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Easyjet to buy 120 A319s, with options for another 120 a/c

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Easyjet to buy 120 A319s, with options for another 120 a/c

Old 14th Oct 2002, 06:21
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easyJet to buy 120 A319s, with options for another 120 a/c

Click here for the easyJet press release

14 October 2002
easyJet selects Airbus as preferred supplier for 120 new aircraft
easyJet plc ("easyJet"), Europe's leading low-cost airline, today announced that it had selected Airbus as the preferred supplier for 120 A319 aircraft, with options with price protection on a further 120 A319s.

easyJet has granted Airbus exclusivity for 45 days to agree documentation. The agreement in principle is subject to contract. The detailed terms are subject to confidentiality restrictions, and any final agreement will be subject to shareholder approval.

Key points of the deal:


Firm order for 120 Airbus A319 aircraft for delivery from September 2003 over 5 years
Options with price protection on a further 120 Airbus A319 aircraft until 2012
Airbus A319 will be configured with 150 seats, with the possibility of increasing to 156, compared to 149 on the Boeing 737-700
Options for larger sized Airbus A320 and Airbus A321 at pre-agreed prices.

It is expected that the final contract would provide easyJet with a number of significant financial benefits:


easyJet estimates substantial savings, compared to buying additional B737-700s today
easyJet estimates the A319 would achieve an approximate 10% improvement per aircraft over the existing Boeing 737 operating cost base (measured per available seat kilometre)
Airbus to provide extensive support so that the introduction of the A319 to be no more expensive than the B737-700 in the first two years
Airbus backed maintenance program means cost not higher than Boeing
Airbus assistance reduces residual value risk on remaining 10 owned B737-300s.

Introduction of new aircraft:


A319s will be introduced initially via easyJet's Geneva base from August 2003 operating under easyJet's Swiss air operator's licence
Eventually both the Airbus A319s and Boeing 737-700s will be interchangeable on all easyJet routes maintaining the "any aircraft, any route" aspect of the easyJet business model.

Stelios Haji-Ioannou, easyJet Chairman, said:

"As easyJet's largest single shareholder, I was faced with the dilemma of either following the conventional wisdom in the marketplace in order to keep shareholders happy in the short term, or doing what's right for all shareholders in the long run.

"We, at the Board, decided to do what's right. We refused to overpay in order to improve the stock price in the short term. It should be an offence to mis-use that level of corporate resources.

"At the end of the day 'low cost' companies remain 'low cost' by not wasting money. Sticking to old-fashioned fads like 'low cost airlines only fly Boeing' does not reduce costs. This order is big enough to be put to a vote by all shareholders. I will personally spend a lot of my time over the next couple of weeks along with the CEO and the Chairman-elect talking to our shareholders in order to explain the benefits of this deal. Having looked at several reference points on aircraft pricing including our own 44 Boeings, the offers Go Fly had received before the acquisition and the Ryanair deal, I am satisfied we have done the right thing by waiting. Having acquired Go Fly, one of the very few other potential buyers of significant numbers of aircraft, we have exploited the contestable market to its full potential. About four years ago, as a small airline we bought 15 B737-700s with no competition. Today, buying 120 aircraft in a competitive market, we can now purchase aircraft at approximately 30% per seat below the prices, adjusted for inflation, we achieved then.

"I have also followed the great success JetBlue have experienced with the Airbus product in the US. It offers an excellent, comfortable cabin for passengers, exceptional reliability and low fuel burn. The wider aisle also means faster boarding and deplaning, and therefore quick turnarounds. We also like the sizing of the A320 family, which allows us to graduate up to the 180 seat A320 and even 220 seat A321, if we choose to do so in the future."

Ray Webster, easyJet Chief Executive, said:

"After exhaustive research and several rounds of negotiation with both Airbus and Boeing, the Board is convinced that we have achieved a tremendous deal which will produce a step-change reduction in our cost base.

