easyJet plc (EZJ.L,ESYJY.PK) announced that it has entered into arrangements with Airbus S.A.S. to acquire 35 Current Generation A320 Aircraft for delivery between 2015 and 2017 under its existing agreement and 100 New Generation A320neo Aircraft for delivery from 2017 until 2022, under a new agreement.
As per this new agreement, Airbus has also granted the Company the right, but not the obligation, to acquire up to 100 further New Generation A320neo Family Aircraft.
easyJet said its board considers that the New Framework Arrangements are in the best interests of the Company and Shareholders as a whole and, accordingly, unanimously recommends that Shareholders vote in favour of the Resolution to be proposed at the General Meeting.
According to the airline, Assuming a fuel price of US$1,100 m/t, the 180 seat New Generation A320neo Aircraft is expected to deliver a cost per seat saving of around 11% to 12% compared to the 156 seat Current Generation A319 Aircraft, comprising a 7% to 8% saving from up gauging from a Current Generation A319 Aircraft to a Current Generation A320 Aircraft and 4% to 5% from moving from a Current Generation A320 Aircraft to New Generation A320neo Aircraft.
The airline said of the 135 aircraft to be delivered under the New Framework Arrangements, 85 aircraft will be for the planned replacement of the existing fleet as it ages over the next 9 years and aircraft are returned to lessors or sold. The New Framework Arrangements will also enable, but not require, easyJet to grow over the next 9 years.
The airline's board believes that there are profitable opportunities for easyJet to grow seats flown at around 3% to 5% a year. This comprises 2% to 4% seat growth from the introduction of new routes and/or increased frequencies and approximately 1% seat growth from flying 180 seat aircraft on routes currently operated by 156 seat A319 aircraft.
easyJet also said that its board has negotiated a significant amount of flexibility in the New Framework Arrangements to protect the Company in the event of negative changes in the external environment. This would allow the Company to reduce the fleet size to 165 aircraft by 2022 compared to the current fleet size of 211 aircraft, taking into account planned returns to lessors and sales. However, there is also flexibility within the New Framework Arrangements and existing fleet arrangements for the Board to increase the fleet size to 298 by 2022.
easyJet noted that it expects the new Framework Arrangements to be funded through a combination of its internal resources, cashflow, sale and leaseback transactions and debt.
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