Is easyJet suffering from growing pains?

Britain's biggest low-cost airline celebrates its anniversary this week. Simon Calder checks in

To Stelios Haji-Ioannou, 10 November 1995 did not feel much like a day to start a revolution. "It was 7am, it was a wet, miserable lousy day in Luton," recalled the now-knighted Cypriot entrepreneur, "And equally cold and miserable in Glasgow."

Fifteen years ago, no one had heard of easyJet. Its fleet consisted of two Boeing 737s chartered from GB Airways (an airline that, 12 years later, was swallowed up by easyJet).

Almost every "start-up" airline is characterised by two things: the proponent's absolute conviction that they have dreamt up the next great idea; and a subsequent financial fall from grace usually measured in months, weeks or days. So when, in the gloomy late autumn of 1995, a fax (remember them?) arrived announcing a new airline that promised to cut out the travel agent and halve fares between London and Scotland, I promptly binned it. This week, easyJet's latest route was launched to somewhere even sunnier and possibly more alluring than Glasgow: its longest-ever link from Gatwick, a 2,500-mile haul to Luxor.

Luxor de luxe? Hardly, though you can while away the five-hour inbound flight with a John West Tuna Snack Pack (£3.50) or the most expensive tea in the sky (£2.50 a cup). But in return for forgoing "complimentary catering", reclining seats and a free baggage allowance, you get 5,000 miles of flying for as little as £139 (out on 21 March, back on 30 March) next year. Or, if you want to fly out to the Valley of the Kings just before Christmas and back to gorgeous Gatwick just after new year, as much as £650 return. Your choice; the fare you pay depends on how keen other travellers are to fly, and how far in advance you book.

Demand-driven pricing is now the norm on trains, boats and buses as well as planes. Whether you prefer rail, sea or air, Sir Stelios has done every European traveller a favour by promoting so effectively the practice of "yield management" – the dark art of filling as many seats as possible at whatever price is just low enough to entice you and me on board. Book early and travel off-peak and you will pay the least; buy late for a high-season departure, and you'll be the one stumping up £650 – the highest return fare, I believe, that easyJet has ever charged.

But nobody has cause to complain about the pricing system. Even the people paying the top rates do so voluntarily – these are usually "distress purchases" or business travellers. The scandalous "Saturday night rule", intended to extract ridiculous sums from business travellers does not apply: easyJet sells all flights as one-way segments. You can arrive in one city and fly back from another, or return by bus, train or thumb. The airline really doesn't mind, because there's always someone else waiting to take your seat. And if your plans change, you can amend the booking rather than losing your entire fare.

Readers with the benefit of youth may be thinking "well, that's all obvious" – but 15 years ago, it wasn't. Prior to easyJet, a hop between London and Scotland cost a minimum of £100, or several times more if you failed to stay a Saturday night. It took a singular individual with a blend of tenacity, obstinacy and lots of cash to transform the way we travel.

The other great service that Stelios did us was to question conventional aviation wisdom, and scythe costs from the business of shuttling between Bedfordshire and the Clyde – or, these days, Sussex and the Upper Nile. Overheads that passengers had unwillingly bankrolled over the years, from expensive HQs to paper tickets, have never featured in the easyJet business plan. Sir Stelios denied travel agents their bite of the fare, with all tickets sold by phone.

"The direct call centre operation felt intuitively the right way to go," says Tony Anderson, who was easyJet's first marketing director. "I thought the airline might fail in spite of going direct but not because of it." Anderson has written a fascinating book, Gorilla Marketing: Birth of a low-cost airline (£8.99), about his five years at easyJet. "We, the management team, had more to lose than Sir Stelios; if easyJet failed he would still be a rich man. But I thought I would personally regret it if I passed up on the chance to be a part of the low-cost revolution."

"I was in the cockpit, I probably had butterflies in my stomach," Sir Stelios told me of that first flight. "In a nutshell, what I discovered very quickly is that this was not going to be glamorous. The images of Branson and his rock stars, and everything else that I had associated with the launch of Virgin Atlantic was just not going to be the case in our company. It was all about utility, how to keep the cost down. I had to shed all my personal preferences as a customer. All the things I had been enjoying as a business traveller I had to throw out of the window and say, 'This is going to be utilitarian.' It's a very unglamorous, unforgiving, thankless business."

Perhaps not entirely thankless: easyJet is no longer a two-borrowed-plane outfit, but a two-billion-pound operation. It recently replaced British Airways as the biggest airline in the UK in terms of passengers flown. That has come about thanks to serious, focused management and staff who work harder for less than some of their counterparts, but enjoy the blessing of being on the winning side. Gradually, they have persuaded the entire spectrum of travellers that flying on a white-and-orange plane is an astute choice.

"My first easyJet flight was to Naples," recalls Peter Shanks, president and managing director of Cunard. "I thought it would be full of backpackers but on board was a rather wealthy bunch off to a society wedding on the island of Capri."

Perhaps they were refugees from BA; easyJet says the cabin-crew dispute has given it a £7m windfall. There are big differences: on the one route where British Airways long-haul competes directly with easyJet, from Gatwick to Sharm El Sheikh in Egypt, BA's crew are given two or three nights in a five-star hotel between the outbound and inbound flights; easyJet's crew get an hour on the ground.

Sir Stelios remains the biggest shareholder in easyJet, with 27 per cent of the airline (his sister, Polys, holds another 11 per cent). But the founder has only just settled a very public spat with the board, centred on the airline's strategy – and its dismal performance this year.

