Should easyJet cancel its 107-strong £4.5bn Airbus order? Sir Stelios certainly thinks so

This article is closed to new comments. Feel free to ask your question in the HfP forums.

• Callum says:

  1 Apr1 April 06:14

  “Logically, the airline will have already picked off the lowest hanging fruit, although if there were a number of major short-haul airline failures in Europe the economics could change quickly.”

  But if there was a major short haul airline failure there would also be a large number of second hand aircraft suddenly available, so I wouldn’t imagine easyJet would need new aircraft in that scenario either.

  • Frenske says:

    1 Apr1 April 06:43

    Cash flow is the issue. With all planes grounded no money coming in, Easyjet is losing millions a day. It might need loans to bridge the gap which only add costs to when operations resume. There is a great uncertainty when operations resume normally and the economical effect might result less people fly in the near future.

• Tim M says:

  1 Apr1 April 06:50

  The 737Max looks dead on arrival. It looks likely that there will be a choice of aircraft to fly on and who would choose to fly on the modern day equivalent of the DC10? I see those aircraft order cancellations materialising soon.

  • Mr. AC says:

    1 Apr1 April 07:13

    737 MAX is actually looking safer than every before due to all the scrutiny. It’s illogical to not fly on them once they’re back in action. I appreciate that the larger flying public might not think along those lines, however.

    • Mark says:

      1 Apr1 April 08:02

      It’s not really illogical at all, given that a fixed MCAS is still going to be a sticking plaster over the engines being too high and too far forward, affecting flight characteristics. As a face-saving exercise they could recertify it without the CFM LEAP engines but then it still wouldn’t be viable for Boeing as it would lose the economy gains that allow it to compete with recent A320 family planes.

      • Mr. AC says:

        1 Apr1 April 08:42

        You’re overestimating the risks if the updated version of the system is robust (which it will be given the scrutiny). Also, pilots and people training pilots aren’t idiots, nor are they suicidal. MCAS won’t be a problem. The 737 MAX will surely crash in the future (simply because of the number built, eventually it’ll happen), but it’ll be some other reason. I also anticipate it’ll actually have a better track record than most other popular aircraft types going forward.

      • Doug M says:

        1 Apr1 April 09:34

        But how many sticking plasters are there on Airbus aircraft. I don’t know, I’m not an aero-engineer. I do know that on many Neo flights people can’t sit at the rear because they’ve changed the weight distribution with their mini toilets and rammed in seats. Aircraft toppling backwards when unloaded in a random way is also not new. Those sort of issues may be very different to MCAS, but it’s not as if aircraft have not previously flown with issues overcome by workaround measures.

        • Patrick says:

          1 Apr1 April 09:58

          I vehemently disagree on the MAX comment.
          No amount of testing or changes (with unknown consequences) will be able to make that plane truly safe on par with current 737’s or an A320 (which is much ahead).
          The simple fact is that the engines are too big for the 1950’s design and thus they are in a substantially more dangerous position which is why Boeing needs an MCAS system now (which Airbus has for a few decades). No amount of software changes is going to change the weight balance problem.
          Also the conflicts of interest are largely still there and the FCA on its own does not have the expertise required to certify planes. Note that thanks to the Trump administration’s “deregulation”, isses like this will continue in all US products. the 777X is just as badly build but thankfully does not have a huge aerodynamic design flaw as far as I know.

          As for the A30neo order, a few things:
          (1) the argument on using the bribery thing is absolute nonsense (thanks to deferred prosecution agreements and the impossibility to prove direct damages).
          (2) the logic behind keeping expensive old planes is similarly flawed. It really highlights the shareholders thirst for money and total lack of any intelligence whatsoever. It is big time that dividend payments become illegal by law if you are about to put all your staff costs to the government. The smart move is to negotiate a later takeup and save a ton of operating costs by operating a younger fleet. Saves the penalty fees as well

  • Rhys says:

    1 Apr1 April 08:34

    The 737MAX is a necessity – Airbus simply cannot produce enough single aisle aircraft, even if it wanted to.

    • Charlieface says:

      1 Apr1 April 09:26

      Given the current situation, do we think that the market actually still requires so many short-hauls?

      • Rhys says:

        1 Apr1 April 09:39

        Right now? No. In two or three year’s time? Almost certainly. Airbus has 6000+ unfulfilled orders – more than eight years’ backlog. Boeing has a similar amount.

        • TimM says:

          1 Apr1 April 11:23

          The Flat Earth Society believes that the World will simply return to how it was before Covid-19. It won’t. The dreaded disease has acted as a catalyst for change which had to be made – more home-working, better internet, less travel. Many of the airlines that are benig supported by governments now will go bust on the other side.

