easyJet: Decision day approaches

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easyJet: Decision day approaches

Barclays | easyJet

and consensus estimates, have made significant progress towards the £1bn PBT target and the

company could point towards a future of positive and building FCF.

Castlelake a plausible buyer: We have long thought that it would be hard for any major

European airline to acquire easyJet because of substantial network overlaps in London, Paris or

Berlin and Geneva. As such private equity seems the more plausible route. Castlelake is an asset

focussed business with aviation as one of its key sectors, and could derive ancillary revenues as

a provider of leasing services to easyJet. It is also experienced in European aviation, having

supported the Air France-KLM and Danish government consortium backing SAS’s emergence

from bankruptcy.

The role of the founder: We think the response of easyJet's founder, Stelios Haji Ioanniou, to

the potential takeover will be important. He, with his siblings, is the largest holder of easyJet

stock, he owns the brand and receives a royalty of 0.25bps of revenue and as a joint Cypriot-UK

citizen would further derisk ownership and control issues - even though we see this as not a key

issue. We think easyJet has been the most successful of Stelios’ very many companies. As such

we think he takes a cautious view towards the business, is risk averse and keen to secure a

steady cashflow. In recent years his relationship with the company has been strong,

underpinned, in our view, by the company’s choice to leave the royalty agreement in place as

easyJet holidays boosts revenue dramatically. Our argument above for delisting and potentially

relistring the company could appeal to the founder. We think the founder would want