easyJet founder and largest shareholder Stelios Haji-Ioannou has said that the United Kingdom low-cost airline needs to cancel orders for new Airbus aircraft. The Greek-Cypriot tycoon who founded the Luton Airport (LTN)-based airline in 1995 has said that the airline needs to plan for 250 aircraft and not the 344 it operates now.
While speaking with UK business newspaper the Financial Times on Monday, the 53-year-old entrepreneur and largest shareholder in the airline called for easyJet to cut its fleet size by a quarter if it wants to survive the coronavirus crisis.
“When we emerge from this effective ban on air travel — albeit stuck in a financial recession — all airlines will have to adjust their business plans to run much smaller fleets than they were beforehand,” he said.
“The number of aircraft in the fleet and the number of aircraft an airline buys from Airbus is critical. Everything else pales into insignificance or just follows on anyway.”
easyJet placed an order for 12 A320neos in November
Just last November before the deadly virus was discovered in Wuhan, China, easyJet placed an order with European planemaker Airbus for 12 A320neos, an order valued at $1.368 billion.
Should easyJet now look to cancel the order they would incur large financial penalties from its only aircraft supplier.
As governments around the world impose travel bans and quarantine restrictions to stop the spread of COVID-19, airlines are worried that they may go out of business.
In light of the restrictions, easyJet has had to ground most of its fleet, only operating a limited number of flights to provide essential services. Today, Tuesday, March 24th, 2020, the airline will only operate between 20 and 30 flights as opposed to around 2,000 it would normally have flown.
easyJet had its best year in 2015
A long-time critic of the company’s expansion plans, Mr. Haji-Ioannou has called the purchase of new aircraft purchases “destructive of long-term value.”
The former airline boss who still holds a 33.7 percent stake in the airline has long argued that easyJet needs to operate a fleet of just 250 aircraft. In 2015, with a fleet of this size, easyJet had its most profitable year ever. It will not show a profit for years if it continues to purchase new planes.
“With the overall economy going into recession now, there is no way these 100 incremental aircraft will make any profit in the next 5-7 years,” he said. “They will just lose more money by having them.”
Meanwhile, despite the criticism from Mr. Haji-Ioannou, easyJet said it was doing everything it can to cut costs during the current coronavirus pandemic.
“This includes working with all of our suppliers to defer and reduce payments where possible including aircraft and maintenance expenditure,” the company said. “We also remain focused on trying to safeguard jobs for the long term.”
Airlines will look to reduce aircraft
In both the short and long-term, the consequences emanating from the coronavirus outbreak mean that people will be traveling less. Because of this, airlines that are struggling now will find it difficult to survive without government help.
Those airlines that do manage to weather the storm will probably reduce their fleet size to increase profits.
At the moment airlines cannot make plans for the future, but what I do know is that if the current crisis continues into the summer many airlines will go under unless they get help.