EasyJet CEO Says Boeing Credible Contender for Jet Deal
EasyJet Plc (EZJ) Chief Executive Officer Carolyn McCall said Boeing Co. (BA) stands a realistic chance of winning a large fleet order to reclaim a customer that it lost to Airbus SAS more than a decade ago.
Boeing is “an absolutely serious contender for a very large transaction,” McCall said in an interview today on the discount carrier’s inaugural flight to Moscow. The Chicago-based aircraft maker would need to offer an “amazing deal” to retake the spot as EasyJet’s preferred aircraft provider, she said.
EasyJet, Europe’s second-largest discount carrier, has opened the bidding for new planes including the Boeing 737 Max and Airbus A320neo as it develops its fleet expansion plan from 2017. While low-fare carriers typically harmonize aircraft types to rein in costs, EasyJet operated planes from both manufacturers as it transitioned to an all-Airbus fleet after committing to the Toulouse-based airplane maker in 2002.
“We are used to running a dual fleet,” McCall said. “We’ve worked out a very efficient plan to do it. That’s not to say its the optimal efficient plan, but it can be done depending on the price we get from Boeing.”
The stakes are high for Boeing after Airbus secured orders for more than 400 A320 airliners in less than a week from Deutsche Lufthansa AG (LHA), Turkish Airlines (THYAO), and Lion Mentari Airlines PT. Lion Air today announced a deal for 234 A320s, topping a contract it signed a year ago with Boeing for 230 jets, in the biggest purchase ever for Airbus by numbers.
Boeing is poised to announce an order for 170 737-model planes this week with Ryanair Holdings Plc (RYA), Europe’s largest discount carrier, people familiar with the matter said. The contract would be worth $15.1 billion at least price, with customers typically receiving large discounts.
McCall said Airbus also has a lot riding on the outcome of her airline’s order, saying a loss to Boeing would mark a “massive blow” for the European manufacturer.
EasyJet founder and No. 1 shareholder Stelios Haji-Ioannou has urged the airline’s management to focus on profitability rather than growth and has threatened to further cut his 37 percent holding after selling some of his stake in January for the first time since 2004.
“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.”
McCall said “we will be talking to all our shareholders in the coming weeks and months about this evaluation.” A decision will not be taken until a new chairman is named to replace departing Mike Rake, she said. Stelios has been a frequent critic of Rake.
EasyJet may hold off on a large order for its long-term fleet needs if the prices aren’t attractive and instead sign a smaller contract to continue expanding the Luton, U.K.-based carrier’s networks in the 2015 to 2017 period, she said.
The airline needs more aircraft as it grows its network and goes head-to-head with network carriers such as British Airways. (IAG) Easyjet is targeting a bigger share of Europe’s lucrative business-travel market on longer routes such as the Moscow service, it’s 100th destination from London Gatwick.
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