July 17, 2017 / 11:44 AM / a year ago

EasyJet can afford a spell on autopilot

LONDON (Reuters Breakingviews) - For easyJet, losing a chief executive is manageable. While Carolyn McCall, who has taken up the top spot at British broadcaster ITV, was the mastermind of the UK airline’s steep ascent over the past seven years, she leaves behind a financially and strategically sound company that can cope with a spell on autopilot.

FILE PHOTO: An EasyJet aircraft is ready for take off at Cointrin airport in Geneva, Switzerland, June 30, 2017. REUTERS/Denis Balibouse/File Photo - RTX3BF9N

Since McCall took over in July 2010, easyJet cranked out an average shareholder return of 25 percent per year, compared to just 8 percent over the same period before she joined from the Guardian Media Group. A share price increase of 40 percent this year makes easyJet one of the best-performing FTSE 100 companies. It is also one of the few European airlines that have paid a dividend consistently since 2011.

A few smart decisions helped. McCall increased the number of back-up crew and aircraft available and added more time in the schedule to turn flights around. Punctuality improved by a third during her first three years. She also made the customer experience more similar to that of premium airlines. Non-budget features like allocated seating and rebookable tickets put some space between easyJet and Ryanair. The UK carrier now trades at a small premium to its Irish rival, as a multiple of next year’s earnings, for the first time in three years.

Airlines seldom rely on one person for their fortunes. EasyJet has also benefited from the lack of decades of history as a national carrier, which puts it at an advantage to the likes of Lufthansa. Some 80 percent of its flights are from or to airports which are full during peak hours, which reduces the airline’s exposure to new competitors and protects profits.

A blueprint to grow while keeping costs per seat excluding fuel constant is in place. The creation of a Vienna-based sister airline will secure access to the inner-EU market after Brexit. New larger, more fuel-efficient aircraft are on order. McCall has answered easyJet’s big operational and strategic questions. The problem in luring a replacement is that there may not be much more altitude to gain.


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