easyJet agrees delivery dates on deferred aircraft
On 9th April 2020, easyJet announced the net deferral of 24 aircraft deliveries versus our previously disclosed fleet plan. easyJet and Airbus have today finalised the exact delivery dates for aircraft deferred as a direct response to COVID-19.
In total, 32 aircraft with original delivery dates between June 2020 and December 2021 were deferred. As 8 aircraft were deferred from FY2020 to FY2022, the net number of deferrals from the Financial Years 2020, 2021 and 2022 was 24 aircraft (being 32 less 8), as announced on 9th April 2020. These 24 aircraft were originally deferred beyond December 2022 and it has now been agreed that these aircraft will be delivered from FY2025 to FY2027.
All aircraft purchased by easyJet under the terms of the original 2013 Airbus agreement are subject to a very substantial discount from the list price which remains unchanged. Within the 2013 agreement a price escalation mechanism is used to reflect market inflation in labour and material costs1. By applying this inflationary mechanism, the future aggregate cash price of the 32 deferred aircraft, at their future delivery dates, could increase by up to c.£95 million2 the large majority payable between FY2025 and FY2027. Any increase would be materially offset by the reduced cost of borrowing associated with the significant cashflow benefits in the next 16 months arising from these deferrals (including consequential changes to the schedule of pre-delivery payments).
As part of these agreements, easyJet has also secured for nil consideration an extension to the deadlines for the exercise of existing deferral and purchase rights.
easyJet now has the flexibility until December 2020 to defer two aircraft and the option to not take up to seven aircraft currently scheduled for delivery between FY2022 and FY2026. easyJet has also secured additional flexibility with respect to its existing purchase options of 13 aircraft, by agreeing an extension to the deadline for the exercise of such options from November 2020 to November 2021 (in respect of seven aircraft) and to November 2022 (in respect of six aircraft). These changes complement our pre-existing deferral rights.
Johan Lundgren, easyJet CEO said:
"I am pleased to confirm the detail of easyJet's revised aircraft delivery commitments. The 24 aircraft that were originally deferred beyond December 2022, will now be delivered from FY2025 to FY2027, whilst our significant discount from list price remains unchanged. We have also agreed further flexibility in relation to deferral rights and future purchase options. The changes agreed defer capacity in the medium term while continuing our long-term strategy of replacing our older fleet with the advanced and lower fuel burning A320NEO family."
1 As set out in the circular sent to shareholders prior to easyJet entering into the 2013 agreement with Airbus.
2 £47 million relating to the original deferral of 8 aircraft to delivery in FY2022 and 24 aircraft to delivery beyond December 2022, and £48 million relating to the further deferral of these 24 aircraft to deliver in FY2025 to FY2027.