EasyJet (EZJ) have recovered sharply from a May 2026 low of 344p to around 529p today, leaving the stock up 3% this year. Much of that recovery has been driven by takeover interest from US investment firm Castlelake, which has made three approaches, the latest valuing the airline at around £4.74bn or 625p a share.
EasyJet rejected the offer, arguing that Castlelake’s ownership structure was unclear and could create issues with European ownership rules, which require airlines to remain majority controlled by EU nationals.
The board now faces a decision over whether the airline is worth more as an independent business. Castlelake’s latest proposal represented a 59% premium to easyJet’s undisturbed share price before the approach, but that price had already fallen heavily on concerns over fuel costs and travel demand linked to Middle East tensions.
Takeover interest highlights easyJet’s potential value
The key question for investors is whether Castlelake has identified an undervalued airline or whether the bid has arrived after a temporary sell-off.
EasyJet’s half-year results showed revenue increased 12% to £3.95bn, helped by strong growth at easyJet Holidays. The division increased revenue by 30% and lifted earnings before interest and tax by 50% to £48m, providing a more profitable source of growth than the airline operation itself.
However, the core airline business remains under pressure. Pre-tax losses widened 40% to £552m as higher costs affected profitability, with cost per available seat kilometre excluding fuel rising 8% year on year.
Higher costs remain the main challenge
Fuel exposure remains a concern, with jet fuel representing a significant cost for the airline. The Middle East conflict added further uncertainty, while softer forward demand has also weighed on sentiment.
Second-half capacity sales are slightly behind last year, while booked revenue per available seat kilometre is down 4%, suggesting pricing power has weakened.
Free cash flow also moved from a £306m inflow last year to a £74m outflow during the first half, as investment and higher costs continue to affect cash generation.
Balance sheet provides room to recover
Despite near-term pressure, easyJet remains in a stronger position than many airline peers. The company has significant liquidity, an investment-grade credit rating and plans to modernise its fleet, with the retirement of older A319 aircraft expected to deliver around £250m of annual savings from FY27 and FY28.
EasyJet Holidays remains another important part of the long-term case, with customer numbers growing 22% and providing a less capital-intensive source of earnings.
The challenge is that cash flow is expected to remain under pressure while fleet investment continues, limiting the potential for higher dividends or buybacks.
The takeover bid is only part of the story
Analysts remain divided on fair value, with some seeing upside towards the takeover price while others remain cautious due to cost pressures and weaker demand.
EasyJet has genuine strengths, including a stronger balance sheet and a growing holidays division, but the airline still needs to prove that higher costs can be absorbed without damaging profitability.
The Castlelake bid has highlighted the value investors may have overlooked, but whether easyJet is worth more than 625p will depend on the recovery of the underlying business rather than takeover speculation alone.