The cut-price king

Stelios Haji-Ioannou has been a scourge of the establishment in several industries through his chain of no-frills businesses. Now, as he tells Richard Agnew, he is eyeing the Middle East.

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By  Richard Agnew Published  March 13, 2005

The cut-price king|~|LOOKING-EAST-200.jpg|~|LOOKING EAST: Haji-Ioannou is planning to expand his group of no-frills businesses globally.|~|Stelios Haji-Ioannou has been a scourge of the establishment in several industries through his chain of no-frills businesses. Now, as he tells Richard Agnew, he is eyeing the Middle East. STELIOS HAJI-IOANNOU, the 38-year-old multi-millionaire and founder of no-frills chain, easyGroup, is a man that gets his fair share of proposals. Shortly before the interview, the self-titled ‘serial entrepreneur’ finishes another speaking engagement at an industry conference and faces a long line of hopeful businessmen waiting to pitch him their plans. He politely hears most of them out, but then makes his excuses. “We get presented with a lot of stupid ideas,” he chuckles, later. “The funniest one was no-frills cosmetic surgery: easyBreasts. No, I’m not going to do that,” he adds. The fact that people are constantly clamouring to jump on easyGroup’s bandwagon isn’t surprising, given the success Haji-Ioannou has had in extending his ruthless, cut-price philosophy across Europe. Since launching his budget airline, easyJet, in 1995, ‘Stelios’ has also become a household name himself — notorious for challenging the orthodoxies of established firms in traditional markets. Now he has 16 firms in the easyGroup stable, including plans to shake up the mobile phone, cruise ship and car insurance sectors this year. And thanks to his estimated personal fortune of US$600 million, he’s not overly worried that more than half have still to break even. “Start-ups will always lose money,” says Haji-Ioannou. “Not all of them are successful. Do I expect to make money this year with easyCruise? Of course not — I expect to lose money for three to five years. But I can afford it,” he adds. Haji-Ioannou admits that his success has depended at least partly on the wealth of his family — his father lent him US$10 million to start his first business, Stelmar Shipping, in 1992. He also admits that, at 38, he still gets daily advice from his mother on how to run his company. But Haji-Ioannou is also very much his own man. He famously has no secretary and manages his time with his Blackberry PDA. And after taking easyJet public in 1999, he decided to take a step back from the company and focus on the group as a whole, rather than spending his time dealing with analysts and outside investors. “I can do both, but I don’t like being an employee of a public company — I like being my own boss,” says Haji-Ioannou. “I’m happy to put the company into the public arena and delegate it to professional managers, but I’m not the sort of a guy who likes standing up after annual reports and [answering] questions like ‘why didn’t you grow?’ Someone else can do that,” he adds. Haji-Ioannou’s outlook towards risk is perhaps best demonstrated by what he says was his biggest mistake. He admits that he “wasted a lot of money” on his easyInternetcafe chain during the dotcom boom of the late 1990s. When things went awry, however, he didn’t shirk the task of turning the company around and resisted the temptation to cut his losses when most other investors in the web industry were bailing out. Now, it’s one of the four easyGroup firms that are in the black, along with easyJet, easyValue (an online comparison website) and, aptly, easyMoney (a credit card provider). “During the bubble, capital was almost free … and like most human beings I get carried away,” says Haji-Ioannou. “The difference is that others would have put the company into bankruptcy. I persevered, changed the business model and cut costs, and now it’s sort of breaking even. And if it’s breaking even I don’t care what you call it, it’s customers for the group – when they log into the home page they could buy an insurance policy or a mobile,” he adds. Haji-Ioannou’s use of the easy brand to expand the business more cheaply into new areas has inevitably led to comparisons with Richard Branson and Virgin. He also draws parallels between the two groups — namely their breadth and the fact that they can attract loyalty across seemingly un-connected aspects of people’s lives. But he plays down any talk of personal rivalry, arguing that the companies end up targeting different consumers. “As a low-cost airline, you’re only relevant to people who are interested in flying and who can afford to,” he says. “But if all of a sudden people can rent a DVD from you, buy a pizza or go to your cinema, you’re suddenly a bigger part of their life. There are not many examples of that. Most mega-brands have one product — it’s only Virgin that does it that way. But I like to think of him [Branson] as a friend, and I think there’s room for the both of us. You fly easyJet in Europe and you fly Virgin Atlantic when you go to the US,” he adds. Nevertheless, one of Haji-Ioannou’s latest plans — to undercut existing mobile phone tariffs in European countries — has already seen a public clash with Virgin’s mobile virtual