Easy Jet looking to expand in Africa

Low cost airline East Jet looking to open routes in Africa.

Africa could be about to benefit from a new low-cost airline thanks to a new venture from the founder of easyJet.

Sir Stelios Haji-Ioannou’s EasyGroup has entered into a deal with Rubicon, a British investment firm, to do a feasibility study into the prospect of creating a budget airline for the African market.

The proposal means EasyGroup will be issued shares of 5 percent in Rubicon, with the option to take a further ten percent.

A statement from the Chairman of Rubicon, Robert Burnham, said: “It iproposed that easyGroup will become a shareholder in Rubicon and will use the services of Stelios and easyGroup’s experienced aviation management team to provide general strategic, management and branding advice on the feasibility of implementing a low cost, point-to-point, no frills, all jet aircraft business model for Africa.”

EasyJet, a British airline founded in 1995, services cheap flights across Europe and is renowned for its “cheap and cheerful” image, expanding rapidly since its inception.

Growth in air travel, measured in revenue passenger-kilometers (RPK), has historically outpaced economic growth, represented by GDP, by approximately 1.5 to 2.0 percent. This leads to conclusion that about 60 to 80 percent of air travel growth can be attributed to economic growth, which in turn is driven, in part, by international trade. This is consistent with the observation that countries whose economies are tied to trade tend to have higher rates of air travel. Air travel revenues consistently total about 1 percent of GDP in countries around the world, regardless of the size of the national economy. Globally, air travel has historically trended toward this consistent share of GDP, such that countries that are below or above this level will generally move toward it over the long term.

The remaining 20 to 40 percent of air travel growth results from the stimulation provided by the value travelers place on the speed and convenience that only air travel can offer. For example, travelers value choice of arrival and departure times, routings, nonstop flights, choice of carriers, service class, and fares. Liberalization is the primary driver enabling value creation in the global air transport network. Liberalization typically gives rise to a “bump” in traffic demand. Studies suggest that as the relative openness of a country’s bilateral air service rises from the 20th percentile to the 70th, the resulting increase in traffic can boost air travel demand by an additional 30 percent.

Often, economic growth, induced directly and indirectly by improved air services, creates a virtuous circle that leads to further air transport growth, which in turn leads to added economic growth, and so on.

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