EasyJet CEO Puts Stamp on Airline -- But Rules Out Norwegian Bid

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(Bloomberg) -- EasyJet Plc said it wants to expand its holiday-tour unit and attract more business travelers as new Chief Executive Officer Johan Lundgren moves the airline beyond an increasingly competitive discount market.

Lundgren named five top managers Tuesday, led by the appointment of Garry Wilson from TUI AG to head the holiday arm, which will become a focus for investment along with a new loyalty program and measures to target corporate travelers. The stock rose following a smaller-than-expected first-half loss.

EasyJet is targeting a broader range of markets as the discount sector becomes an increasingly tough battleground, with network carriers setting up their own cut-price units and Ryanair Holdings Plc expanding operations. Lundgren said he won’t be muscling in on the bidding for Norwegian Air Shuttle ASA after IAG SA had two approaches rejected and has no plans to enter the long-haul low-cost market where the Scandinavian company is a pioneer.

“We are not interested in buying Norwegian. We’re going to focus on our core,” Lundgren, who is Swedish, said on a conference call with journalists. “We have a lot of plans and initiatives.” Neither will Luton, England-based EasyJet become part of a wider bid group with other carriers, he said.

Alitalia Pursuit

EasyJet still intends to be “on the right side” of a consolidation trend in European aviation and remains interested in bidding for the short-haul operations of failed Alitalia SpA., according to Lundgren, who joined in December. That approach was initiated by his predecessor Carolyn McCall, now CEO of broadcaster ITV Plc.

Lundgren’s focus on leisure harks back to his own career at TUI, the world’s biggest tour operator, where he ran the U.K. business. EasyJet entered the vacation sector a few years ago but has so far failed to fully exploit its low cost base and network of holiday routes from major airports, according to the CEO, who says he’s targeting “a significant share” of the market. Among changes, the carrier aims to develop a closer relationship with hotel operators.

EasyJet will attempt to increase the number of corporate passengers by modifying its schedule to add “a business-bias” on certain routes and introducing a new online portal to allow small- and medium-sized companies to book more easily. The carrier plans to enhance a loyalty program of which less than 10 percent of customers are currently members.

Lundgren, who ruled out further aircraft purchases in the near term, named other top managers to help see through the initiatives. He recruited Luca Zuccoli from personal-credit checker Experian Plc as chief data officer and appointed Flic Howard-Allen, formerly of Associated British Foods Plc and Marks & Spencer Group Plc, as communications head. Thomas Haagensen, managing director of EasyJet’s Austrian arm, becomes group markets director, and Lis Blair steps up to chief marketing officer.

Earnings Boost

EasyJet’s first-half result was one of its “best ever” for the winter trading period, the CEO said. The demise last year of Monarch Airlines Ltd. and Air Berlin Plc, together with Alitalia’s insolvency, reduced competition in the traditionally weak travel season, bolstering fares, while the timing of Easter gave a late boost to earnings.

The pretax loss narrowed to 18 million pounds ($24 million) from 212 million pounds a year earlier after analysts had predicted a 74 million-pound deficit. Excluding start-up costs for a new operation at Berlin Tegel airport EasyJet would have posted a profit of 8 million pounds.

EasyJet shares advanced as much as 4.9 percent, hitting their highest price intraday price since 2015, with the stock trading up 2.1 percent at 1,720 pence as of 11:49 a.m. in London.

Sales jumped 20 percent to 2.2 billion pounds, aided by a near 11 percent increase in revenue per seat, a measure of pricing. Full-year pretax profit is forecast to be in a range of 530 million pounds to 580 million pounds.

"Despite the good news, costs remain a concern," analysts at Sanford C Bernstein wrote in a note. "We see a risk that EasyJet’s medium-term cost reduction targets will become increasingly challenging to achieve as current initiatives do not appear to be sufficient to prevent unit cost inflation."

©2018 Bloomberg L.P.

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