network operator (MVNO) arm in the UK. “One of the spokesmen at Virgin said that we will fail,” says Haji-Ioannou. “But when Richard Branson and I last spoke about it we thought that the brands are at different ends of the market. Virgin [is] clearly about entertainment. They’re about music — you know, teenagers with the latest gizmos, ring-tones and everything else. They started from a record label. We’re much more about value for money. They are already pushing high-end 3G services with the Virgin brand and I think they are moving up, leaving a gap in the market for us,” he adds. Another difference between Virgin and the easyGroup is that Haji-Ioannou has yet to really establish his brand outside Europe. He points out, however, that the no-frills approach could work well in other areas and that the Middle East is among the regions he is starting to scope out more actively. “My philosophy now is to diversify in industries and in geography,” says Haji-Ioannou. “The brand is not as well known outside Europe as it is inside, but you’ve got to start from somewhere. That in itself is not a barrier to entry — it isn’t a reason not to try. McDonald's didn’t become a global brand in one day — it took them time,” he adds. A more difficult problem, Haji-Ioannou says, would be to find local affiliates — but one would presume he will not be short of offers when he speaks at the upcoming ‘Entrepreneurs in Dubai’ conference in May. “For me, when you are looking at any new venture, you have to have capital, local management expertise and know-how,” he says. “A brand is more than just brand recognition, it’s knowing how to put all this together. I’d love to do something in travel and tourism or telecoms in any of the Middle Eastern countries if we can find the right local partners. I was in Dubai last year and I’m coming back for this entrepreneurship conference, so I’m spending time in the area,” he adds. As well as setting his sights globally, Haji-Ioannou is also keen to extend the principle of demand-based pricing, which underpinned the original idea of easyJet, to the hotel industry and other sectors this year. Stelmar Shipping was sold recently for US$1.3 billion — he says he is now considering where to put his share of the money, and that it is unlikely to go in the bank. Already announced is a US$59 per night cruise-liner, which will sail around the Mediterranean when it launches in May. It will spend 70% of its time in port, however, and act more as a kind of “floating hotel”. At the same time, Haji-Ioannou has often been criticised for over-stretching the brand and says that he won’t launch a venture in any old industry. “Although it looks very diversified, the brand is not going to go on coal mining,” says Haji-Ioannou. “I’ve decided to focus on four industries — travel, leisure, telecoms and personal finance. Within these four sectors there’s plenty to go on, especially if you think about geographical expansion as well,” he adds. The other thing he says to consider is collateral damage to the overall group if a new business doesn’t work out as planned. “It’s always possible to make a mistake. Every time you put a name on something — whether it’s a pizza box or a ship — you’re taking a risk with the brand,” Haji-Ioannou says. “But you can de-risk something by finding the right partner, and we’ve done that with easyMobile by partnering with TDC (the Danish pan-European operator).” Indeed, easyGroup is notoriously protective of its brand and actively fights any attempt to hitch a ride on the name — for example, it says is currently considering legal action following Axa Investment Managers and BNP Paribas Asset Management’s recent launch of a range of trackers under the ‘EasyETF’ brand. However, the tables have been turned in Haji-Ioannou’s latest court battle, which follows the announcement of easyMobile’s launch. This prompted a lawsuit from France Telecom-owned mobile operator, Orange, claiming that the venture will be using its “corporate colour” in its branding and will confuse consumers. “They are acting arrogantly,” says Haji-Ioannou, however. “As they are France Telecom and have a lot of money to spend on lawyers, they think we’ll roll over. I know about passing off because we accuse others of doing it and we are not pretending to be someone else,” he adds. Another issue is how the easy brand compares to that of Stelios himself. EasyJet — which, with revenues of over US$2 billion in the year to September 2004, remains the group’s flagship — was almost called Stelair instead. And, like Branson, Haji-Ioannou’s per-sonality can’t be separated from that of his firm. Faced with the inevitable prospect of his own mortality or retirement, his plan is that individual divisions within the easyGroup will work to enhance their own reputation over the next few years, and then be partially floated so that professional managers could take over from him. But if something happens in the meantime? “It can take five to 10 years to establish brands so they can stand on their own legs,” says Haji-Ioannou. “EasyJet will survive my lifetime — no doubt about it. But I don’t think all the others will unless we get them up and running and they create their own reputation,” he adds. ||**||

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