LONDON (Reuters) - EasyJet is to pay more of its profits out to shareholders via dividends in a sign of the budget airline’s confidence in future growth.
The company, Europe’s second largest low-cost airline behind Irish rival Ryanair, said on Thursday its dividend would now amount to 40 percent of pretax profit, compared to the one third it previously paid out to investors.
EasyJet also said it had reached agreement with Airbus to exercise existing purchase rights over 27 current generation A320 aircraft for delivery between 2015 and 2018. Those rights follow a deal signed by the company in 2002.
“The continued strength and execution of our business model provides the platform to deliver sustainable growth and attractive cash returns for shareholders in the years to come,” Chief Executive Carolyn McCall said in a statement ahead of the company’s capital markets day.
EasyJet’s low-cost model has helped it and rival Ryanair weather an increasingly competitive European short-haul market, while more traditional carriers have struggled.
In 2013, easyJet’s shares reached an all-time high of 1,853 pence in April. Since then they have fallen 26 percent partly in response to uncertainty over whether the airline can maintain such a pace of growth.
Shares in the company gained 2.4 percent in morning trading to 1,369 pence.
Some analysts said the share price reaction was dampened by some disappointment that there was not a more concrete statement on a special dividend, noting that last November, easyJet announced one of 175 million pounds.
“Some longer-term holders would rather have seen a special dividend flying their way like last year rather than having to wait for more income to trickle in as recompense for staying onboard,” Mike van Dulken, head of research at Accendo Markets, said in a note.
The hike in the dividend makes easyJet stand out in the aviation sector, where some airlines have not made consistent payouts. British Airways-owner IAG has not paid a dividend since it was formed in a merger in 2011, while Lufthansa did not pay a dividend in 2012.
The fleet expansion would help it keep costs low, easyJet said, as the new planes would be cheaper to run than its older A319s, six of which it plans to retire before the end of September 2015. The 27 new jets are subject to a very substantial price discount from the $2 billion list price.
The company already has 135 new Airbus planes on order, having last year agreed to buy 35 A320 aircraft and 100 new A320neo jets.
EasyJet will declare a dividend based on the higher ratio when it reports its full-year results on November 18.
Reporting by Sarah Young, Editing by Paul Sandle and Jane Merriman