Stelios may bid to take easyJet private after fresh profits shock

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The Independent Online

EasyJet yesterday issued its second profits warning within a month, sending shares in the low-cost airline tumbling and prompting speculation that its founder, Stelios Haji-Ioannou, could be lining up a bid to take the company private once more.

Contacted last night, Stelios said: "I would not like to comment at this stage."

EasyJet shares have more than halved since the start of the year and at last night's closing price of 200.25p, the airline is valued at £800m. That means Stelios, who along with his brother and sister still owns 41 per cent of the business, would need to find at least £500m to fund a buyout.

Chris Avery, transport analyst at JP Morgan, referred to recent reports that Stelios had received offers for his original shipping business, Stelmar, adding: "If consummated, this might fund both start-ups and give Stelios the cash to take easyJet private again at [for him] a sensible price, perhaps returning to the stock market in a few years' time when the business model would be more mature."

Ray Webster, easyJet's chief executive, said a buyout "is not on my radar screen", adding that Stelios was a supportive shareholder who took a close interest in the running of the business and had his own representative on the board, making him an insider.

Earlier in the day, easyJet shares fell 18 per cent after the airline warned investors that fares were likely to fall 10 per cent this summer, leaving profits for the year only marginally above the £52m achieved last year.

A month ago easyJet warned that "unprofitable and unrealistic" pricing across the airline industry would hit profits, but did not put a number on it, sending its shares down by 25 per cent. Yesterday, the airline repeated that warning but gave more detailed guidance to investors, saying the outlook for the year had since deteriorated further as a result of the "exceptionally competitive" market and rising fuel costs. Based on current exchange rates, easyJet calculates that the increase in oil prices will knock £4m off profits in the six months to the end of September.

The latest warning follows a prediction from Michael O'Leary, the chief executive of the rival no-frills carrier Ryanair, of a "bloodbath" among Europe's airlines this year as the fares war intensifies.

Mr Webster admitted that the airline had made a mistake last month in not being specific enough in its guidance, but denied that it had been punished by the markets as a result.

"I wouldn't call it punishment; I would call it a correction," Mr Webster said. He added that, in the aftermath of last month's profits warning, forecasts of how much the airline would make for the year to the end of September had varied wildly from less than £50m to almost £100m.

Mr Webster also served notice that there would be some "bloody noses" among its rival low-cost operators as the fares war intensified.

"There is going to be a lot of blood on the floor and it is not going to be O'Leary's or mine. We are not going to sit on our hands as other airlines come along and try to take our market but nor are we going to open up the war chest and go out and pick a fight," he said.