WHEN Carolyn McCall, easyJet’s new chief executive, delivers her first strategy update tomorrow, she will do so in fortunately auspicious circumstances. Annual profits are expected to be almost three times higher than last year at £154.5m. But McCall, a newcomer to the airline industry, won’t have long to bask in the glory: there is a fierce debate raging over the firm’s future – and she will have to pick a side.
Stelios Haji-Ioannou, the airline’s founder and largest shareholder, thinks it is time to put the brakes on expansion. He wants easyJet to cap aircraft numbers at 200 (the current total is 196) and only operate routes that are profitable all year round, instead of grounding some aircraft in the winter months. He also wants to reduce the annual target for growth in seats to “GDP plus something” rather than the much-higher 7.5 per cent.
Of course, Stelios’ prudence should be heeded, but McCall needs to consider the other shareholders, who make up 64 per cent of the register, as well.
There are several reasons why McCall can afford to be more bullish. Having agreed 88 options and purchase rights for new aircraft during the downturn, easyJet is unlikely to expand its fleet at such a low cost in the near future. And while GDP growth will be anaemic in Europe, it can use this to its advantage by winning business from other low-cost carriers and regional players. Operating more medium-haul routes, such as London to Luxor, Egypt, which begins service this month, will also help it grow.
Ryanair’s fleet will swell to 299 by 2013. Easyjet needs to catch up.