3 challenges ahead of EasyJet’s new CEO
After a four-month search, the appointment of TUI AG’s former Deputy Chief Executive, Johan Lundgren, as the new CEO of EasyJet from 1st December will provide welcome relief for the airline as it faces some of the biggest challenges in its history over the coming 18 months. We can review the most significant of these issues under three headings.
Integrating the fall-out and acquisitions stemming from the demise of Air Berlin, Monarch and Alitalia will require the immediate attention of Mr. Lundgren. The Eur40 million paid for slots at Berlin’s Tegel Airport and up to 25 operating leases on Airbus A320s from the remains of Air Berlin will result in EasyJet operating at two Berlin airports as it recruits up to 1000 of Air Berlin’s pilots and cabin crew. The ruling that Monarch’s London Gatwick slots must be placed back in the pool for distribution rather than put up for sale will reduce EasyJet’s ability to consolidate its position at this important base. It may well result in further competition as new entrants will be afforded priority in re-issuing the slots. Whilst no final decisions have been made in the carve-up of Alitalia’s assets, any benefits for EasyJet will demand more investment and integration.
Whilst the biggest carrier in Europe (and 4th biggest in the world) has had a bad few months from both financial and reputational perspectives, it continues to grow and the imminent arrivals of a new Chief Operations Officer and the ‘game-changing’ B737 Max 200 aircraft will consolidate its cost-per-seat advantage over EasyJet. Speculation that EasyJet might be interested in Bombardier’s CSeries jets (seemingly a European carrier is in the process of ordering 61) is probably exaggerated now given the aircraft acquired from Air Berlin. Nevertheless, the economics of the CSeries may well be attractive to EasyJet given Ryanair’s fleet acquisition plans and the rising cost of fuel. Financially, Ryanair’s operating margin is more than twice that of EasyJet (who experienced a dip from 14.7% to 10.7% last year) and its market capitalisation is four times higher.
With 500 days left until the UK exits the EU, EasyJet has been proactive in addressing the uncertainty by applying for an aircraft operator’s certificate in Austria. Just how this would be rolled out however in terms of routes, slots and traffic rights still needs a lot of evaluation and vision. The economic impact of BREXIT on the UK looks set to be negative, at least in the short to medium term, and this does not augur well for air transport demand in EasyJet’s biggest market. As airlines and tour operators sell their products up to 18 months in advance and as WTO rules do not apply to aviation, some form of aviation agreement is needed between the UK and the EU long before 11pm on 29th March 2019.
All in all, Mr. Lundgren has an onerous task ahead in maximising his potential £2m annual income package.
Padraic currently holds the position of Ussher Assistant Professor in International Strategic Management at Trinity College Dublin. His career to date has spanned both academic and industry worlds. Academically, he obtained his PhD in Strategy from University College Dublin's Smurfit Graduate School in 2009 (he also attained a BA, BComm and MBA from UCD). His experience in management education exceeds twenty years and he has worked for a number of third-level institutions, including the Open University Business School and the Irish American University in Dublin. Commercially, Padraic worked for over twenty years in the aviation sector, specifically Airport Management, and he has held a number of Senior Management positions in Aer Rianta (now Dublin Airport Authority) and Aer Rianta International Middle East, including Head of Business Strategy, Head of Marketing, Head of Business Development, and Head of Services (Operations). Germany, Oman, Turkey and Yemen are just some of the countries where Padraic has undertaken Aviation Consultancy projects. Padraic's current responsibilities include MSc in Management Programme Director, BESS Committee Member, College Tutor, UG and PG Committee Member and Senior Sophister Year Coordinator. Research interests focus on strategic decision-making processes, entrepreneurship, cross-cultural management, and academic integrity. Industry research focuses on Aviation Management.