Apollo's easyJet Buyout

At first glance, Apollo's recommended offer for easyJet is a straightforward 715p cash bid at an 81% premium. The transaction becomes more interesting once the capital structure is rebuilt. Apollo has to fund the acquisition, preserve an airline-sized liquidity buffer, finance a heavy aircraft investment programme and stay within ownership rules that prevent a conventional sponsor majority.

The purpose of the model is to test what needs to go right for the deal to produce a credible buyout return. Four items matter most: the debt funded at closing, the shareholder rollover, the treatment of the 14% preference shares and the amount of fleet capex that can be financed outside the RCF.

easyJet and Eagle Bidco announced the recommended acquisition on 6 August 2026. At the 16 August cut-off, the transaction had not completed. Shareholder and court approvals, regulatory clearances, airline licensing conditions and the final rollover mechanics were still outstanding.¹ The public documents therefore show the proposed transaction structure, not a final closing balance sheet or a permanent debt package.

In the central case, the acquisition uses £3.18bn of debt, £900m of preference capital and £720m of Apollo ordinary equity. It also assumes that 160m easyJet shares roll into the new structure rather than take cash. On those assumptions, Apollo reaches a five-year 3.48x MOIC and 28.3% IRR. The result still requires EBITDA to recover from a modelled £979m in FY2026 to £2.85bn in FY2032 and roughly half of gross fleet capex to be financed or monetised externally. The RCF peaks at £1.13bn. The headline return is attractive, but the case has little room for a funding miss during the capex peak.

01The offer, not the closing

At 715 pence, the cash offer carries a fully diluted equity value of approximately £5.7bn and premiums of 81% to the 394 pence unaffected price on 28 May 2026, 22% to the 588 pence four-year high, 80% to the 90-day volume-weighted average price of 397 pence and 54% to the 464 pence price on 27 February 2026.² Those percentages are useful for judging the board's recommendation and the immediate value delivered to cash shareholders. They say much less about the leverage the operating company can support.

Fully diluted shares can be reconstructed. easyJet reported 758,010,025 issued shares. The announcement adds 35,226,624 shares potentially issuable under employee plans and deducts 1,291,648 shares held by the employee benefit trust. That produces 791,945,001 fully diluted shares. Multiplied by £7.15, the calculated equity value is £5,662.4m, which reconciles to the announced approximately £5.7bn.³

Competing interest preceded Apollo's firm offer. Castlelake withdrew when the Apollo transaction was announced. The founder family and its holding vehicles gave irrevocable undertakings over 116,061,871 shares, or 15.31% of the issued share capital, and committed to elect for the alternative offer on those shares. Director undertakings covered a further 427,767 shares for the vote, but not the same economic rollover commitment.⁴

Completion was expected by the end of the first calendar quarter of 2027. The scheme still required a majority in number of voting scheme shareholders representing at least 75% in value at the court meeting, the relevant resolution at the general meeting, court sanction, airline-licence comfort and an extensive set of merger-control and foreign-investment clearances.⁵ The offer hub did not display a Scheme Document by the 16 August cut-off. That was only ten days after the announcement and does not imply a delay, but it leaves the final election mechanics, ownership allocation and long-form capital rights unavailable for this model.

02A buyout constrained by flying rights

A conventional buyout starts with a sponsor acquiring control of the ordinary equity. This one starts with aviation law. Article 4(f) of Regulation (EC) No 1008/2008 requires an EU air carrier to be majority-owned and effectively controlled by Member States or their nationals, subject to applicable agreements. The regulation defines effective control by reference to decisive influence over assets, management bodies and business decisions.⁶ UK Civil Aviation Authority guidance similarly requires a UK licence holder to be majority-owned and effectively controlled by qualifying nationals.⁷

Ownership, voting control and economic entitlement are therefore separate questions. The offer announcement anticipates three holders of Topco ordinary shares: rollover shareholders with 45.1% to 49.9%, an EU Trust with up to 5% in connection with the management incentive plan, and Apollo funds holding the balance, capped at 49.9%. The exact proportions depend on alternative-offer elections and adjustments to be described in the Scheme Document.⁸

Each eligible easyJet shareholder may elect one unlisted Topco rollover share for each easyJet share instead of cash, on an all-or-nothing basis for the relevant holding and subject to scaling. The founder family election gives the structure a committed qualifying block. Yet the announced 45.1% minimum Topco ordinary ownership for rollover holders is not a simple translation of the family's 15.31% easyJet stake. It is a legal capital allocation produced by the wider structure, including Apollo's preference capital and the EU Trust. Until the Scheme Document provides the final allocation formula, it would be false precision to derive the Topco percentage solely from cash value contributed.

Ordinary ownership is therefore treated as a legal assumption separate from sources and uses. The central allocation is 49.9% Apollo, 47.5% rollover holders and 2.6% EU Trust. The founder-only case uses 49.9%, 45.1% and 5.0%. The maximum-rollover case uses 49.9%, 49.9% and 0.2%. All three sum to 100%, and Apollo never exceeds the disclosed ordinary ceiling.

Expected pari passu ranking does not create equal economics across shareholder groups. Apollo also owns the Midco 1 preference shares. Their fixed return ranks ahead of the Topco ordinary residual. Rollover holders share the ordinary upside while sitting behind an instrument that ordinary investors do not own. Governance is also constrained: rollover holders cannot initiate an exit without the relevant Apollo consent, and individual holders below the stated thresholds have limited appointment rights. The alternative offer is therefore illiquid ordinary equity with a long path to liquidity and a senior return layer above it.

