EasyJet on collision course for row with Stelios

Sir Stelios Haji-Ionnou is opposed to EasyJet chief executive Carolyn McCalls plans to buy more planes. Picture: complimentary

Stelios, who together with his family owns almost 37 per cent of the no-frills carrier, said earlier this year that placing a large order for new planes would “destroy shareholder value” and vowed to reduce his stake if a deal was signed.

However, EasyJet chief executive Carolyn McCall said the deal, for 35 current-generation Airbus A320s and 100 A320neo planes, had been secured at “highly

attractive prices” representing a greater discount to the list price than its current contract with the European plane-maker.

Numis analyst Wyn Ellis said: “This is a sensible and attractive deal for all shareholders.”

The planes are due for delivery between 2015 and 2022, and the group also has the option to buy up to 100 further A320neo jets, which are expected to cut costs per seat by up to 12 per cent compared with the A319 model.

The move will allow EasyJet to replace more than 80 of its current 211-strong fleet, as well as giving it room to add routes. McCall said: “All manufacturers competed hard for the EasyJet business. Both Airbus and Boeing offered us new-generation aircraft that met our requirements and offered greatly improved fuel efficiency.

“Ultimately, Airbus offered us the best deal, and at a price with a greater discount to the list price than their landmark fleet purchase with EasyJet in 2002.”

The list price for the 135 planes is about $11.9bn (£7.6bn), but McCall said the Luton-based carrier had negotiated a “very substantial discount”.

The scale of the expansion, which would see EasyJet’s fleet grow to 276 aircraft by 2022, means it will need approval from shareholders at a meeting due to be held next month.

Chairman John Barton, who replaced Sir Mike Rake at the helm of the carrier last month, said: “Since joining the EasyJet board, I have spent a significant amount of time reviewing the rationale for ordering new aircraft and have been actively involved in the selection process, which I am sure has been robust and thorough.”

Barton said the deal would be financed without the need to tap investors for funds, and the expansion is expected to deliver enhanced returns and dividends.

Rival Ryanair yesterday gained shareholder approval for its £10bn order of 175 Boeing 737-800 aircraft.

Espirito Santo analyst Gerald Khoo said he expected that EasyJet’s order would be approved by its investors, but Stelios – who earlier this year pledged to remain a “loyal” shareholder provided the airline did not buy new aircraft for at least four years – said the deal raised “more questions than answers”.

He added: “We will ask all our questions when we have seen the full shareholder circular, which must include the actual price to be paid for each aircraft and the incremental profit each of these aircraft will actually

deliver.”

If the deal is not improved, EasyJet said higher maintenance costs for its ageing fleet would have a “material” impact on profits.