Stelios holds fire on easyJet expansion plan

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The Independent Online

EasyJet is buying 15 new passenger planes and upgrading an existing 20-strong order to larger aircraft, in the teeth of long-standing opposition to expansion plans from the founder and largest shareholder, Sir Stelios Haji-Ioannou.

The decision from easyJet chief executive, Carolyn McCall – who took over in July when her predecessor left under the cloud of an increasingly vicious spat with Sir Stelios – commits the company to ambitious European expansion plans.

A muted response to the deal from Sir Stelios yesterday signals a gradual rapprochement between the two warring sides.

One area of contention in the long-running dispute was resolved in October with a brand licence agreement allotting annual royalty payments to Sir Stelios's easyGroup in return for greater operational freedom. But Sir Stelios's complaints on strategy, and repeated call for a dividend, rather than continual expansion, were left hanging.

Ms McCall started the process of compromise. Alongside stellar annual results in November she set out terms under which the company would start paying a dividend – a move welcomed as "a good first step" by Sir Stelios.

The easyJet founder's response to yesterday's aircraft deal with Airbus showed reciprocal restraint. While describing the announcement as "good news at least in the short term" from his perspective as the brand licensor, he also avoided overt criticism in his role as easyJet's largest shareholder.

"We shall see if these 15 incremental aircraft will find deployment on profitable new routes and earn the appropriate return on capital employed," Sir Stelios said.

The 15 new planes will be Airbus A320s, bought under an option of a deal negotiated by Sir Stelios himself, when he was still operationally involved with the company. Although easyJet did not disclose the price tag yesterday, the group said it has negotiated a significant discount on the $1.1bn (£704m) list price of the planes. The carrier is also switching an existing order for 20 Airbus A319s to the larger A320 model, as well as taking out an option on another 33 A320s.

Ms McCall said the deal "will help deliver easyJet's strategy of continued profitable growth towards our target of 12 per cent return on capital employed, through the cycle, whilst providing even more flight capacity for our passengers".

The expansion of the airline's fleet is part of plans to grab market share from flag carriers in key European markets such as France. While budget airlines constitute 48 per cent of the British market, the penetration rate on the other side of the channel is just 24 per cent, leaving considerable space for growth, says easyJet. The group has bases across Europe, and is focusing on travel all over the Continent, not purely from the UK and back again.