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easyJet steals from Air France-KLM, British Airways; Ryanair "hisses" as Aer Lingus bid closes.


easyJet shares soared 15%, closing the day up 12.5% on a better than expected financial report, as the carrier confirmed that it will continue to expand even as economic conditions deteriorate. CEO, Andy Harrison, expects easyJet to improve its average yield by around 5% as part of the "flight to value", as the carrier picks up new business traffic.

easyJet plans to add another 27 aircraft to its fleet by Sep-11, up from today's 170. Its advantage is that it operates into the same major airports as the network airlines, making diversion of traffic that much easier.

Some of that flight to value is apparently from Air France-KLM, as the major issued an earnings downgrade, causing its shares to lose 3.9% yesterday - on top of further losses earlier in the week. British Airways has reported a 12% reduction in premium travel during December, a trend that other majors must similarly be experiencing. The other mainline carriers (except Finnair) all lost ground on the day.

Ironically, across the Atlantic, the share price of leading US LCC, Southwest Airlines, leapt 17.1% on the day, outdoing easyJet's rise.

Why the jump for Southwest? Because, said CEO, Gary Kelly, it is to suspend growth "indefinitely" and is cutting back 2009 capacity by 4%. The US market liked that strategy.

European selected airlines daily share price movements (% change): 22-Jan-09

Meanwhile, Ryanair was "hissing like an ex-wife", as described in yesterday's Dallas Morning News, following Aer Lingus' announcement of a proposed 2010 codeshare with United Airlines. According to Ryanair CEO, Michael O'Leary, "After months of trawling around looking for partners, it is a sad reflection on Aer Lingus that the best they could come up with is one of the weakest and biggest loss makers in the US airline industry."

The Irish government refused to sell its shareholding to Ryanair - probably more for political reasons than sound economic strategy - effectively meaning that the Ryanair bid for the flag carrier is now ended. Aer Lingus shares lost 4.3% on the news and on the potential that Ryanair may now ramp up its competition.

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