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Airline in robust shape

EasyJet warns of penalties if Stelios’ call is heeded

Edinburgh airport Easyjet

Not such plane sailing: airline defends deferral (pic: Terry Murden)

EasyJet has hit back in a row with its founder, saying it has no ability to terminate the contract with Airbus.

Sir Stelios Haji-Ioannou has been at loggerheads with Easyjet’s board for weeks over the £4.5billion order for 107 aircraft, which he wants the company to cancel as it battles to stay afloat.

On 9 April easyJet announced that it had reached agreement with Airbus for the deferral of 24 aircraft deliveries from financial years 2020, 2021 and 2022. 

The company said today that easyJet it has “no ability to terminate the contract by reason of force majeure.  This is standard in aircraft purchase contracts.”

Cancelling the order would leave it liable for significant compensation related to the discounts received on the 45 aircraft it has had delivered to date under the 2013 contract.

Within the next 16 months easyJet also has 24 operating leases due for renewal, providing it with further flexibility, which could include deferral and cancellation.

The company expects to deliver a first half headline loss before tax in the range of £185m to £205m, representing an improved year-on-year first half headline loss before tax (H1 2019: £275m).

It said steps it had taken to shore up its finances meant it would be able to survive a lengthy fleet grounding.

The airline said that it had the ability to shrink its fleet through leases and planned to sell six old aircraft, giving it flexibility depending on the shape of future demand.

Despite uncertainty over the length of restrictions on travel it said that bookings for winter are well ahead of the equivalent point last year.

It plans to keep the middle seat on its planes empty, ostensibly to allow for social distancing once the Covid-19 lockdown has been lifted, but more realistically as a way of encouraging customers to return.

EasyJet chief executive Johan Lundgren said: “That is something that we will do because I think that is something that the customers would like to see,” he said.

EasyJet later said the idea was one suggested measure that could be undertaken “for a short period while flying was resuming”.

Airlines have often left middle seats empty on planes which are below capacity.

This latest move will see plane loads reduce from 180 to 120 and the expectation among aviation analysts is that easyJet will compensate by raising prices.

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