EasyJet Orders 135 Airbus Jets, Reopening Clash With Founder

EasyJet Plc agreed to buy 135 Airbus SAS jets worth about $13.22 billion at list price as Europe’s No. 2 low-cost carrier upgrades its fleet, reopening a confrontation with its founder, who has opposed the purchase.

EasyJet will take 35 current-generation A320s for delivery between 2015 and 2017, and 100 new-engine A320neos from 2017 to 2022, the Luton, England-based company said today. It also has options to purchase 100 additional A320neos.

The agreement reignited a clash with founder and largest shareholder Stelios Haji-Ioannou, who called it “another huge capital expenditure deal with the same supplier at secret prices.” EasyJet should reveal the price per plane and “the incremental profit each of these aircraft will actually deliver,” he said in an e-mailed statement.

The airline is buying more fuel-efficient airliners to replace old jets, helping boost seat capacity by as much as 5 percent annually. Stelios, who is known by his first name, has demanded that management focus on profitability rather than fleet expansion.

“These arrangements allow us to continue to deliver on the successful strategy of profitable growth and returns to shareholders,” Chief Executive Officer Carolyn McCall said on a conference call with journalists today. “This agreement will enhance EasyJet’s cost advantage and mitigate against the inflation increases that all airlines have been seeing.”

‘Substantial Discount’

McCall said EasyJet received a “substantial discount” and won’t reveal the cost.

EasyJet spent 18 months analyzing financial and technical benefits of Boeing Co. and Airbus offerings, Chairman John Barton said on the call. A strong balance sheet means the company can finance the deal “without recourse to our shareholders and without threatening” its dividend policy, he said.

“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,” McCall said.

EasyJet shares rose as much as 3.8 percent and were up 3 percent at 1,290 pence at 12:23 p.m. in London. The stock has gained 69 percent this year, valuing the airline at about 5.1 billion pounds ($7.97 billion).

Airbus’s January 2013 list price for the current-generation A320s is $91.5 million and $100.2 million for the A320neo. Customers typically buy airliners at a discount, and the price per plane isn’t revealed, at the manufacturer’s request. Shareholders will be asked to approve the deal at a general meeting held at EasyJet’s Luton headquarters on July 11.

‘Good Deal’

“If you’re going to buy 135 airplanes you get a good deal, certainly,” said John Leahy, sales chief for Airbus.

The agreement comes three months after larger rival Ryanair Holdings Plc agreed to buy 175 Boeing 737 jets worth $15.6 billion at list price.

While ranked second to Ryanair among Europe’s low-cost airlines, EasyJet has dropped its early no-frills approach in favor of a model that offers ancillary services such as flexible tickets to draw corporate traffic. The move comes as network carriers including Deutsche Lufthansa AG and BA-parent IAG SA trim short-haul capacity. EasyJet attracted 10 million corporate travelers in 2012.

“The deal gives highly attractive flexibility,” James Hollins, an analyst at Investec in London, said in a note to investors today. “There are also clear operating costs benefits of the new generation fleet replacing older assets.”

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