          On the Airbus A320 vs 737Max, the Airbus was designed from the ground upwards to be fly-by-wire. Yes they suffered some early software issues (e.g. the Paris air show crash) but that is totally different to retro-fitting software control to an airliner, which never was fly-by-wire, made inherently unstable by cost-cutting mods. Can you imagine the publicity and public reaction to the next 737Max crash? There will certainly be one and may be for unrelated reasons. It is dead already.

        • Rob says:

          1 Apr1 April 14:48

          I don’t see it. There will be no fundamental changes, apart from some businesses not making it through. I know people who run businesses with 100+ staff totally remotely, with no office at all, but for most there is real value in human interaction. I would be £18k per year better off if we’d all worked from home and not taken an office, but I am happy we did and – perhaps not coincidentally – getting us together was followed by a large spike in revenue. We are absolutely moving back when we can.

      • mvcvz says:

        1 Apr1 April 10:05

        That’s a remarkably good question. Unfortunately there’s no remarkably good answer available at present. Best is probably “anyone’s guess”.

• Tim M says:

  1 Apr1 April 06:55

  Frenske, There is money coming in. EasyJet put their winter 20/21 schedule on sale early to bring in cash. At the same time they are being tardy, to say the least, in refunding cancelled flights. My Venice flights were cancelled a month ago, the refund shows as “processing” and there is no human means of contacting them – no one answers the phone and email has been withdrawn.

  • Mikel says:

    1 Apr1 April 08:10

    It’s a shambles. We’re in a similar position. Flight cancelled at short notice but I was fortunate enough to have the refund button available. That said, 2 weeks later there’s still no refund for the return leg of our journey. Refund processing. Abandoned us at very short notice in Faro 24hrs “due to Coronavirus” (to avoid compensation claims and then flew the same route 2 days later. Seriously considering going down the chargeback route now. We have another return flight (x4) booked for next month totalling £900.

    • Mikel says:

      1 Apr1 April 09:23

      Tom, as you know they can dispute it and Amex isn’t particularly good at fighting your corner. I had an Avis chargeback when they charged me for an extra driver (free when booked via BA) Despite sending them all the necessary documentary evidence to support my claim, they reversed the chargeback when Avis challenged it. My Initial route was via BA but they dragged their heels over it and I decided on the chargeback option as a last resort. Thankfully BA stepped in after 5 months and refunded me. Disappointed in Amex.

      • Philip says:

        1 Apr1 April 10:02

        Is that because Amex is a charge card rather than credit so different legislation applies ?

    • mvcvz says:

      1 Apr1 April 10:01

      Yes, I too have an Easyjet return flight refund due to cancellations “being processed”. Was supposed to reach my account in seven days, but that was fifteen days ago and still no sign. It’s less than £150 so I don’t really give much of a toss either way. However, it’s irritating a) that millions of quid can be paid out in dividends, yet refunds remain in the company coffers and b) that Easyjet appears to consider itself above the law.

      And before anyone asks, yes I do understand how dividends work.

      • Bill says:

        1 Apr1 April 10:14

        I phoned easyjet yesterday. Took 2 hours to get answered

        • mvcvz says:

          1 Apr1 April 11:57

          Thanks. Confirms the validity of my decision to not be arsed with that.

    • Lady London says:

      1 Apr1 April 10:47

      If you had accomodation or meal costs in Faro before you could get a replacement flight then you are also entitled to have easyJet claim those as well as any extra transport costs to and from accommodation. EU261.

      They are are also obliged to pay you your replacement ticket costs if they left you in a situation where you had to pay your own replacement ticket.

    • Lady London says:

      1 Apr1 April 18:56

      @Mikel

      Amex to BA “Did you run that flight our Amex customer has asked us for a chargeback for?”

      BA “Err… No.”

      –> chargeback stands.

  • TGLoyalty says:

    1 Apr1 April 08:51

    I imagine credit card companies are withholding a lot of easyjet money right now.

• letBAgonesbe says:

  1 Apr1 April 07:16

  OT As a point of reference to those who requested VA point transfers to Hilton.
  I requested mine 15 days ago and though they confirmed it is all ok, still no sign of points in my Hilton account.

  • Genghis says:

    1 Apr1 April 07:37

    @Stephen reported a couple of days ago that VFC noted points should be in HH accounts on Friday. Let’s see…

    • Tamara says:

      1 Apr1 April 09:37

      Any info regarding when IHG points are going to be transferred? I’ll have ~15k miles coming in this month from CC and will be missing the Friday cut off date for HH.

