(Bloomberg) -- EasyJet Plc placed the biggest aircraft order in the discount carrier’s history, potentially buying as many as 257 jets from Airbus SE in a commitment valued at almost $20 billion as it seeks to benefit from booming travel demand and get its hands on planes that are rapidly selling out.
The airline will buy an additional 157 Airbus A320neo jets, with an option to add 100 more, with deliveries running through 2034. The carrier is also converting 35 of its previously ordered A320neo into the larger A321neo as it looks to tap better economies of scale.
“It’s been known now for some time that there is a difficulty to get slots,” Chief Executive Officer Johan Lundgren said on a call with reporters. “We did a very thorough process as you can imagine. It’s taken over 12 months to get to the stage where we are today.”
This year is shaping up to be among the hottest for large aircraft deals, as EasyJet follows rival Ryanair Holdings Plc and other carriers including United Airlines Holdings Inc. and India’s Indigo with a giant purchase. At the same time, Airbus and Boeing Co. are finding it harder to ramp up output and meet the surge in demand because of parts shortages, intensifying the race among airlines for the last remaining production slots still available this decade.
Airbus and rival Boeing Co. have said they’re practically sold out for years, and the rush for new planes is now extending to bigger, more-expensive widebody models. Airlines are set to continue their buying spree next month at the Dubai Air Show, where local champion Emirates has already teased that it wants to order more.
EasyJet fell as much as 4.7% in London, before erasing losses and trading unchanged. Airbus gained as much as 1.4% in Paris.
Lundgren said the carrier also held discussions with Boeing about a deal. The US manufacturer has been additionally constrained by manufacturing defects at a key supplier that’s holding back output of its 737 model. EasyJet now operates an all-Airbus fleet, and discount carriers generally prefer to operate planes from one manufacturer to keep training and maintenance costs low.
The purchase, which requires shareholder approval, will let EasyJet replace its remaining A319 aircraft, a smaller variant that’s no longer popular with airlines. The deal also allows the carrier to switch out about half of its older-generation A320ceo aircraft that have less fuel-efficient engines.
The purchase and conversion value is based on the latest Airbus list prices, though customers typically get steep discounts for major orders.
EasyJet said it’s in exclusive talks with CFM International, a General Electric Co. and Safran SA joint venture, for engines to power the new planes.
The carrier expects capacity in the quarter that began Oct. 1 to grow 15%, saying ticket yields are ahead year on year. EasyJet expects to report a fiscal year profit before tax of between £440 million and £460 million, following a bumper summer.
Lundgren said he continues to see booking momentum in the winter, although EasyJet may need to stimulate demand with discounts outside of the peak school holidays, which he said was typical for the period.
The airline’s medium-term target is to reach pretax profit of more than £1 billion, it said. The company also said it will reinstate its dividend payments, and intends to pay out 10% of this year’s profit after tax in early 2024. It expects to increase payouts to 20% of profit in next year.
(Updates with other aircraft deals announced this year)
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