"Airbus has demonstrated an enthusiasm to do business with us which is unmatched in my experience.

"We believe that the overall deal which they have offered us, together with their willingness to support the costs of introducing a new aircraft type to our fleet far outweigh the costs of the complexity of running a dual fleet."

Noel Forgeard, President and Chief Executive of Airbus, said that he was immensely gratified with easyJet's decision:

"The A319 will do an outstanding job for easyJet, providing its passengers with more comfort, higher reliability and, with its unbeatable operating economics, the opportunity for lower fares. We are very excited at entering into a long term partnership with one of the world's most dynamic, low cost airlines."
So what changes will happen to the current easyJet pilots now that the company decides to run a dual fleet of 737s/A319s?

Last edited by Massey1Bravo; 14th Oct 2002 at 07:37.
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Old 14th Oct 2002, 06:46
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It had to be.......... Airbus wasnt going to let this one pass.
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Old 14th Oct 2002, 07:43
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Big Mistake!
Its not all about saving money in the short term .Its about reliability and robustness 5 years down the road.
Interesting what rostering and engineering will make of it.
City isnt impressed shares down 7.25 p.
The order is estimated at 4billion.

Last edited by mjenkinsblackdog; 14th Oct 2002 at 08:41.
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Old 14th Oct 2002, 08:01
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Talking

Guess that an Airbus Type Rating is going to be pretty handy over the next few years then!!

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Old 14th Oct 2002, 08:19
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Talking Best Possible News

easy has taken the bold step rather than the predictable soft option. The bus is up to the job having been used (and abused) in the charter market since Excalibur orderded them in 1992. They were good reliable workhorses then as they will be now.

Well done easyJet!!!
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Old 14th Oct 2002, 08:27
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fly right.
Disagree, most unreliable aircraft on uk register is an airbus owned by a charter airline north of watford.
Political move to gain slots throughout europe is also a consideration behind decision.
Particularly, paris and others.

Last edited by mjenkinsblackdog; 14th Oct 2002 at 08:34.
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Old 14th Oct 2002, 08:43
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mjbd WRONG! Having 4000+ hours on the 320 it gets my vote, reliable, modern and great to fly.
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Old 14th Oct 2002, 08:47
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Unreliable my a**e. That report on the spotty M aircraft was bulls*t. Ay Spotty M we have an open reporting system of Air Safety Reports, it is a safety culture, and in no way has anything to do with reliability.

Check out the PPrune archives for the threads on G-MONX, you will see the thread completly trashes the uninformed journos.
Also see reply on Monacrh Website Spotty M News section.
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Old 14th Oct 2002, 09:00
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.....and even if the report on the Spotty M aircraft is valid, so what. I can show you a few very unreliable Boeing's which may well have been "friday afternoon aircraft builds". You cannot base your argument on one or two specific aircraft in this way.

Besides, we all know there were some reliability problems in the early days, but it's a very mature product now.

Well done easy....definitely the right decision for the long term. The 737NG is just a re-warmed version of the old generation aircraft, whilst the Airbus is modern and definitely the aircraft for the future.

.....and remember, easy will keep flying a sizeable fleet of -700's, so their original intention of achieving the benefits of a contestible market will be there for a while to come!
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Old 14th Oct 2002, 09:14
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I have flown the Airbus with Excalibur,Airtours and currently with BA. It is a first class aircraft with a very high despatch reliabilty and the customers love it.

I remember one trip from Manchester to Palma with 180 pax and the jet only burnt 5 tonnes of fuel. Yes we had a tailwind but nothing exceptional. It is a very efficient aircraft and it has proved its value over the years with numerous charter operators.

Does anyone think there may be a signing on fee next year with Easy? Get your Airbus rating asap...
Regards BP
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Old 14th Oct 2002, 09:34
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The money men don't like it - EZY shares currently 9.5p off on volume of nearly 90,000 shares.

