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easyJet: how the pricing model is being challenged as Ryanair moves into its territory

Since autumn 2015 easyJet has been running a UK TV advertisement celebrating its first 20 years. Ending with the line "Europe still from £29.99", it echoes the LCC's debut advertisement in 1995 offering GBP29 tickets from London Luton to Edinburgh or Glasgow, "the same as a pair of jeans". It is a powerful testament to easyJet's business model that 20 years on it can still offer GBP29 tickets. Moreover, it has become one of Europe's most profitable airlines.

The ad throws the spotlight on the development of easyJet's average prices (total revenue per passenger) since the 1990s and their divergence from Ryanair's average prices since that period. Both LCCs had a major impact on legacy airlines in the late 1990s/early 2000s, when BA's UK/Europe network suffered a heavy fall in average revenue per passenger, and then after the global financial crisis, since when prices on the Lufthansa Group's Europe network have not recovered.

For several years easyJet's discount from Lufthansa has been narrowing, while Ryanair's discount from easyJet has been widening. With both LCCs now aiming at similar strategic territory, easyJet seems to face the bigger challenge in growing its revenue per seat.

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