EASYJET yesterday took steps to placate founder Stelios Haji-Ioannou’s demand that the airline curtails its expansion ambitions in favour of improving profit margins.
Still Easyjet’s largest shareholder, Sir Stelios has argued that the low- cost airline market, which has enjoyed huge growth in the past decade, has now reached maturity and that it is time for the company to prioritise improving shareholder wealth instead of growth for its own sake.
While unveiling full-year trading figures yesterday, the airline’s board (which Stelios quit earlier this year) also said it intends to pay its first ever dividend.
The parallel with rival Ryanair’s decision to start paying dividends is obvious.
As well as paying money to shareholders, Easyjet was sounding more circumspect about plans to buy new aircraft. While it would still buy 24 more planes, this figure is only one-fifth of the number previously mentioned. Any further orders for new planes will depend on market growth.
When you add into the equation the fact that Easyjet also reported a big rise in pre-tax profit, it would seem Stelios’s shareholder activism has paid off, quite literally, albeit not immediately as the share price fell yesterday despite all the good news.
The question is what does slower growth mean for the future of Liverpool Airport? Slower expansion by no-frills airlines combined with the fact that Easyjet is building a base at Manchester has to pose some degree of challenge.
While Easyjet chief executive Carolyn McCall was eager to emphasise that Liverpool John Lennon Airport would not lose out to its near neighbour, the fact is Manchester is very much bang in the middle of the same geographic marketplace as JLA.
FASCINATING news from the Zhuhai airshow yesterday.
China used its biggest airshow to trumpet its arrival as a serious planemaker capable of competing for orders with Boeing and Airbus.
COMAC (Commercial Aircraft Corp of China) has received orders for 100 planes from three Chinese airlines for a model that will fit in the market place alongside the 737 and the A320.
A clearly sensitive Airbus yesterday insisted the emergence of another rival doesn’t concern it, but the fact is China will represent a massive part of the total world market for airliners. Even if COMAC confines its ambitions to its home country, it will capture market share that would otherwise have gone to Boeing or Airbus.
But what are the chances that COMAC will confine itself to the domestic market?
If the planes keep a good safety record, then why wouldn’t non Chinese airlines buy them?
The Chinese have the advantage of cheaper labour and a weak currency, so they will easily beat their western rivals on price.
It is of course a disturbing development. While the West has long accepted that China and other emerging countries will gobble up market share for textiles and the assembly of some types of electronic gadgets, high-tech, precision engineering was meant to be our salvation. It was thought the Chinese wouldn’t be able to match western quality and technology for many years yet.
Clearly we were wrong.
And what’s next? China is seeking to develop its universities, so we may not be able to cling onto gene science or molecular chemistry for much longer.
Within a decade, the West will be unable to claim any sector as our preserve.