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Old 14th Oct 2002, 09:40
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I thought the low cost model worked by operating 1 type of aircraft, having 2 types on the fleet pushes up costs.

And one thing for sure 150 seats on a 319 is going to be very very tight!
Hell of a lot of aircraft 120...so Air Europe.
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Old 14th Oct 2002, 09:44
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This has to be good news. Reliability has a number of statistics and of course lies. A number of A319 orders have been cancelled since 9/11 and the deal that easy are getting will undoubtedly be outstanding. I am sure that there will be issues for a low cost operator to cope with by introducing a new fleet but they will have done their homework.

Political decision based on slots etc? If that is a contributary factor so what! That's business as well isn't it? What it does offer Easy is the ability to quickly open up their route structure - especially if they go to the 321 to longer distances and more importantly capacity for hardly any additional cost, the yield would be greater or the seats maybe even cheaper. Despite that though during most of the year you could easily fill a 747 on routes like Malaga, Faro and Alicante, so it would make sense to use bigger aeroplanes on these established routes and all on the same type rating!

The future of the business has changed in a number of ways but seeing orders like Ryan and Easy have placed does at least mean that there will be pilot jobs. How often do you see orders for this number of aircraft from established 'old school' operators nowdays - not very often, only the 'new boys' are doing it and for the pilot workforce who have been battered over the last 12 months this has to be excellent news.

The actual implementation dates etc are still to be announced in detail but i for one am quite enthused by it. I am watching this space - My own future might even be orange!!

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Old 14th Oct 2002, 09:46
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Bigpants et al, just wondering what were the turnaround times with the Airbus?
Are 25 mins turnarounds realistic with the bus? Although this is obviously not a probelm at LTN as they seem to be nearer to the hour at the moment!!
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Old 14th Oct 2002, 10:15
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Stock market drop not unexpected, city wants confirmation about how the purchase will be financed. If another rights issue in the pipeline, then price will be negative for a bit.
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Old 14th Oct 2002, 10:31
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120 aircraft, more than a 120 jobs! Too easy!
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Old 14th Oct 2002, 10:35
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Bite.
We are comparing b737/a319 not b757 laddie.
khabsman.
My experience was flying a b767 to replace a broken Airbus in the Middle east for Gulfair.
The Bus just fell appart due to high temperature and conditions.
Main failures were ac systems and hydraulics[often using alt system to get the gear down].
Happy now.
Plus crashed in crosswind takeoff at abu dhabi,and went swimming in the Gulf on its way into Bahrain.
But then again youve only operated around europe so what do know.

Last edited by mjenkinsblackdog; 14th Oct 2002 at 10:48.
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Old 14th Oct 2002, 10:52
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Hmm, seems obvious that running two types concurrently will increase costs. I'm a bit shocked that Easyjet estimate the A319 to be 10% cheaper to operate than the 737s. I don't believe it, personally, but that's politics for you.

Easyjet will just have to get rid of all those non-strategic 737s.

:-)

TW
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Old 14th Oct 2002, 11:01
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I think you'll find that easyJet have done a very detailed financial comparison between the two types and will have taken all the concerns mentioned in these posts into consideration. On the basis of the negatives they will have built in "risk costs" of going with Airbus instead of the known costs for Boeing, with this figure they will have gone to Airbus and sought a price for the aircraft which will cancel out the risk and on top of that obtain guarantees for things like maintenance etc. The 10% reduction in cost/ASK will be based on these figures, and believe it or not, they will make sure Airbus delivers.
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Old 14th Oct 2002, 11:30
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Good news for Boeing.

Airbus sells at a price rumoured to be at break even or at slight loss per a/c which means the EU are propping up this deal or are they goingto bump up the price for the larger a/c which will mean carriers looking at "cheap" Boeing?

Airbus capacity now to accept any new orders is now tight to say the least (read: cannot accept any further big orders for 318/9/20). Boeing can now fulfill orders more easily.
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