REG-easyJet plc Proposed purchase of aircraft

easyJetAnnouncement

21/06/2022 07:15

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   easyJet plc (EZJ)
   Proposed purchase of aircraft

   21-Jun-2022 / 07:00 GMT/BST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   This announcement contains inside information

    

   For immediate release

    

   21 June 2022

                                  easyJet plc

                                        

    Proposed purchase of 56 Airbus A320neo family aircraft and conversion of
               18 A320neo family aircraft to 18 A321neo aircraft

    

   easyJet plc  ("easyJet" or  the  "Company") today  announces that  it  has
   entered into conditional arrangements with Airbus S.A.S. ("Airbus")  under
   which Airbus has agreed to supply 56 A320neo family aircraft for  delivery
   between FY  2026 and  FY  2029, utilising  purchase options  and  purchase
   rights under the existing contract with Airbus (the "Airbus Amendment" and
   the existing contract with Airbus  being the "2013 Airbus Agreement").  In
   addition, the Company proposes to convert 18 A320neo aircraft planned  for
   delivery between FY 2024  and FY 2027 to  18 A321neo aircraft  deliveries.
   The Company  has  also  entered into  conditional  arrangements  with  CFM
   International S.A. ("CFM") to ensure that the commitments given under  the
   current engine supply  agreement between  the Company and  CFM will  cover
   aircraft delivered  under  the  Airbus  Amendment  (the  "CFM  Amendment",
   together with the Airbus Amendment, the "Proposed Purchase").

    

   The Proposed  Purchase  firms  up  easyJet’s order  book  with  Airbus  to
   calendar year 2028,  continuing the  Company’s fleet refresh,  as the  156
   seat A319s and older A320s (180 and  186 seat) leave the business and  new
   A320 (186  seat) and  A321  neo (235  seat)  aircraft enter  providing  up
   gauging,  cost  and  sustainability  enhancements  to  the  business.  The
   directors  believe  this  will  support  the  delivery  of  our  strategic
   objectives and  provide  the aircraft  to  help build  strong  shareholder
   returns.

    

   This purchase will:

    

   • Secure  Certainty  of  Aircraft   Supply:  Airbus  delivery  slots   are
   increasingly scarce, with no slots being available until 2027. By securing
   delivery slots now, easyJet ensures future deliveries between FY 2026  and
   FY 2029 to replace aircraft leaving the fleet. The Company and its group's
   ability to maintain desirable slots and sustain its route network  depends
   on the timely delivery of aircraft.

   • Maintain Operational Scale:  The new  aircraft will be  used to  replace
   older aircraft as they reach the end of their useful life. These  aircraft
   will  become  economically  unviable  for  our  high  intensity   low-cost
   operation and will  need replacement  if we  are to  maintain the  current
   scale of our business.

   • Utilise the Benefits  of the 2013  Agreement: The new  aircraft will  be
   purchased under the 2013 Agreement,  meaning the Company will continue  to
   benefit from the highly competitive pricing and the flexibility rights  in
   this agreement. These  aircraft are  priced very  substantially below  the
   Airbus  list  price,   and  benefit  from   attractive  price   escalation
   protection.  In  addition,  the   Airbus  Amendment  continues  to   offer
   flexibility with  respect to  delivery dates  and the  ability to  convert
   A320neo aircraft to A321neo aircraft.

   • Benefits of New  Generation Technology: The  new aircraft will  continue
   the modernisation  of the  easyJet fleet.  The new  aircraft will  deliver
   between a 15% and 25% unit cost fuel efficiency improvement (depending  on
   which aircraft  they replace).  This will  significantly reduce  easyJet's
   fuel costs  and therefore  improve our  overall cost  base. It  will  also
   reduce the costs of compliance with various environmental regulations. The
   costs of carbon emissions  will increase significantly  over the next  few
   years, and increased fuel efficiency will lead to a proportional reduction
   in carbon emissions. Additionally,  some airports provide discounted  fees
   for new generation aircraft, further enhancing the economic benefits.

   • Increase Aircraft Size:  The new aircraft  will also facilitate  further
   up-gauging of the fleet – increasing  the average seat count per  aircraft
   of the easyJet fleet. This is achieved through some of the new A320s (with
   186 seats) replacing smaller  A319s (with 156 seats)  and 180 seat  A320s.
   Further up  gauging will  also occur  as a  result of  additional  A321neo
   aircraft (with  235 seats)  being  introduced into  the fleet.  This  will
   result in further improvements in cost efficiency, with the costs of  each
   flight spread across  a greater  number of  passengers. The  A321neo is  a
   highly cost-efficient aircraft,  well suited  to higher  demand or  longer
   sector length parts of the Company's network.

   • Sustainability Benefits:  The new  aircraft are  aligned with  easyJet's
   sustainability strategy,  with  the adoption  of  the more  efficient  new
   technology aircraft being a core component  of easyJet's path to net  zero
   emissions. Alongside  this, the  new aircraft  are significantly  quieter,
   with half the noise footprint of the older aircraft they are replacing.

