EasyJet expands fleet again - despite Stelios reservations

EasyJet has bought another 15 Airbus A320s - but it's still not clear whether founder Sir Stelios totally buys into the strategy...

by James Taylor
Last Updated: 19 Aug 2013
An interesting move from easyJet: the low-cost airline has just announced that it's buying 15 brand spanking new A320s from Airbus, as it looks to accelerate its push into continental Europe. To thicken the plot, this seems to run counter to the approach favoured by its very vocal founder Sir Stelios Haji-Ioannou, who has previously argued that the company should be returning money to shareholders rather than splashing out on new planes (hence why it recently paid out its first divi in 10 years). EasyJet insists he was consulted, and he appeared to give the move a cautious welcome today. But he still wants more detail on what exactly these new routes are going to be...

EasyJet currently has 193 planes, and new boss Carolyn McCall has previously talked about boosting this to 220 by September 2013. The deal announced with Airbus today will add an extra 15 planes over the next couple of years; it's also taken out an option for another 33 A320s, and switched an existing order for 20 A319s to A320s instead, since they're apparently 7% cheaper to run. Good news for Airbus, then: easyJet's bill hasn't been disclosed, but these planes have a list price of over $1bn (although the airline insists it has won 'substantial price concessions').

EasyJet's plan is to use these new planes to run new routes, as it looks to expand into Europe. And the scale of this deal suggests it's pretty bullish about the opportunities on offer, although McCall was quick to point out that the way it's been structured (some definite orders, some options) gives it the flexibility to scale up according to demand.

But where will these new routes go, exactly? So far no word – and although Sir Stelios was apparently consulted about the deal, he doesn't seem to know the answer to this question either, judging by public pronouncements today. Although he said the move 'sounds like good news, at least in the short term' (insofar as it should boost turnover and thus increase royalties generated by the brand), he also reiterated his focus on earnings per share, as opposed to passenger numbers.

In other words, he still appears to want reassurance that management will keep a beady eye on the bottom line. He's previously suggested that each route should be delivering profits of about £2m. If this doesn't turn out to be the case, McCall can expect a very prompt phone call from her largest single shareholder...

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