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EasyJet under fire as flight chaos exposes carrier’s operating model

As the first signs of travel disruption emerged in the spring, easyJet’s chief executive was relishing a new challenge after two miserable years of border restrictions because of a pandemic that had plunged the industry into crisis.

“It is a good challenge to have, it is customers coming back. We are putting pressure on the system, the airports, the ground handlers, the air traffic controllers, because customers are coming back. . . that is good,” Johan Lundgren said in late March.

Three months later and he may have said that comment. Returning passengers have overwhelmed the European aviation system, with easyJet one of the worst-hit airlines in a barrage of disruption caused by staff shortages across every part of the industry.

This week the chaos took its first major casualty, with the company’s chief operating officer Peter Bellew resigning after a difficult run. The airline has canceled 1,760 flights departing from the UK this year — five times the number over the same period in 2019, according to data provider Cirium.

“It has been an operational disaster at easyJet,” said Chris Tarry, of Ctaira, an aviation consultancy.

The disruption will cost the airline about €200mn, according to Bernstein analysts, pushing it into a loss this financial year, which ends in September.

Holidaymakers queue in the North Terminal at Gatwick airport near London, UK
Holidaymakers queue in the North Terminal at Gatwick airport near London. EasyJet was one of the airlines to suffer the most in a chaotic late May and early June © Dinendra Haria/LNP

Its share price has also suffered, plummeting 40 per cent to 11-year lows since the start of January as it outpaced the declines of rival carriers.

Although not the only airline facing difficulties — British Airways, Lufthansa and KLM have canceled tens of thousands of flights between them this summer — easyJet’s operating model is at the heart of its problems, leaving it helplessly exposed to the industry-wide disruption.

Like rivals Ryanair and Wizz Air, it has a low-cost business built on fine margins that rely on swiftly turning round flights, which are vulnerable to any delays or disruption at the airport.

But unlike its two rivals, easyJet has based its operations around a handful of capacity-constrained airports, notably London Gatwick, that have been badly hit by staff shortages and also have little slack in their busy schedules to cope with disruption.

“From the design of the business, it is in the worst place on both fronts. . . they are in the wrong place for the present environment,” said Andrew Lobbenberg, an aviation analyst at HSBC.

It was one of the airlines to suffer the most in a chaotic late May and early June, which came to a head during the UK school half-term break with passengers facing cancellations, huge queues and hours-long delays at airports.

Line chart of Share prices rebased showing EasyJet has underperformed against its low-cost rivals

The disruption prompted a rethink as easyJet management realized they needed to factor in greater buffers into their schedules, particularly more standby crew to take over when delays pushed staff beyond their permitted working hours.

With airports overwhelmed, executives concluded they had overestimated how many people they could fly this summer, and later in June announced plans to cut back schedules to try to stop last-minute cancellations.

EasyJet was also cautious about restarting flying — its plans were grounded for 11 weeks in 2020 — leaving it with a huge challenge as the industry suddenly switched from hibernation to full throttle in a matter of weeks this year.

Ryanair chief executive Michael O’Leary said his airline had experienced much less disruption from its London hub, the smaller Stansted airport, because his team worked “hand in glove” with the airport to gear up for the restart.

“At Heathrow and Gatwick, it is much more difficult because easyJet and British Airways were not sure what they were going to do,” he said.

With plans to fly slightly fewer flights than 2019 but with roughly the same number of staff, easyJet management blames its problems on high sickness rates among its own workers as well as labor shortages across nearly every part of the industry, from ground-handlers to air traffic controllers.

Lundgren also blames the government for immigration rules that have made it harder to hire EU workers, on top of delays in getting new staff security clearances.

But, despite the wider industry problems, some argue easyJet should have been more alert to the potential disruption.

Passengers board an easyJet plane at the Amsterdam-Schiphol airport in the Netherlands
Passengers board an easyJet plane at the Amsterdam-Schiphol airport in the Netherlands. There are signs now for easyJet that the cuts to schedules have worked, with far fewer last-minute cancellations © Remko de Waal/ANP/AFP via Getty Images

Tarry said the airline was ultimately responsible for planning its summer schedule, and chose to run more flights than it could handle.

“They decided to offer, then sell, far too many seats,” he said.

Bellew’s departure has also unnerved investors — shares fell 5 per cent after he quit — as the former Ryanair executive had been well-regarded by investors for his role in cutting costs during the pandemic.

It has also focused attention on Lundgren’s position. It is “not professional” to lose an operations boss during the middle of your busiest period, one industry figure said.

However, people close to the airline’s board say Lundgren has the backing of chair Stephen Hester, the City veteran with a history of overseeing struggling companies, who took the job last autumn. The board is also not seeing significant unease among investors, according to the people.

Yet, other industry figures outside the company are less sure. “Johan needs a win soon,” one person said.

Heaping more pressure on both Lundgren and the board is a souring in industrial relations.

A set of strikes looms in Spain this month, while British pilots’ union Balpa has accused the airline of “corporate bullying” over treatment of staff and the high absences during the pandemic, which the company fiercely denies. A French pilots’ union has also fired a broadside at the airline’s management for its poor summer planning.

Much will rest on how easyJet handles the rest of this summer. For now, there are signs the cuts to schedules have worked, with far fewer last-minute cancellations.

Investors will hope that means the airline has got to grips with its problems as it aims to keep costs low and move past the worst of the pandemic to restore profits, with HSBC’s Lobbenberg summing up the key task.

“The fastest way to reduce costs is to stabilize your operations,” he said.