Traditionally, easyJet has been less punctual than Ryanair, its bigger rival, but better than British Airways. In the past two years, though, BA has dramatically improved its timekeeping – while easyJet has appeared to lose the chronological plot. At its main base, Gatwick, fewer than half the flights in June left on time. The passengers on those were the lucky ones, because at least they got to travel. Thousands more fell victim to flights cancelled at very late notice.

"Like a bad British Rail apology from the 1970s, passengers were informed that the flight had been cancelled that morning due to staff sickness," reported an Independent reader, Richard Madge, after his trip to Dubrovnik was unceremoniously axed in July. "The next available flight was in three days – hardly worth it when you are only going for four."

At least he could stay at home; in August, Dr Rosemary Leonard was left stranded in Dalaman, Turkey, when the flight to Gatwick was cancelled. "There was no easyJet rep there at all and the airport staff did nothing to help. They didn't even provide water for the mother breast-feeding her six-month-old baby. At about 3am those waiting got so angry that the police were called, and then the British consulate got involved – and lo and behold, by 4am there was a coach to a hotel."

Even Mr Shanks, a travel industry heavyweight who understands the many impediments to running a perfect operation, was a victim: "You don't want to be booked to fly with easyJet from Geneva to Gatwick when it snows at Gatwick at Easter. We all have our operational challenges but when easyJet are bad they are very, very bad. You can't tell families on a Sunday that the next available flight home is on Wednesday."

Certainly 2010 has been tough for all airlines, with heavy snow, volcanic ash and air-traffic control strikes causing thousands of cancellations. But easyJet's performance over the summer was woeful. The flying programme the airline sold for the summer proved unachievable, even with three (later four) jets chartered in from other airlines. At Gatwick, the airline's main base, the problems ran right through to baggage reclaim: in July and August, easyJet failed to deliver the first bag within 20 minutes on more than half of its flights – far worse than Ryanair and Flybe. Looking back, it seems the airline's bosses were so distracted by the feud with Sir Stelios, and so keen to demonstrate their financial prowess by cutting costs to the bone, that they forgot about the passenger.

The new chief executive, Carolyn McCall, concedes "We didn't have enough crew in the right places, and we didn't have enough standby cover." One of her first decisions was to invite her pilots to fly faster so "they actually get to places on time".

Her working day – including weekends – now begins with a 15-minute meeting looking at the previous day's performance. More crew are rostered on standby. Extra "fire breaks" have been built into the schedule, allowing a swifter recovery from events such as French air-traffic control disputes, which affect three out of five easyJet flights. "France has been on strike almost continuously," she says, with only slight exaggeration.

In under a year, the easyJet fleet will hit 200 aircraft – enough to fly the entire workforce of British Airways (now there's a thought). The management consultancy BGC has been looking over the operation. One result is likely to be allocated seating – something Sir Stelios spurned, aiming to keep the operation simple.

Tony Anderson, easyJet's original marketing director, says, "Over the last 10 years it's felt sometimes like a looking-glass world where easyJet has been trying to turn itself into BA while BA endeavours to become more like easyJet."

Yet the reason you can pay BA just £97 for a day-trip from Gatwick to Venice later this month, compared with £500-plus a decade ago, is because of easyJet (which, incidentally, charges only £51 for the same round-trip). We passengers have helped easyJet extend its reach by greedily buying flights far longer than the two-hour maximum originally imagined for no-frills flying. At 5.25pm on Wednesday, Egyptian time, easyJet flight 8742 departed from Luxor airport for the first five-hour flight to Gatwick.

In the past 15 years, easyJet has revived moribund airports such as Liverpool and Luton; connected Scotland and Northern Ireland to Europe; and flown one-third of a billion people in absolute safety, enabling them to sunbathe, shop or slog away at work for fares that traditional airlines pretended were unfeasible.

Only one European airline has been more successful. I asked its chief executive, Michael O'Leary, for some words of advice for his new adversary at easyJet, Carolyn McCall:

"Fly Ryanair – you'd get there on time and cheaper. Happy birthday."

Anything for an easy life

Tony Anderson, easyJet's original marketing director, recalls his most memorable flight

In late 1997, I was flying back from Amsterdam on easyJet. There had been bad fog at Luton all day. Before getting on the flight at Schipol, I had spoken to the call centre, which had been dealing with aggrieved passengers for most of the day. We circled Luton for half an hour but were diverted to Birmingham, where we waited for two hours for coaches onwards to Luton.

By now it was well past midnight and I settled into my coach seat hoping to grab a couple of hours' sleep. At that point, a burly, red-faced man started walking up and down the aisle asking passengers to join him in making a formal complaint. I pretended to be asleep.

Suddenly there was a triumphant shout. The red-faced man's colleague announced that he had spoken to the easyJet call centre and apparently the airline's marketing director was on board the bus. I sensed a lynch mob starting to form, and my survival instinct kicked in.

Across the aisle sat a nervous-looking man in a sharp suit and wearing a Daffy Duck tie. I figured he looked for all the world like a marketing director and shot him an accusatory look. Aware that other passengers were also regarding him with suspicion, he stood up and announced in a panicked voice "It's not me, I'm an accountant!"

For more on Tony Anderson's book, Gorilla Marketing, see www.gorilla-marketing.co.uk