The airline's founding chairman, Stelios Haji-Ioannou, is offering a 25%stake, mainly aimed at institutional investors, although employees will also be offered shares.
Market volatility means that it is difficult to put a price on the airline, although sources close to the company say it hopes to raise at least £500 million ($750 million).
Analysts see some risks attached to the flotation, which comes at a time of stock market turbulence. Chris Tarry at Commerzbank says that while it may be operating in a growth market, the flotation "is not a no-brainer".
Tarry notes that sentiment towards airlines in the market at the moment "is not good" and says that "dot.coms are hardly the flavour of the month either." easyJet has been a leader in the field of online reservations, which are up around the 80%-level, and sees this as a strong selling point for the flotation.
Fuel is an obvious concern. Unlike Ryanair, the carrier does not have a hedging policy, although easyJet argues that this will work in its favour next year if the price of fuel goes down. Analysts say that fuel makes up around 15% of total costs for a low-cost carrier, compared with 6% to 7%for a short-haul dominated flag carrier.
The carrier made an unaudited pre-tax profit of £22 million on turnover of £263 million in the financial year ending September this year. The 2001 figures, expected by analysts to be lower, will be key as regards valuation: "Last year is history," said one analyst.
easyJet will use the money generated by the flotation to help finance its ambitious expansion plans, including an order for 32 Boeing 737-700s. In addition, the carrier is seeking to add a fourth base to its London Luton, Liverpool and Geneva hubs at Amsterdam. The airline plans to add frequencies to existing routes, bringing in more high-yield business traffic.
One intriguing piece of speculation thrown up by the flotation is the possibility of a partnership with low-cost rival Go. Owned by British Airways, Go is widely seen as a target for disposal by the UK flag carrier. A link up with Go would provide easyJet with a foothold in slot-constrained London Stansted.
Twice the size of Luton in terms of passenger numbers, Stansted is widely seen as the UK's leading low-cost airport. In addition, easyJet had a well publicised feud with Luton over charges, which the latter seems to have won. This is likely to lead to higher future charges.
Sources close to the airline pour cold water on suggestions of a Go deal, suggesting that London's Gatwick may offer more opportunities with BA downgrading its services there.
Analysts say, however, that easyJet is well down the queue when it comes to Gatwick slots.
Source: Airline Business
