EasyJet Plc (EZJ) is set to ascend to the FTSE 100 Index next week, joining British Airways on the U.K. benchmark and confounding senior shareholder Stelios Haji- Ioannou’s opposition to its expansion strategy.
Europe’s second-biggest low-cost carrier has doubled its value to 4.03 billion pounds ($6.1 billion) in the past 12 months, making the company the 84th-largest listed in London as of the close of trade today, according to data compiled by Bloomberg News. Businesses can join the FTSE 100 only when they rank among the top 90 to avoid yo-yoing between indexes.
From two planes in 1995, EasyJet has grown to 214 Airbus SAS aircraft carrying more than 59 million people annually, 20 million fewer than rival Ryanair Holdings Plc. (RYA) Led by Chief Executive Officer Carolyn McCall, the company has refined its no-frills model, using allocated seating, flexible tickets and corporate agents to grab a bigger slice of the business market.
“There’s been a huge cost focus and they’ve been very clever at targeting high-fee paying business traffic at primary airports and taking that market share from the legacy carriers, who have been cutting,” said Donal O’Neill, an analyst with Goodbody Stockbrokers in Dublin. “The market value reflects the underlying performance and the performance has been phenomenal.”
FTSE Group will announce its next quarterly assessment of changes to the benchmark’s membership on March 6, basing its decision on closing prices from the previous day. The changes will take effect from the start of trading on March 15.
Shares of the Luton, England-based carrier reached a record high on Feb. 20. The stock advanced 2 percent today, closing at 1,017 pence in London.
CEO McCall, who stepped down as head of Guardian Media Group Plc to join EasyJet in July 2010, targeted the airline’s on-time performance, load factor and profit-per-seat. Her oversight has seen on-time arrivals jump to 88 percent from 60 percent and the load factor, a measure of occupancy, grow to 88.9 percent in 2012 from 87.2 percent two years earlier.
“Carolyn McCall at EasyJet was one of the standout performers of 2012,” Willie Walsh, CEO of British Airways- parent International Consolidated Airlines Group SA (IAG), said Feb. 28 when he presented earnings. When IAG set cost targets to overhaul its Spanish domestic and short-haul service, it benchmarked against EasyJet, he told analysts.
McCall held talks with investor Stelios, who goes by his first name, resolving a branding dispute over the use of the “easy” name. The relationship with the airline’s founder, who still controls 37 percent of its shares, remains contentious: Stelios cut his holding in January for the first time since 2004 and has threatened to sell more stock if EasyJet buys more jets.
“If the board places another order for aircraft it will destroy shareholder value into the future,” Stelios said in January. “Instead of ordering new aircraft, EasyJet should aim for a 10 percent profit margin.”
EasyJet says it’s planning “prudent” capacity increases of 3 percent to 5 percent as it develops a proposal to present to shareholders on fleet management from 2015 and plane deliveries after 2017. McCall also initiated payment of a maiden dividend, boosting payments to one-third of profit after tax last year.
The airline lured 10 million corporate travelers in 2012 and boosted capacity to destinations including Switzerland and France in the last three months of the year. It will add lucrative business connections between Moscow and London, as well as from Milan to Rome’s Fiumicino airport, in March. Competitors flying on the low-cost carrier’s routes trimmed capacity by 800,000 seats in the last quarter of 2012.
Other companies that may join the index include London Stock Exchange Group Plc (LSE), ranked 90, while Serco Group Plc (SRP) and John Wood Group Plc (WG/) may both be removed.
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