EasyJet’s head got rid of the cautious label and started a fight with his competitors

Even with the bleak outlook for the aviation industry, John Lundgren decided it was time to become more ambitious. After being very cautious in responding to the pandemic, the boss of EasyJet is turning to a bolder strategy to deal with arbitrary rivals Ryanair and Wizz Air.

The British low-cost airline is buying flight slots at busy airports, including London Gatwick Airport, and expects to make a major turn next summer, returning to levels close to pre-pandemic flights.

Lundgren hopes that this change will support easyJet’s hard-hit share price and satisfy some “underwhelmed” investors who have been calling for a more aggressive strategy.

This shows that the Swedish executive who has always emphasized “credibility and trustworthiness” hopes to increase the challenge to Ryanair and Wizz Air, two other large low-cost airlines in Europe.

“In uncertain times, there will always be big mouths to fill the vacuum, and they have unlimited expectations for long-term growth. This may be very attractive to some people,” he told the Financial Times. Ryanair’s owner Michael O’Leary and Witz’s Joseph Varadi are both optimistic, and they are both optimistic about their growth forecasts.

With the support of easyJet’s £1.2 billion in funds raised in September that exceeded expectations, Rungren’s new approach comes at a critical moment for the airline, as uncertainty has swept across the whole after the emergence of the Omicron coronavirus variant last week. industry.

He spoke before the British government announced the new travel restrictions on Saturday night, which dealt a blow to the aviation industry’s hopes of recovery.

EasyJet’s share price is 50% below pre-pandemic levels, which is in stark contrast to the rebound in Ryanair and Wizz Air, which has ordered hundreds of jets to take advantage of the weaker group’s retreat , In order to achieve rapid expansion.

O’Leary talked about the once-in-a-lifetime market share opportunity due to the pandemic, and Wizz initiated an opportunistic bid for easyJet, which was unanimously rejected by the board of directors of the British group.

However, some of Lundgren’s caution still exists. “Our position is unclear, and the uncertainty that has been demonstrated this week [with the emergence of the Omicron variant] For example, this means you must also be realistic and understand that this is not a short-term sprint. “

His approach is based on the airline’s difficult year in the past. The airline lost more than £2 billion during the pandemic as it slowly rebuilt its flight schedule and focused on operating what can fill seats to maximize returns. route.

But compared with Ryanair and Wizz Air, its share price and capacity are sluggish, and it is expected to be 65% of normal levels this quarter. Both companies have returned to the pre-pandemic timetable, which prompted some people to question Lundger Has Lun charted the correct course.

An industry executive who understands easyJet’s negotiations with the airport said he was shocked by the airline’s cautious attitude in adding new routes and seizing opportunities after the pandemic.

An industry executive stated that he was shocked by easyJet’s cautious approach to seizing opportunities after the pandemic © Jeremy Suyker/Bloomberg

Eddie Wilson, an executive at Ryanair, said that easyJet “seems to be gradually retreating.”

“They are getting smaller and smaller… We always seize opportunities in such times,” he said at an industry event.

In fact, Lundgren admitted that shareholders felt that the targets set in the company’s September annual performance report were not bold enough.

He talked about the goals including the ability to return to the pre-pandemic by 2023 and the realization of low-end capital returns within the same time frame, and said: “As we all know, some people may feel overwhelmed by these goals.”

“There is still uncertainty about the pace of recovery. So you also want to make sure you come up with a target that you think you can hit. You know, my ambition is of course to defeat them. This is the whole purpose of everything we do, “He added.

However, there is a reason why he has adopted a more cautious approach than his two main competitors. The carrier suffered losses due to its exposure to the UK market, which is recovering more slowly than continental Europe due to stricter travel restrictions (including expensive tests).

It also takes off from airports that are more expensive than Ryanair and Wizz, and cost more.

In addition, Lundgren also faced severe criticism from the company’s largest shareholder and founder, Stelios Haji-Ioannou, who wanted the airline to reduce its fleet and launched an unsuccessful bid to replace the CEO and other board members last year.

The line chart of the percentage of passengers in 2019 shows that EasyJet is growing slower than its competitors

Although Haji-Ioannou’s shares were diluted from 25% when the airline raised funds in September to 15%, the impact of its shares has been greatly reduced, but the pressure to reduce business has complicated the airline’s challenges.

“I just noticed that in the 14 months of the pandemic, the company has received some criticisms and inquiries… Why do we order all these aircraft? There are more now, okay, do you have enough?” He Say.

He also faces the threat of a competitor’s acquisition, which became apparent when Wizz bid for the airline this fall.

“It’s not uncommon for these things to happen. Similarly, we ourselves will look at other companies from time to time,” he said.

However, as the industry recovers from the pandemic, he does not accept major consolidation and expects the airline to continue its recovery. Summer bookings have now surpassed pre-pandemic levels, and the accumulation of airport slots means that the airline has the ability to grab market share.

He also received early support from the new chairman Stephen Hester, a city veteran who took office on Wednesday.

Hester stated on the first day that the airline “will do everything possible to create a real shareholder backlash in the coming years”. He emphasized the airline’s renewed determination to be the winner of the pandemic and ultimately rewarded long-suffering shareholders.

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