business

How easy Does Just About Everything

At Davos, easyGroup's Stelios Haji-Ioannou explains how his Internet business strategy applies to renting cars and filling movie seats

The dot-com millionaires and billionaires who once were such a big and colorful part of the World Economic Forum in Davos are few and far between at this year's glum, Iraq-obsessed annual meeting. But one refreshing throwback is wandering Davos' Congress Hall, wearing a pre-crash smile and a casual, bubble-era sweater. He's none other than London-based Greek serial entrepreneur Stelios Haji-Ioannou.

Stelios (no one calls him anything else) has not only survived the Internet bust but has thrived. His orange easyGroup brands -- discount airline easyJet, rent-a-car group easyCar, and easyInternetcafe -- are a distinctive feature of Europe's urban landscape. His philosophy: Offer customers the best value for the least price and get them to book early -- and online.

At Davos, Stelios spoke with BusinessWeek Paris Bureau Chief John Rossant about his various businesses and how he applies his model of flexible pricing and Web-based booking across them. Edited excerpts of their conversation follow:

Q: Last July, easyJet bought Go, making it one of the biggest players in the no-frills airline market. Are you still personally involved?

A:

No. Now that easyJet is a public company, I've stepped down as chairman. I'm represented on the board by an appointee, so right now I'm only a shareholder and a licensor of the brand. [Running] easyJet was taking up a lot of time, and that's not what I like to do.

Q: So what are you spending most of your time on?

A:

I'm trying to get easyCar into shape. We'll break even this year, make a profit in 2004, and then we'll take it public the year after -- just as we did with easyJet. My model is to have a portfolio of investments, some consisting of risky startups, some consisting of shares in public companies.

I spend about one-third of my time on easyCar, another third on fixing easyInternetcafe and rolling out a new business plan for it, and a third on new ventures, such as easyCinema -- which is about movie houses, not making movies.

Q: What's the idea that connects them all?

A:

The core of the easy brand began with easyJet. First thing is price elasticity -- i.e. you reduce the price of something and people will consume more of it. Then, we have the ability to yield-manage, to charge prices according to demand. At easyCar, we've rented out cars -- the same car -- for several pounds a day to 100 pounds a day. I'm taking that idea to cinema. If you're willing to commit in advance to go see a movie on a certain Tuesday afternoon, I'll sell you the ticket for 20 pence. Cinemas today have a one price-fits-all policy.

For my method to work, you need fixed costs -- and very few variable costs. We'll look for efficiency by having the bookings made on the Internet. I'm also removing things like popcorn and candy sales. Cinema operators today kid themselves that popcorn is the highest-margin part of the business. You need people to run it. You can now [spend] as much for popcorn and Coke as for the movie. It makes the whole business of going out and seeing movies much more expensive.

I've learned that you don't start big. I've leased one cinema outside London, and we're going to experiment the hell out of it. When you book online, you get a bar code which you then print out. At the cinema there's a turnstile which will read it. No personnel involved.

Q: You got carried away with easyInternetcafes, didn't you?

A:

We got carried away with irrational exuberance. We had an almost incestuous relationship with Hewlett-Packard (HPQ ). We installed 7,000 of their PCs, and do you know how much we paid them over three years, including maintenance? Seventy-eight million dollars. That's over $10,000 per PC! Now we're multivendor. Most of the financial damage was done in 2000, and total retained losses now amount to $140 million. But we're going to break even this year.

We still have 24 megastores, including the one in New York and six in European countries. The rest are in Britain. [But] we're giving up creating megastores. We're now doing point-of-presence. We have one in McDonald's (MCD ), and there'll be one in Burger King. We're in discussions with the post office, supermarkets, gas stations, airports.

Q: What's your strategy in car rental?

A:

I want to change the way people look at car ownership. We've developed a system where we can break even [renting cars for] around $22 a day. Hertz and Avis are around twice that, and we have a much higher utilization rate than they do. We can also charge by the hour, instead of by the day.

We're now starting a Car Club that's completely automated. You make a booking online. You go to a garage at a certain time, and we unlock the car automatically. We're starting the operation in London on Feb. 27. In the normal easyCar operation, there's a van in the car park with a person inside with a laptop.

Q: Do you share the pessimism here in Davos about a conflict in Iraq?

A:

You know, I don't think a war is a fait accompli. There's a lot of saber-rattling going on. I personally hope there won't be a war. On the economy...I'm frankly not that worried. I'm a discounter. And in periods of uncertainty, we do better.

Edited by Patricia O'Connell

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