Stelios Makes Growth Look Easy

Here's an easy one: How cheap is Stelios Haji-Ioannou, the jet-setting son of a Greek shipping tycoon, who's worth roughly three-quarters of a billion dollars? He's so cheap that when he started a London-based air carrier modeled after Southwest Airlines, he decided not to offer free soft drinks or peanuts. Instead, flight attendants on easyJet sell snacks and beverages to passengers from their carts. He's so cheap that when he started an auto-rental business called easyCar, he decided to charge drivers the equivalent of an extra $15 if they brought the car back dirty. He's so cheap that when you use a computer at one of his easyInternetCafés, you see a message just after you log off that says, "Please take your rubbish with you -- your mother doesn't work here." It's signed, "Stelios."

Stelios -- the 35-year-old entrepreneur is known throughout Europe by his first name -- has become a curious kind of business folk hero, an energetic almost billionaire whose neon-orange Easy brand represents value for the masses. He's a sort of bargain-basement version of marketing showman Sir Richard Branson.

But like Branson, Stelios means serious business. His front-and-center cheapness is part of a strategy that enables his companies to use their assets more efficiently than the competition and deliver steep discounts to customers. About 80% of the drivers who rent cars from easyCar return them clean to avoid the $15 penalty, which lets easyCar turn the vehicles around more quickly. The decision to charge for coffee on easyJet flights generates two sources of additional revenue: one from the brew itself and the second from the fact that easyJet can eliminate one lavatory from its planes thanks to lower demand for them, making room for a few extra seats.

Stelios may have spent his privileged youth behind the wheel of a light-blue Porsche and at the helm of a 110-foot yacht, but he understands the value of a pound. "The world's biggest companies, such as Wal-Mart and McDonald's, got that way because they sell low-cost products," he says. "The cheaper you can make something, the more people there are who can afford it."

EasyJet Takes Off
Stelios's appreciation of business strategies powered by low prices led him to examine the legendary success of Southwest Airlines and, in 1995, to start an airline of his own that he thought could one-up the Southwest model in the European market. Based at the underused Luton Airport north of London, easyJet began operations with two leased Boeing 737s, flying from London to Glasgow and Edinburgh. EasyJet avoided travel-agent commissions by taking reservations only by phone. (EasyJet's phone number was painted on the side of the planes; Internet ticketing began in 1998.) Ads invited passengers to "fly to Scotland for the price of a pair of jeans" -- about $45 each way.

Part of easyJet's takeoff reflected Stelios's Bransonesque knack for attracting free publicity. When British Airways launched a clone of easyJet in 1998, called Go, Stelios and nine colleagues bought tickets on Go's inaugural flight to Rome. Wearing bright-orange jumpsuits, they sat in the back of the plane, giving interviews to journalists and handing out free tickets for easyJet flights. When Greek travel agents took the airline to court for its strict policy of selling direct to customers (today, 92% of easyJet's reservations are taken over the Internet), Stelios promised to give a free ticket to anyone who showed up outside the courthouse to cheer him on, thereby ensuring a camera-ready spectacle. In another notable publicity move, Stelios allowed ITV, a London-based television network, to create a reality show called Airline that focuses on the drama inherent in keeping easyJet aloft.

Today, easyJet is Europe's biggest low-fare carrier, flying 15 million people a year. Earlier this year, easyJet completed an acquisition of its arch rival, Go. The merger gives the combined company a total of 63 planes flying out of three different London-area airports to more than 30 cities throughout Europe. The airline's pretax profit nearly doubled from $34 million to $62 million between 2000 and 2001, and Stelios brags that easyJet's load factor (the percentage of total available seats sold each month) now routinely tops that of Southwest. During the summer, as full-fare U.S. airlines were either considering or filing for bankruptcy protection, easyJet's load factor peaked at 87%, while Southwest's was drifting down toward the low 70s.

Stelios credits a great deal of easyJet's success to two strategic imperatives. One is what he calls "sweating the assets" -- making sure that his planes are as full as possible and that they are flying as much as possible. "If you have a very expensive fixed asset," he says, "you need to make it work for you." It's not unusual for an easyJet plane to make eight or nine hops around Europe in a day, beginning before dawn and ending around midnight.