EasyJet Plc (EZJ) is set to ascend to the FTSE 100 Index next week, joining British Airways on the U.K. benchmark less than a month after shares of Europe’s second- biggest low-cost carrier rose to a record.
EasyJet has doubled its value to 3.97 billion pounds ($6.02 billion) in the past 12 months, making the Luton, England-based airline the 85th-largest company listed in London at 8:39 a.m., according to data compiled by Bloomberg. Businesses can join the FTSE 100 only when they rank among the top 90 to avoid yo-yoing.
From two planes in 1995, EasyJet has grown to 214 Airbus SAS aircraft carrying more than 59 million people annually, 20 million fewer than rival Ryanair Holdings Plc. (RYA) Led by Chief Executive Officer Carolyn McCall, the company has refined its no-frills model, using allocated seating, flexible tickets and corporate agents to grab a bigger slice of the business market.
“There’s been a huge cost focus and they’ve been very clever at targeting high-fee paying business traffic at primary airports and taking that market share from the legacy carriers, who have been cutting,” said Donal O’Neill, an analyst with Goodbody Stockbrokers in Dublin. “The market value reflects the underlying performance and the performance has been phenomenal.”
FTSE Group will announce its next quarterly assessment of changes to the benchmark’s membership on March 6, basing its decision on closing prices from the previous day. The changes will take effect from the start of trading on March 15.
McCall, who stepped down as CEO of Guardian Media Group Plc to join EasyJet in July 2010, targeted the airline’s on-time performance, load factor and profit-per-seat. Her oversight has seen on-time arrivals jump to 88 percent from 60 percent and the load factor, a measure of occupancy, grow to 88.9 percent in 2012 from 87.2 percent two years earlier.
“Carolyn McCall at EasyJet was one of the standout performers of 2012,” Willie Walsh, CEO of British Airways- parent International Consolidated Airlines Group SA (IAG), said Feb. 28 when he presented earnings. When IAG set cost targets to overhaul its Spanish domestic and short-haul service, it benchmarked against EasyJet, he told analysts.
McCall has opened negotiations with EasyJet founder Stelios Haji-Ioannou, who has long opposed its growth plans. The relationship with entrepreneur, who controls 37 percent of its shares, remains contentious. Stelios, who goes by his first name, cut his holding in January for the first time since 2004 and threatened to sell more stock if EasyJet buys more planes.
“If the board places another order for aircraft it will destroy shareholder value into the future,” Stelios said in January. “Instead of ordering new aircraft, EasyJet should aim for a 10 percent profit margin.”
EasyJet has said it’s targeting “prudent” capacity increases of 3 percent to 5 percent as it develops a proposal to present to shareholders on fleet management after 2015 and aircraft deliveries from 2017.
The airline lured 10 million corporate travelers in 2012 and boosted capacity to destinations including Switzerland and France in the last three months of the year. It will add lucrative business connections between Moscow and London, as well as from Milan to Rome’s Fiumicino airport, in March. Competitors flying on the low-cost carrier’s routes trimmed capacity by 800,000 seats in the last quarter of 2012.
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