Easyjet conflict over airplane purchase

Easyjet, a UK-based low-cost air carrier, is the subject of internal conflict over the proposed purchase of new aircraft.

Divisions have been drawn within the company between its founder and major shareholder, Sir Stelios Haji-Ioannou, who is opposed to the purchase of the new aircraft, and other major investors in the company who are in support of the deal.

The deal involves as many as 200 new aircraft, and the Financial Times has reported that six investors with a significant stake in the company are prepared to support it. Their backing could enable the company’s chief executive, Carolyn McCall, to gain approval for the purchase. The Haji-Ioannou family own a 37 percent stake in the company, but institutional investors could win the day if they group together in a straight vote.

The Financial Times quoted one anonymous investor as saying, ‘EasyJet has been a model company in terms of providing strong revenues and good returns. As long as there is growth, they should expand.’

The opinion of industry analysts is that easyjet will place a major order for at least 100 aircraft, either with Boeing or Airbus, with an option for a further 100, but by way of explanation for Sir Stelios’s opposition to the deal, his spokesman told the FT, ‘He believes any new aircraft order would be destructive of shareholder value and that the money would be far better spent on improving returns to investors, either through dividends or share buybacks.’

The proposed new aircraft would ultimately replace most of the company’s existing fleet of 214, 156-seat Airbus A319’s with more fuel-efficient 180-seat aircraft.