September 18, 2014 / 7:12 AM / 3 years ago

easyJet ups dividend payout ratio, buys more planes

LONDON (Reuters) - Budget airline easyJet (EZJ.L) signalled confidence in future growth by lifting its dividend payout ratio to 40 percent and adding 27 new planes to its fleet through exercising rights held with Airbus (AIR.PA).

The company, Europe’s second largest low-cost airline behind Irish rival Ryanair (RYA.I), said on Thursday its dividend would now represent 40 percent of pretax profit, compared to the one third ratio 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 firm’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.

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 (ICAG.L) has not paid a dividend since it was formed in a merger in 2011, while Lufthansa (LHAG.DE) did not pay a dividend in 2012.

Last year, easyJet also paid out a special dividend of 175 million pounds.

The fleet expansion would help it keep costs low, easyJet said, as the new planes would be cheaper to run than its older A319s. 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.

Reporting by Sarah Young, Editing by Paul Sandle and James Davey

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