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EasyJet reveals mega deal to buy 135 Airbus planes

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(Globalpost/GlobalPost)

EasyJet announced a huge deal on Tuesday to buy 135 Airbus single-aisle A320 passenger planes, including 100 new generation neo aircraft, spotlighting tensions between the British no-frills airline and its founder Stelios Haji-Ioannou.

EasyJet has negotiated "very substantial" discounts on the combined list price of $11.9 billion (8.9 billion euros), the airline said. Industry sources told AFP that EasyJet may end up paying only half the amount.

The airline also has an option to buy an additional 100 A320neo planes, EasyJet said in a statement issued amid the Paris Air Show where European aircraft maker Airbus is battling for orders with US rival Boeing.

The deal drew fresh opposition from the founder of the airline and its biggest shareholder Haji-Ioannou, or Stelios as he is widely referred to, who opposes the strategy of increasing seat capacity.

EasyJet chief executive Carolyn McCall meanwhile said she was "delighted" with the deal struck.

"All manufacturers competed hard for the easyJet business. Both Airbus and Boeing offered us new generation aircraft that met our requirements and offered greatly improved fuel efficiency," McCall said in the company statement.

"Ultimately, Airbus offered us the best deal, and at a price with a greater discount to the list price than their landmark fleet purchase with easyJet in 2002," she added.

EasyJet is to acquire 35 current generation A320 aircraft for delivery between 2015 and 2017 under an existing option agreement, and 100 new generation A320neo planes for delivery between 2017 and 2022 in a new deal.

"We are delighted our reliable aircraft have met easyJet's demanding criteria," Airbus Chief Operating Officer-Customers John Leahy said in a separate statement.

EasyJet said that 85 of the 135 ordered aircraft will be used to replace ageing passenger planes, with the remaining 50 used to build on its strategy of increasing its seat capacity of between three and five percent annually.

The company's network spans Europe and it flies also to a sprinkling of destinations in north Africa and the Middle East.

EasyJet shares rallied 3.0 percent to stand at 1,290 pence, topping London's benchmark FTSE 100 index, which was up 0.85 percent overall in afternoon deals.

Tuesday's massive deal announcement is subject to approval by EasyJet shareholders, although Haji-Ioannou does not have a large enough stake to alone scupper the company's intention to purchase new planes.

Haji-Ioannou has long argued that EasyJet should be returning money to shareholders via the payment of dividends, rather than buying more planes.

In a statement issued on Tuesday, he said: "Another huge capital expenditure deal with the same supplier at 'secret' prices.... Naturally it raises more questions than answers.

"We will ask all our questions when we have seen the full shareholder circular which must include the actual price to be paid for each aircraft and the incremental profit each of these aircraft will actually deliver," he added.

Amid the tensions between Haji-Ioannou and the EasyJet board, Mike Rake last month stepped down as group chairman to be replaced by John Barton, who has also remained in his role as chairman of British clothing retailer Next.

Haji-Ioannou meanwhile last year launched the first pan-African no-frills carrier, Fastjet, while he and his family still own almost 37 percent of EasyJet.

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http://www.globalpost.com/dispatch/news/afp/130618/easyjet-reveals-mega-deal-buy-135-airbus-planes