easyJet could shrink its fleet by 56 aircraft by 2023 – but Stelios still isn’t happy

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Whilst Sir Stelios Haji-Ioannou continues to threaten easyJet’s non-executive directors with the sack, the board is quietly pursuing alternate arrangements to secure the company’s future.

On Thursday easyJet released its H1 Trading Update, which included some information on how the company will manage its outstanding $4.5 billion order for 107 Airbus A320-family aircraft. You can read the full report here.

Whilst Stelios wants to cancel the order entirely on the basis of ‘force majeure,’ the easyJet board argues that it doesn’t actually have the ability to do so.

(Stelios does not necessarily disagree with this, but counters with the fact that ‘trying it on’ would, given the inevitable lawsuit and appeal, give easyJet a five year breathing space even if it loses.)

It also said the company would be on the hook for “significant” compensation based on the volume discount it received on the original 135-aircraft order. With 45 of the planes already delivered it would have to pay a penalty for not taking the remainder and forfeit the negotiated discount on those it is already operating.

easyJet’s new fleet plan

With outright cancellation seemingly off the table, the board’s plan is to defer the arrival of 24 (potentially 29) aircraft between now and April 2023. Airbus has already agreed to this as it struggles with its own corona-related production delays.

That means that easyJet will not receive any new planes in 2021, although it is still set to take six aircraft this year.

Furthermore, easyJet has some flexibility with another 24 aircraft which are coming to the end of their leases in the next 16 months. Depending on how the airline industry recovers it may choose to drop these aircraft too.

This would potentially take the minimum number of aircraft the airline expects to operate by September 2023 down to 281. The current number is 337. This is not all that far off from the Stelios target fleet of 250 aircraft.

easyJet has also secured additional funding, on top of its £600m Government loan, that should provide it with enough cash to ride out a nine-month grounding of its fleet.

Stelios still isn’t happy

Stelios is still unsatisfied. In response to the new fleet proposals he has called for the removal of “scoundrel” easyJet CEO Johan Lundgren and board chairman John Barton. Whilst the company has deferred some of its deliveries, Stelios still claims the company is paying Airbus “at least” £2.5bn over the next two years which is money it can ill afford.

With Stelios and his family controlling 34% of the shares, Lundgren and Barton would need 76% of the remaining potential votes if they were to survive.

Category

General

This article is closed to new posts. Discussion continues in the HfP Forums.

Bertrand says:

20 Apr20 April 13:15

You all see to forget that this man took is millions of dividends and after that decided to complain about the airlines management. You also all seem to forget that he wants to sack staff and appoint the man from Ryanair (COO) that all EasyJet staff hates because he wants to destroy all their working condition. EasyJet is not Ryanair and it stay that way. Now I am a capitalist and I should believe that what Stelios wants is good but even so I think he should stay back sell his shares and move on as what he is doing right now is seriously wrong and putting potential little investors away from EasyJet shares.
- Lady London says:
  
  20 Apr20 April 17:18
  
  @Bertrand I’m glad someone else (you) has the same misgivings that the new COO easyJet has recruited, who is ex-Ryanair, seems to have started destroying core advantages which were key to Easyjet’s Unique Selling Points.
  
  I pointed out some changes which have annoyed myself and ripped off other customers, that were not done in an open transparent way, but have been brought into the operation sneakily and IMV have been done in a way that could be legally challenged.
  
  @Bertrand thank you for also mentioning this new COO’s moves to downgrade easyJet staff working conditions. Easyjet’s great advantage has been their happy flexible helpful staff. This is very different from the experience of those of us who land with British Airways’s miserable slow unhelpful obdurate Indian call centre, for example. This was a big factor in why easyJet gets a huge % of my business. BA only gets longhaul from me and only some routes.
  - J says:
    
    20 Apr20 April 18:12
    
    Good point I’ve heard easyJet has a good working relationship with the unions/good industrial relations which is quite a contrast to BA/Ryanair.
    - Lady London says:
      
      21 Apr21 April 02:17
      
      …Till now. Very worried about these reports that the new COO is trying to use this temporary crisis to permanently downgrade staff working conditions.
      
      It takes a long time to build up goodwill with happy staff. In a service business that really differentiates you with customers. easyJet can’t just let their USP only be about price or they’ll lose everything that lets them own a quite specific positioning above the riff raff of the other LCC’s and that’s why they can charge the prices they do and keep elephants like BA, LH, KLM challenged.
      
      If they get unhappy staff in the call centre and on the planes then this all changes. Their Customer Services didn’t seem to be doing very well since long before the current crisis and their new COO might spend his time usefully sorting that out instead.