Why easyJet is attracting takeover interest

There is not even a deal on the table but there is little surprise in the City that easyJet has become the latest big UK name to face takeover interest.

It emerged late on Friday that US private equity firm Castlelake was circling the no-frills airline.

EasyJet's US shares were up 10% in response - a performance that was later matched in London on Monday morning.

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The company is very attractive but mostly for negative reasons.

Most can be traced back to easyJet but it has also fallen victim to headwinds outside its control.

Its recovery since the COVID pandemic has lagged that of rivals in a very competitive European budget travel market.

You can see in this chart how shares in Ryanair, the biggest airline by passenger numbers, has performed in comparison.

Its stock has struggled for traction and, as such, easyJet's market value has plunged to £3bn from almost £8bn 11 years ago.

When you factor in the post Brexit weakness for not only UK shares but also the pound, there is value there for any foreign buyer.

The attraction intensifies when the value of its fleet of aircraft is also taken on board, estimated at around £5bn.

So it is not hard to see why Castlelake is interested in potentially taking easyJet private.

The airline most recently reported an expanded loss of £552m for the first half of its financial year despite a 4% rise in revenue to £4bn. It also set alarm bells ringing over the outlook.

EasyJet said customers were leaving it late to book flights and holidays over the core summer season as consumer budgets are squeezed by rising costs related to the effects of the conflict in the Middle East. Doubts have also set in over global jet fuel supply following the summer rush.

The company had already reported a £25m hit from higher jet fuel bills in March alone. It is seen as less hedged against fuel price volatility than many industry peers.

Its fleet is also less fuel efficient.

EasyJet said on Monday there had been no contact so far from Castlelake which has, under City rules, until 26 June to make a formal bid or walk away.

EasyJet shares were up 10% - but still 12% lower in the year to date.

Susannah Streeter, chief investment strategist at Wealth Club, said of the bid interest in easyJet: "Its valuation had dropped to a level not seen for more than three years, leaving the company looking vulnerable despite its strong liquidity position.

"Castlelake clearly believes the market may be underestimating easyJet's longer-term earnings potential and the resilience of its network. easyJet appears open to discussions but does not seem in the mood to accept a bargain-basement offer, calling the bid 'highly opportunistic'."

She added: "This is fresh evidence that the British markets are increasingly becoming a hunting ground for sophisticated institutional investors, with UK-listed stocks continuing to trade at lower valuations than other markets."

Dan Coatsworth, head of markets at AJ Bell, believed any offer would struggle for support among easyJet's shareholder base, including founder Stelios Haji-Ioannou and his family, who still own 15.3%.

"EasyJet's biggest shareholders are unlikely to accept a takeover bid unless there is a knockout price", he wrote.

"Castlelake is preying on the weak, pouncing when easyJet faces its biggest headwind since the global pandemic. Investors won't want to sell in the darkest of hours unless they are getting generous compensation.

"Airline shares can be volatile at the best of times, prone to wild swings as the industry has form in being dealt with a multitude of challenges. In recent years that's included air traffic control strikes, baggage handler strikes, virus outbreaks, and volcanic dust clouds. Investors owning airline shares know they must be patient, and they won't want to cash out in a depressed market."

"There is logic to Castlelake being interested in the business, given it has a history of investments linked to the aviation sector. The big unknown is whether it would want to run easyJet in its current form or simply flip it when market conditions improve", he added.

Easyjet looks cheap but is it vulnerable? Perhaps only a bidding war could tell us that.

(c) Sky News 2026: Why easyJet is attracting takeover interest