Reports that EasyJet could be a takeover target for International Consolidated Airlines make perfect sense.
The pandemic has created concerns about the future of business travel, with companies globally realising they donโt need to hold so many meetings in different locations. Itโs far easier, cheaper and more environmentally friendly to hold many conversations over Teams or Zoom than get on a plane.
Therefore, companies like International Consolidated Airlines need to rethink their future sources of revenue as they may find that business travel doesnโt match pre-Covid levels.
AJย Bell investment director Russ Mould said:ย โOwning EasyJet would significantly boost International Consolidated Airlinesโ position in the leisure market and give it access to many prized airport landing slots.
โThe key challenge is funding such a deal. International Consolidated Airlines is already ladened with large debts and shareholders may prefer it to pay down these borrowings rather than spend billions on buying another airline such as EasyJet.
โShares in EasyJet earlier this month traded at their lowest levels since 2011, which is the marketโs way of saying it believes the companyโs recovery from the pandemic will be very slow.
โMany airlines will have been watching EasyJetโs share price collapse and weighing up their options. An opportunistic takeover bid now could net them a bargain in the long term, but equally itโs a bold move to take given the gloomier economic outlook which could cause further disruption to earnings over the coming year.
โWizz Air has been linked as a potential suitor for EasyJet in the past and there is also logic behind a tie-up of those two companies. Eastern Europe-focused Wizz Air could strengthen its position in Western Europe by owning EasyJet. Additional airlines may also find a good rationale for owning EasyJet. This suggests International Consolidated Airlines will face competition from other parties should it decide to make a move on the low-cost airline operator.โ
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