Holidaymakers risk paying the price for a US takeover of easyJet

Ben MarlowTue, June 2, 2026 at 5:45 AM UTC

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EasyJet is facing a multi-billion-dollar swoop from American outfit Castlelake - Paul Ellis/AFP via Getty Images

The war in Iran has turned UK plc into a sitting duck, unleashing a fresh wave of opportunistic takeover bids for companies whose share prices have been torpedoed by surging costs driven by the conflict.

It is hardly a shock that easyJet, facing a multi-billion-dollar swoop from American outfit Castlelake, finds itself among those targeted. Surging fuel costs have hit the travel industry hard and spooked holidaymakers.

Shares in the low-cost airline have fallen by roughly a quarter since US bombs started landing on Tehran, leaving it highly vulnerable. What’s more, the impression is of a company desperately in need of a shake-up after losing ground to British Airways and Ryanair in recent years.

Still, the idea that an opportunistic, debt-fuelled US private equity bid is the answer to easyJet’s woes is plain silly.

Financial engineering is rarely – if ever – the solution to any company’s challenges, and there is no reason to think easyJet is going to be fixed by the sort of short-termism that pervades the buyout world.

On the contrary, customers have every reason to fear losing out through reduced choice and more expensive flights.

Private equity is founded on making a quick profit, which usually means price increases, cost-cutting and ultimately a fast exit. In easyJet’s case, that might mean a break-up or sale to a rival.

The last thing holidaymakers need is less competition, given the extortionate cost of going anywhere these days. Recent research from HSBC found the price of a week’s holiday has jumped by 30pc since 2019, outpacing general inflation.

The robust response of the easyJet board to the possibility of an acquisition is grounds for optimism.

For once, it looks as though a UK household name isn’t about to meekly flop into the hands of a bidder at the first opportunity.

There have been far too many of those in recent years, including several major companies that should have come with a firm “hands-off” warning on the grounds that they are vital to our national interests.

The Government’s willingness to allow a profit-driven Czech financier to take control of Royal Mail has the potential to become one of the greatest acts of self-harm ever committed.

Equally, it seems highly unlikely that Thames Water will benefit from being owned by a pack of Wall Street vulture funds.

Yet cowardly ministers seem perfectly willing to let such a deal happen if it avoids the cash-strapped Treasury having to step in.

The easyJet board is absolutely right to highlight what it calls “the highly opportunistic timing” of Castlelake’s interest – confirmed in a stock exchange announcement late on Friday night.

That the private equity firm is circling at a time when easyJet shares are trading at three-and-a-half-year lows is almost certainly no coincidence.

It comes just days after the airline warned that bookings were running below last year’s levels and that it was having to raise fares to offset higher fuel costs following disruptions to oil flows through the Strait of Hormuz.

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Turmoil in the Middle East cost the budget carrier an additional £25m in fuel costs in March alone, and Kenton Jarvis, easyJet’s chief executive, has said the company faces a potential £175m fuel bill this summer if prices don’t bounce back.

Though no guarantee that directors will hold out – the board says it is “clear in its duty of aiming to maximise shareholder value and will consider any proposal” – the tone of the response suggests they intend to put up a decent fight.

Equally, the company’s assertion that there are “considerable regulatory, financial and other execution challenges associated with a potential takeover” suggests it thinks Castlelake will be defeated by outside forces as much as by any board resistance.

Under EU rules, European airlines must be majority owned by investors within the region, and as Ruairi Cullinane, an analyst at RBC Capital Markets, points out, the requirements “could, at the very least, complicate a takeover of easyJet by Castlelake, if acting alone”.

Yet the greatest obstacle to any deal could be Castlelake itself if it comes in with a low-ball bid.

The company says it has been quietly hoovering up easyJet shares. As a result, it would be required to make an offer of at least 403.2p a share under the takeover rules.

With easyJet stock changing hands at 464p before the war in Iran, the standard 30pc bid premium would surely mean any suitor would have to put at least 600p a share on the table as an opening salvo to avoid being given short shrift.

The airline’s ability to be a master of its own destiny is complicated by the presence of founder Sir Stelios Haji-Ioannou as its largest shareholder.

Easyjet’s ability to be a master of its own destiny is complicated by the presence of Sir Stelios Haji-Ioannou - Chris Radburn/PA

Meanwhile, thanks to a secret share raid, Castlelake has quietly built up a 2.1pc stake in the business, giving it greater – albeit limited – leverage.

The private equity firm will no doubt believe it can capitalise on longstanding concerns from shareholders regarding easyJet’s performance.

The board’s claim that the airline “is in a position of strength” thanks to a balance sheet with £430m of net cash, high levels of customer satisfaction, and forecast profits of more than £1bn, belies an underwhelming track record.

The company’s share price halved at the beginning of the pandemic and has continued downward, trading as low as 339p in recent weeks – a fall of almost three-quarters.

However, there is nothing to suggest a sale to private equity would mean a change in fortunes. Quite the opposite. Castlelake’s involvement in the restructuring of Scandinavian Airlines (SAS) in 2023 left it with a reputation as a hard-nosed, financially driven investor after shareholders, including the Swedish state, were wiped out.

Analysts, meanwhile, have repeatedly warned that the value of easyJet’s giant fleet of planes has long dwarfed its market cap, leaving it wide open to the sort of asset-stripping private equity is renowned for.

Might Castlelake shun such practices and prove to be a benevolent owner that engineers a much-needed turnaround?

SAS insists it is in better shape after Castlelake teamed up with Air France to buy it out of Chapter 11 bankruptcy.

But too many once-great UK companies, including Asda and Morrisons, have been laid low by private equity ownership for the easyJet board to take such a significant gamble.

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Source: “AOL Money”