EasyJet Plc (EZJ) founder and No. 1 investor Stelios Haji-Ioannou said profit projections from house broker Credit Suisse show excessive plane purchases are eating into earnings at Europe’s second-biggest discount carrier.
The latest forecast from Credit Suisse suggests EasyJet will post a profit of about 33 pence a share for the year to Sept. 30 2012, down 18 percent on the 40 pence projected for the current 12 months, Stelios, who prefers to be known by his first name, said today in a statement from his EasyGroup Holdings Ltd.
“This is proof that the additional aircraft purchased by the board are actually destroying shareholder value,” Stelios said, adding that the plane orders were supported by director Rigas Doganis, who he is seeking to remove. “More aircraft in the EasyJet fleet now means lower profits, not higher.”
Stelios, who controls about 38 percent of EasyJet’s stock, has been at loggerheads with management over expansion plans for almost three years. He called for more prudence in November 2008 while refusing to sign off on the company’s annual accounts and is targeting Doganis after David Michels, the airline’s deputy chairman, quit last month following a similar campaign.
EasyJet needs no more than 180 planes, Stelios said separately in an interview. The Luton, England-based carrier had 203 jets in its fleet as of June 30, it said in statement July 22, and last placed a new order in January, for 35 planes.
Growth Halt
“The time has come to stop growth because the oil price is too high and the aircraft are too expensive,” the 44-year-old entrepreneur said. “You’re trying to find new routes to fly 12 months a year and make an adequate return on capital. It’s impossible now. There aren’t any more good new routes.”
EasyJet rejects the assertion that aircraft orders have caused a decline in profitability, spokesman Paul Moore said, while declining to comment further on Stelios’s remarks.
Credit Suisse cut estimates in an Aug. 24 note to clients, citing slowing demand likely to impact “most” European carriers. Analyst Neil Glynn reckons EasyJet will post a pretax profit of 197 million pounds ($315 million) next fiscal year, 12 percent lower than his previous figure. He rates the stock “neutral.”
Glynn raised his pretax forecast for Ryanair Holdings Plc (RYA), Europe’s No. 1 low-cost carrier, by 2 percent to 519 million euros ($729 million) for the year through March while cutting his estimate for fiscal 2013 16 percent to 429 million euros.
Stelios said in the interview that he has no interest in returning to the role of chairman at EasyJet, and that neither does he want to disrupt its day-to-day running.
EasyJet shares rose as much as 4 percent today and were trading 3.2 percent higher at 332.1 pence as of 2:53 p.m. in London, paring the decline this year to 25 percent and valuing the company at 1.43 billion pounds.
Ryanair was trading up 4.5 percent and has lost 18 percent for the year, giving a value of 4.52 billion euros.
