RBC mulls over reports of EasyJet bid for Monarch

RBC Capital Markets Monarch’s Gatwick slots would offer a potential opportunity for EasyJet if the company did not overpay.

“If EasyJet pursues Monarch to us this implies: (1) EasyJet’s growth is more capital intensive than peers (i.e. expansion needs slots/businesses purchases as well as aircraft); and, (2) other non-margin dilutive organic growth opportunities might be becoming limited – or more contested.”

The Canadian bank said the main asset would be Monarch’s 4-5% of Gatwick slots, usefully spread across the day.

RBC noted unsubstantiated press reports suggest Vueling, HNA, or others might be planning a bid for the company, who will also see attraction in UK-Spain routes.

“We think in these circumstances we see a scenario where EasyJet may be forced to bid – and to pay high multiples to prevent competitors or blocks to its expansion to Gatwick.”

Still, RBC said: “We do not think acquiring a small airline resolves the wider market over supply risk issues or EasyJet’s summer profit challenge.”

RBC rates EasyJet shares at ‘underperform’ with a 1,450p price target.

At 1600 BST, EasyJet shares were up 1.5% to 1,468p.