EasyJet has decided to risk incurring the wrath of Sir Stelios Haji-Ioannou, its founder, by agreeing to buy 135 planes from Airbus, subject to shareholder approval.
The airline said on Tuesday it had entered into arrangements to purchase 35 A320 aircraft and 100 of the forthcoming revamped version of the short-haul workhorse, the A320neo.
The price of the deal – which contains an option to buy up to 100 more A320neo aircraft – has not been disclosed.
EasyJet had been in talks with both Airbus and Boeing about the order in spite of opposition from Sir Stelios, who last month branded it a “vanity exercise”, arguing that the cost of the purchase would be unjustifiably high.
Sir Stelios, the airline’s largest shareholder with a family stake of 37 per cent, said on Tuesday he would examine the cost of the order.
“Yet another huge capital expenditure deal with the same supplier at “secret” prices . . . Naturally it raises more questions than answers,” he said.
“We will ask all our questions when we have seen the full shareholder circular which must include the actual price to be paid for each aircraft and the incremental profit each of these aircraft will actually deliver.”
Carolyn McCall, easyJet chief executive, said: “Ultimately, Airbus offered us the best deal.”
The company said it had negotiated a “very substantial” discount for the planes, but did not disclose how much this was, although Ms McCall said it was deeper than the discount it had obtained from Airbus when buying planes in 2002.
EasyJet said the undiscounted price for each A320 was $76m, and $92m for the A320neo, adding that it would fund the deal through its own cash, sale and leaseback deals and debt.
The cost of the deal at an undiscounted price would be $11.9bn.
The airline said the A320neo would bring down its cost per seat by between 11 per cent and 12 per cent compared with the A319 that comprises the bulk of its fleet. It said it might not be able to deliver sustainable returns over the long term if shareholders rejected the deal.
“EasyJet’s cost advantage would be eroded as the age of the fleet increases materially and other airlines benefit from the cost efficiency expected to be provided by new generation aircraft,” it argued.
Analysts described the deal as attractive, welcoming its flexibility and discount. They expect shareholders to back the deal at the annual meeting on July 11, notwithstanding Sir Stelios’s cool remarks.
The carrier has 211 aircraft at present and 85 of the 135 new planes would be used to replace aircraft leaving the fleet, although it is also aiming to provide more flights.
The company said the “base case” plan was to have 276 planes in its fleet by the end of its 2022 financial year, although this could be materially higher or lower depending on market conditions and strategy.
Shares in easyJet closed 2.66 per cent up at £12.85 in London, having more than doubled in value over the past year.