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EasyJet Plc, Europe’s second biggest discount airline, plans to boost dividend payouts and exercise purchase rights for 27 Airbus Group NV A320 planes to ramp up its position against struggling network competitors.
The carrier will increase the ordinary dividend payout ratio to 40 percent of profit after tax from one-third in the fiscal year ending Sept. 30, and it plans to take delivery of the single-aisle airliners from 2015 through 2018, Luton, England-based EasyJet said today in a statement.
EasyJet will use the planes to bolster its position in “core markets,” Chief Executive Officer Carolyn McCall said in the statement. Under McCall, the discount carrier has refined its image and intensified efforts to lure business passengers away from network airlines like Air France-KLM Group and Deutsche Lufthansa AG, offering allocated seats, flexible tickets, fast-tracking and more frequent flights on key routes.
“We are bringing new aircraft into the fleet as we continue to see a significant number of new profitable opportunities,” McCall said. “The continued strength and execution of our business model provides the platform to deliver sustainable growth.”
The deal will exhaust purchase options under EasyJet’s 2002 agreement with Airbus and means the airline will have 70 firm orders for current-generation A320s. The arrangement will allow EasyJet to expand or shrink its fleet size to within a range of 204 to 316 airliners by 2019 depending on traffic. Its fleet today stands at 226 A320 and A319 models.
EasyJet rose as much as 2.8 percent, the biggest intraday gain since Aug. 19, and was trading up 2.4 percent at 1,370 pence at 8:32 a.m. in London. That pared the stock’s decline this year to 8.5 percent, valuing the company at 5.44 billion pounds ($8.85 billion).
The new aircraft will deliver an operating-cost advantage of 7 percent to 8 percent compared with the A319s, EasyJet said. The addition means EasyJet capacity will increase 5.5 percent in 2015, compared to growth of 3 percent to 5 percent over the past three years.
Discount rivals such as Ryanair Holdings Plc and Norwegian Air Shuttle AS are also adding seats, while full-service carriers are striving to become more competitive via low-cost units including Germanwings at Lufthansa and Barcelona-based Vueling at British Airways owner International Consolidated Airlines Group SA.
EasyJet said in July that annual earnings will gain at least 14 percent. The carrier, which will be hosting a capital markets day in London at 2 p.m., will publish an overview on Oct. 3.
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