US Investor Castlelake Considers Takeover of Easyjet – Share Price Jumps

EU Ownership Rules as a Hurdle

A key obstacle for a takeover by Castlelake are the European ownership regulations. Airlines must be majority-owned and controlled by EU citizens to obtain an operating license in the region.

JPMorgan analyst Harry Gowers explained: "A non-EU controlled company like Castlelake can therefore theoretically not acquire a majority stake in Easyjet and at the same time retain the rights for flights within the EU." Since Brexit, ownership and control rules between the EU and the United Kingdom have been relaxed, but a takeover by a US investor could still cost Easyjet important intra-European flight rights.

However, alternative takeover structures that would allow for the preservation of EU flight rights are conceivable. Industry experts point out that cross-border takeovers in air transport are generally difficult, as take-off, landing, and overflight rights are tied to the nationality of the owners and control relationships.

Financial Situation of Easyjet

Easyjet founder Stelios Haji-Ioannou holds around 15 percent of the shares and receives annual license payments for the brand rights. The airline is under financial pressure: In April, Easyjet issued a profit warning, citing uncertainty due to the Iran war and sharply increased kerosene prices.

When presenting the quarterly figures in May, Easyjet CEO Kenton Jarvis did not provide a profit forecast for the current financial year. Only 40 percent of tickets were sold for the important summer quarter from July to September at that time – three percentage points less than a year earlier.

Management has increased prices for the cheapest tickets and is reducing internal costs. In the seasonally weak first half of the financial year until the end of March, revenue increased by 12 percent to 3.95 billion British pounds (around 4.56 billion euros).

However, due to significantly higher operating costs, the seasonal winter loss before taxes grew by 40 percent to 552 million pounds. In the end, the net loss widened from 297 to 377 million pounds. Last-minute bookings remain strong for Easyjet.