UPDATE 2-EasyJet first half improves as fleet decision nears

Wed May 15, 2013 6:22am EDT

By Rhys Jones

LONDON May 15 (Reuters) - Low-cost airline easyJet cut its losses in half in the six months to April and is nearing a decision on whether to upgrade its fleet with updated Airbus or Boeing jets.

Europe's second-largest budget carrier behind Ryanair said on Wednesday it was in the "final stages" of choosing whether to go with re-engined Airbus A320neo planes or Boeing's 737 MAX.

The airline is looking at buying up to 200 of the new, fuel-efficient planes, which are not available until 2017 and 2018, so it is also negotiating a bridging deal.

EasyJet chief executive Carolyn McCall said "this year is the year we will know whether we are making a recommendation to upgrade the fleet or not ... we want to get the right terms and the right price so we may recommend (a deal) or we may not."

However, an industry source said talks between easyJet and the planemakers were going down to wire with a decision in principle seen possible within days. The decision is likely to loom large over next month's Paris air show as Airbus and Boeing battle for market share in the largest segment of market, worth an estimated $2 trillion over the next 20 years.

EasyJet, which operates an all-Airbus fleet of 213 aircraft, wants to remain a single-manufacturer fleet, but is considering moving entirely to Boeing planes.

If Boeing were to be successful it would have to cover the cost of easyJet having a dual fleet for a certain period of time. Operating a single manufacturer fleet saves an airline on maintenance and training costs.

"Boeing know they have to be better than Airbus by the amount it is going to cost us to transition," said Chris Kennedy, easyJet's chief financial officer.

LOSSES HALVED

EasyJet reported a pretax loss of 61 million pounds ($93 million) for its fiscal first half ending in March, down from a loss of 112 million pounds a year ago.

The airline, which makes its profit in a second half that includes the busy summer holiday period, said it was helped by Easter falling earlier than a year ago and strong bookings from customers wanting to escape cold weather in Northern Europe.

That helped it beat the consensus of analysts' forecasts for the loss by just over 3 million pounds, but more impressive were forecasts for 4 percent growth in revenue per seat in the next six months and improved profitability for the full-year.

Numis analyst Wyn Ellis said easyJet had shown "strong progress" and upgraded his 2012/13 profit target by 3 percent to 416 million pounds. Its shares, up 50 percent this year, rose 5.2 percent to an all-time high of 1197 pence by 0935 GMT, valuing the group at around 4.8 billion pounds.

Airlines including British Airways owner IAG, Lufthansa and Air France-KLM are slashing jobs and shelving growth plans as they grapple with soaring jet fuel prices and a weak economy, leaving gaps that budget carriers like easyJet have been quick to exploit.

Since McCall took over in 2010, easyJet has introduced flights between top business destinations, flexible tickets and allocated seating in an attempt to steal corporate customers.

This month it started fast-tracking flexi-fare customers through security at 27 airports in a bid to add to the 10 million business passengers it carried last year.

The airline said total revenues grew 9.3 percent to 1.6 billion pounds, while revenue per seat grew 8.6 percent, better than the 6 to 8 percent it previously expected.