    

   The directors  believe  the proposed  purchase  supports the  delivery  of
   easyJet's  overall  strategic  objectives.  Given  constraints  on  Airbus
   delivery slots, should  the Proposed Purchase  not proceed, easyJet  would
   not have a secure supply of aircraft between FY 2026 and FY 2029 and would
   therefore need to either decrease its fleet size or source alternative new
   generation aircraft  with  higher  ownership  costs.  If  instead  easyJet
   sourced aircraft from  the secondary  market, this may  expose easyJet  to
   older technology. easyJet would face greater exposure to fluctuating  fuel
   prices and carbon related taxes  and would be competitively  disadvantaged
   relative to  the  more  modern  fleets operated  by  its  competitors.  In
   addition, easyJet would be delayed in achieving its sustainability and net
   zero emissions objectives.

    

   The  Proposed  Purchase  would  substantially  complete  the  2013  Airbus
   Agreement with Airbus whilst also securing delivery slots between FY  2026
   and FY 2029 to replace aircraft leaving the fleet.

    

   At 2018 average list prices for  the Airbus aircraft (the latest year  for
   which Airbus has  published list  prices for the  relevant aircraft),  the
   aggregate purchase price for the Proposed Purchase would be  approximately
   USD6.5 billion. The aggregate actual price  for the aircraft will be  very
   substantially lower  because  of  certain  price  concessions  granted  in
   connection with the 2013 Airbus Agreement.

    

   The aircraft associated with the Proposed Purchase will be financed over a
   number of years  through a  combination of  easyJet's internal  resources,
   cash flow, sale and leaseback transactions and debt. While the Board  will
   regularly review  optimal  sources of  financing,  there is  currently  no
   expectation that shareholders  will be  asked to  fund any  aspect of  the
   Proposed Purchase.

    

   Although the Proposed Purchase was  already envisaged by the  shareholders
   when they approved the 2013 Airbus Agreement and subsequent amendments, in
   view of its size, the Proposed Purchase constitutes a Class 1  transaction
   under the  Listing  Rules  and is  therefore  conditional  on  shareholder
   approval at a general meeting of the shareholders (the "General Meeting").
   A circular is  expected to be  sent to shareholders  in due course  giving
   further details  of  the Proposed  Purchase  and containing  notice  of  a
   General Meeting at  which a  resolution to approve  the Proposed  Purchase
   will be proposed.

    

   Johan Lundgren, easyJet Chief Executive said:

   “The proposed purchase firms up our orders with Airbus between FY 2026 and
   FY 2029, continuing the  company’s fleet refresh, as  the older A319s  and
   A320s leave  the  airline  and  new A320  and  A321  neo  aircraft  enter,
   providing benefits to  easyJet through up  gauging, cost efficiencies  and
   sustainability enhancements. We believe this will support positive returns
   for the business and the delivery of our strategic objectives.”

    

   Contacts

    

   Institutional investors and analysts:

    

   Michael Barker Investor Relations  +44 (0)7985 890 939

   Adrian Talbot  Investor Relations  +44 (0)7971 592 373

    

   Media:

    

   Anna Knowles  Corporate Communications +44 (0)7985 873 313

   Edward Simpkins FGS Global    +44 (0)7947 740 551 / (0)207 251 3801

   Dorothy Burwell  FGS Global    +44 (0)7733 294 930 / (0)207 251 3801

    

   About easyJet plc

    

   easyJet plc is a low-cost  European point-to-point airline operating  over
   900 routes in 35 countries. We employ over 14,000 people and in 2019  over
   96 million passengers flew with us.

    

   Our sustainable business model makes travel easy and affordable and drives
   growth and returns for shareholders.

    

   Forward-looking statements

   Certain  information  contained  in   this  announcement  may   constitute
   "forward-looking statements", which can be identified by the use of  terms
   such as "may", "will", "would", "could", "should", "expect", "anticipate",
   "project", "estimate",  "intend",  "continue", "target",  "plan",  "goal",
   "aim" or "believe" (or the negatives thereof) or other variations  thereon
   or comparable terminology.  These forward-looking  statements include  all
   matters that are not historical facts and include statements regarding the
   Company's intentions, beliefs  or current  expectations and  those of  our
   directors and employees  concerning, amongst other  things, the  Company's
   results of operations, financial condition, changes in global or  regional
   trade conditions, changes in tax  rates, liquidity, prospects, growth  and
   strategies, acts of war or terrorism worldwide, work stoppages,  slowdowns
   or strikes,  public  health crises,  outbreaks  of contagious  disease  or
   environmental  disaster.  By  their  nature,  forward-looking   statements
   involve inherent  risks, assumptions  and uncertainties  that could  cause
   actual events or results  or actual performance of  the Company to  differ
   materially from those  reflected or contemplated  in such  forward-looking
   statements. For further information regarding risks to easyJet’s business,
   please consult the risk management section in the company’s Annual  Report
   (as  published).  No  representation  or  warranty  is  made  as  to   the
   achievement or reasonableness of and no reliance should be placed on  such
   forward-looking statements.

    

   The Company does  not undertake  any obligation  to update  or revise  any
   forward-looking statement  to reflect  any new  information or  change  in
   circumstances or in the Company's expectations.

    

   ENDS

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   ISIN:           GB00B7KR2P84
   Category Code:  MSCU
   TIDM:           EZJ
   LEI Code:       2138001S47XKWIB7TH90
   OAM Categories: 2.2. Inside information
   Sequence No.:   169548
   EQS News ID:    1379749


    
   End of Announcement EQS News Service

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