European budget airlines draw private equity interest after Apollo moves on EasyJet

Traders Union
All News
Financial News
European budget airlines and PE

Highlights

Apollo Global Management announces acquisition of EasyJet, taking it private at a $7.7 billion valuation after Castlelake withdraws $7.3 billion offer.
Jet2 identified as a potential private equity target, having rebounded roughly 60% from prior lows with a 6–7 times price-to-equity ratio.
Industry challenges like low margins and volatility drive takeover logic, as private ownership may reduce capital intensity and create pricing flexibility for budget airlines.

Valuations put budget carriers in focus

As reported by CNBC, Apollo Global Management says this week it will acquire EasyJet, a transaction expected to take the airline private at a valuation of about $7.7 billion, after Castlelake withdraws its $7.3 billion bid for the London-listed carrier.

Anna Macdonald, investment strategy director at Hargreaves Lansdown, says more European airlines could now fall into the sights of private equity buyers. She identifies Jet2 as a possible target, arguing that it shares similar characteristics with EasyJet as a low-cost carrier and had traded on a price-to-equity ratio of 6 to 7 times before rebounding about 60% from that low.

Macdonald says airlines were hit hard in the early stages of the Iran war, but recent share price moves suggest investors are beginning to price in the prospect of further deal activity. Jet2 declines to comment, with a spokesperson saying the company does not comment on market rumour or speculation.

Sector pressures shape takeover logic

Macdonald says UK equities, including airlines, remain fertile hunting ground for investors because valuations have lagged global peers. She adds that private buyouts of international flag carriers are a more difficult proposition than deals in the budget airline segment, where the upside appears clearer.

The takeover interest comes as the airline industry continues to face pressure from low margins, cyclicality, regulation and volatile costs and demand. Macdonald says a privately held structure could allow operators to rethink financing and make the business less capital-intensive, which could eventually support better pricing for consumers.

EasyJet shares are down 0.48% in Friday afternoon trading after closing the previous session 2.8% higher, reflecting a market response that is still adjusting to the competing bids and Apollo's path toward completing the deal.

Our earlier coverage of OCS’s agreed all-cash takeover of Mitie explained why the deal put Mitie’s BBB issuer rating under review with negative implications. We highlighted the leveraged buyout structure, the key questions around how existing debt would be treated after completion, and why higher leverage could weigh on the combined group’s credit profile despite added scale and broader geographic reach.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.