways launched its discount airline Go, Haji-Ioannou and a group of orange-clad easyJet colleagues were on the inaugural flight, distributing free easyJet tickets to passengers. More recently, Haji-Ioannou has directed his public ire at Barclays Bank, which through its venture capital subsidiaries owns a 65% stake in Luton Airport, easyJet's base outside London. Plans to increase landing charges at Luton will raise ticket prices by about $5, an increase Haji-Ioannou has protested by picketing a Barclays branch and taking out full-page newspaper ads picturing him cutting up his Barclays card.
Less showy elements of Haji-Ioannou's corporate approach, like the aggressive expansion of the Easy brand into disparate sectors, also take their cue from Branson. And with Haji-Ioannou regularly finding new business pies to stick his
fingers into, the source of his inspiration is showing no sign of ceding technology turf to his one-time protege. Virgin's newly rebranded V Shop chain is in the process of refurbishing 100 stores where, in addition to buying mobile phones and other hi-tech gadgets, customers can access Virgin.com's catalogue of services at in-house computer kiosks.
Haji-Ioannou's success is also due to his willingness to experiment with untested strategies. When easyJet launched, he never even considered using the Internet to book tickets. In 1998, the company began offering online reservations and today claims to sell about 75% of its seats online. A small discount for online bookings and the fact that the Internet is the only way to book an easyJet flight more than two months in advance help attract online customers. In an industry in which about 20% of costs are spent on ticket distribution, easyJet's use of the Internet and refusal to book tickets through travel agents also cut costs. Another boon has been the airline's reliance on what Haji-Ioannou calls "the world's simplest and most effective yield management system."
Pioneered by the airline industry in the '80s, yield management allows a seller to adjust the price of a commodity according to demand. In the airline context, that means ticket prices rise with the number of seats that have been booked on a flight, adding to the incentive to book early. Haji-Ioannou has also applied the concept to easyRentacar and easyEverything, which adjust rental prices and log-on costs to match demand. Critics of easyRentacar have charged that as a result, the low rates the company boasts of in advertisements as little as $15 a day with a comparatively stingy free mileage allowance of 120 km in the U.K. and 100 km on the Continent are rarely available. Others have complained that because the company operates entirely online, customer service is woefully inadequate.
For easyEverything, however, yield management seems to be an unqualified success. Software designed by Hewlett-Packard, which has a $40 million stake in the chain and whose flat screen monitors are standard throughout tracks the number of people in each 24-hour easyEverything, and the price of Internet access in that store fluctuates accordingly. Logging on is most expensive at peak hours in the middle of the day and cheapest in the middle of the night. But at a high of around $2 per hour, the cost is still far less than in most traditional Internet cafes, which tend to be small, individually owned operations with just a handful of terminals. "Even in Internet access, even in nickels and dimes, there's clearly price elasticity," says Haji-Ioannou. "People are willing to change their behavior because it's so cheap."
Now Haji-Ioannou is aiming to change the behavior of Americans by opening the U.S.'s first easyEverything, an 800-terminal megastore that will be the largest Internet cafe in the world. His potential competitors, at least, remain unimpressed. The New York-based CyberCafe chain operates a 20-terminal site on 49th Street, just blocks from where easyEverything will debut later this year. CyberCafe charges a hefty $6.40 for half an hour of Internet access, but the chain's co-founder, Thomas Wise, is confident EasyEverything's low rates in high-rent Manhattan will doom it to unprofitability. "In a couple of years we'll still be here and [easyEverything] won't," he predicts.
Wise is not the only skeptic. With high computer ownership levels in the U.S. and Internet connection fees much lower than in Europe, some analysts say the easyEverything model is destined to fail across the Altantic. "I think it could have a short-term impact," e-commerce expert Bruce Kasrel of Forrester Research concedes, "but I just don't think it will be that compelling." Haji-Ioannou scoffs at the notion that easyEverything cannot make the transition. "The rate of failure of airlines is much higher than the rate of failure of Internet cafes, so that doesn't scare me."
His confidence is not mere bravado. The nine existing easyEverythings draw a large proportion of their customers from people in transit, like students or tourists wanting to check their e-mail of whom there's never any shortage in New York. And Haji-Ioannou thinks even native New Yorkers with computers at home will eventually be won over. "Once the Internet became a part of our lives, it was inevitable that people are going to consume it in the street. You can have coffee at home, people still go out to coffee shops," he argues
Put like that, it all sounds so Easy.