• Melonfarmer says:

  1 Apr1 April 07:56

  Threatening to fire non-execs should raise serious governence issues. These may be unprecedented times (for the unprepared), but other investors should crucify him for this threat. Stelios is acting as though the Company is his completely.

  There’s also the small matter of a contract with Airbus. I used to work in systems so may be slightly biased, but easyJet (Stelios) is way out of line imho.

  • Paul Pogba says:

    1 Apr1 April 08:05

    Insisting the company pay his dividend despite the company bleeding cash in an uncertain economic period and threating the board tells you a lot about the man I suspect.

    • John says:

      1 Apr1 April 08:09

      Do you understand how dividends work?

      • Paul Pogba says:

        1 Apr1 April 09:12

        A proportion of the profit after tax is proposed as a dividend by the directors and approved by shareholder vote. I appreciate this has all happened but we’re in extraordinary circumstances and any decision that has been made can be unmade at an EGM if necessary.

        The PRA have effectively forced the finance industry to do the same, if the airlines expect state assistance they should at the very least be trying to preserve themselves as long as they can.

        • Tom B says:

          1 Apr1 April 09:16

          Well said Paul

        • mr_jetlag says:

          1 Apr1 April 09:45

          looks like he does 🙂

        • Philip says:

          1 Apr1 April 10:06

          You can not blame him for trying to avoid govt bailout He will be diluted and lose his divi income , it is easy to think atruistically when it is not your income . He was against the aircraft deal before this kicked off and those profits have accrued that was his share , he is prepared to re invest to keep the business afloat .

        • Philip says:

          1 Apr1 April 10:07

          Altruistically , apologies .

        • Anon says:

          1 Apr1 April 11:43

          Banks are different due to strict capitalization rules no?

          Once a dividend is declared it impacts movement of share prices and the level of transactions of a stock. People would have to be compensated.

          I liked his line about the alternative being giving Airbus a bailout

  • Ralph says:

    1 Apr1 April 09:00

    I’m not sure why it is a governance issue. The NEDs will only get ‘fired’ if enough shareholders, in addition to Stelios, vote in favour of their removal.

    • ChrisC says:

      1 Apr1 April 20:30

      Threatening your independent directors with removal IS a governance issue.

      It can be seen as coercion for them to vote a certain way that whilst beneficial to one shareholder is not beneficial to the rest (who are the majority)

• Philip says:

  1 Apr1 April 08:00

  Stelios has had the hump with Airbus ever since the EasyJet board decided to switch over to the A3XX series and away from B737s with which he started the company.

• Paul Pogba says:

  1 Apr1 April 08:02

  You say AIrbus will be able to fill the spots in its production line but won’t every other airline on earth be looking to cancel or defer orders? I’m still not sure that travel is going to be as easy in the medium term as it was last year, laissez-faire visas on arrival might be replaced with pre-checks for vaccinations or protracted quid-pro-quo bilateral agreements. The industry could end up a lot smaller.

  • Brighton Belle says:

    1 Apr1 April 08:30

    I think Germany tells us what’s going to happen. You get a certificate to prove you have had Covid19 and carry antibodies and can go back to work. Next we’ll have a certificate needed to cross international borders and get on a plane. The problem is getting the antibodies. Get infected or vaccinated. .. which doesn’t yet exist and might take 18 months to arrive. The pussycat virus might keep “shoestring” out of circulation for a while.

    • Edd Morris says:

      1 Apr1 April 09:12

      I absolutely think you’re correct on this.
      Undoubtedly for USA where there is a hard border, you’ll need proof of immunity or you quarantine on arrival for 14d.
      The interconnected world we once thought was normal could take many years to return.

    • Paul Pogba says:

      1 Apr1 April 09:27

      Thats possible, but its also possible that WuhanFlu ends up being the same as HIV, Hep C and seasonal flu in that we can’t create a vaccine for it – either because of the characteristics of the virus or because of mutations and this idea of immunity disappears. Its also possible this vanishes as quickly as SARS did.

      If the worse economic forecasts prove to be accurate (30% contraction US Q2, Morgan Stanley) I think governments are going to exercise extreme caution before risking a second wave. Civil disorder in developing nations might also make them places you no longer wish to visit.

      There are hundreds or more unknowns.

    • mvcvz says:

      1 Apr1 April 09:37

      Firs upside to all this I’ve encountered.

• Richard Relief says:

  1 Apr1 April 08:27

  I suspect the only important missing bit is data – with good data, we’d all be reaching similar conclusions as it would be obvious.

  My job is to suggest data-driven possibles/ likelies ahead of the herd.

This article is closed to new comments. Feel free to ask your question in the HfP forums.