03From 715p to enterprise value

An 81% premium is an equity comparison. Enterprise value gives a different starting point because easyJet entered the bid period with substantial cash and investments. At 30 September 2025, the group reported £3,528m of cash and investments, £1,881m of borrowings and £1,045m of lease liabilities. Its own net-cash measure was £602m, defined as cash and investments less both borrowings and lease liabilities.⁹ That definition is important because a short-form description of the Q3 FY2026 £661m figure as excluding leases would be inconsistent with easyJet's published glossary.

At 30 June 2026, the trading update reported approximately £3.6bn of cash and other investments and £661m of net cash. It did not restate every component on the same page. The model therefore carries £1,944m of existing debt and £995m of lease liabilities into closing as explicit assumptions, because those values reconcile approximately to the reported net cash: £3,600m minus £1,944m minus £995m equals £661m.¹⁰

Using the £5,662m fully diluted equity value, those assumed debt and lease balances, and £3.6bn of cash, the calculated entry enterprise value is £5,001m. That is 3.46x FY2025 headline EBITDA of £1,446m. The ratio is not a market comparable without consistent lease treatment, but it explains the apparent paradox: a very high premium to the unaffected share price can coexist with a moderate enterprise value when the target holds more cash than its debt and leases.

Unearned revenue is not added to acquisition debt. easyJet had £1,950m of unearned revenue at September 2025 and £3,056m at March 2026. These customer prepayments fund seasonal working capital, but they also carry a service and potential refund obligation. Treating them as a free acquisition source would overstate debt capacity. The model retains them in working capital, stresses the seasonal reversal and separately sets a minimum cash requirement.

04Sources and uses: what is actually funded

Apollo's equity commitment letter provides up to £1,641,504,906.¹¹ The alternative-offer term sheet says £750m to £1.0bn of Apollo's equity contribution is expected to be invested through Midco 1 preference shares.¹² The central case uses £900m of preference and £720m of Apollo ordinary equity, for £1.62bn in total. That stays below the commitment while leaving enough equity for the founder-only rollover case to remain within the £3.5bn bridge capacity.

Central rollover is modelled at 160m easyJet shares, worth £1,144m at the offer price. It reduces cash consideration from £5,662m to £4,518m. Adding £180m of transaction fees and £105m of financing fees produces £4,803m of cash uses. The balancing acquisition debt draw is £3,183m. No RCF draw is treated as a purchase source.

Rollover is shown twice for different purposes. It is a non-cash source in the total ownership bridge, because shareholders exchange easyJet equity for Topco equity. It is excluded from cash sources, because it does not fund payments to non-rolling shareholders or fees. That distinction prevents purchase equity value from being mistaken for cash uses.

05The earnings base is not FY2025

FY2025 was a strong but incomplete base for an acquisition expected to close in 2027. easyJet reported £10,106m of revenue, £1,446m of headline EBITDA, £703m of headline EBIT and £665m of headline profit before tax. The airline produced £415m of headline PBT and easyJet holidays £250m.¹³ Capacity reached 104.0m seats, 93.4m passengers and 134,451m available seat kilometres. The longer average sector length helped revenue per seat while lowering reported RASK on the expanded distance base.

Current trading was weaker. H1 FY2026 produced a £552m headline loss before tax. Q3 then delivered £85m of headline PBT, compared with £286m in the prior-year quarter. Q3 carried 25.8m passengers on 29.0m seats at an 88.9% load factor, one percentage point below the prior year. The update attributed pressure to the Middle East conflict and recorded a 3% year-on-year decline in RASK.¹⁴

No one-off add-back is used for the difference. Disruption, fuel volatility and operational friction are part of airline ownership. FY2026E is rebuilt from 107.1m seats, a 89.3% load factor, £60.0 of passenger revenue per seat, £25.5 of ancillary revenue per seat, 3.43m holidays customers and explicit cash CASK assumptions. It produces £10,857m of revenue, £979m of headline EBITDA and £195m of headline EBIT. That is the earnings trough from which the acquisition case must recover.

Recovery is not simply a return to FY2025. FY2027 EBITDA rises to £1,624m as fuel CASK normalises and holidays grows. FY2028 reaches £2,007m. FY2032 reaches £2,850m on 127.9m seats, a 90.0% load factor, £67.3 of passenger revenue per seat, £28.5 of ancillary revenue per seat and 6.01m holidays customers. Those are assumptions, not Apollo guidance. Apollo said it saw opportunities in revenue management, winter performance, ancillary revenue, technology, loyalty, network connectivity, premium and business travel, holidays and partnerships, while also saying a detailed value-creation programme had not yet been completed.¹⁵

06Building the operating case

Forecasting begins with seats and ASK, not a single revenue-growth percentage. Seats grow 3.0% in FY2026 and 2.0% in FY2027, then 3.0%–3.5% annually. ASK grows faster because average sector length continues to increase. Load factor recovers gradually from 89.3% in FY2026E to 90.0% in FY2031 and FY2032. The assumption is deliberately cautious. It does not treat every empty seat as fillable without a yield cost.

Passenger revenue per seat increases from £58.38 in FY2025 to £60.00 in FY2026E, then reaches £67.30 by FY2032. Ancillary revenue per seat moves from £24.94 to £28.50 over the same period. Those values capture a mixture of pricing, route length and product development. They do not separately credit every Apollo opportunity. The downside reduces passenger revenue per seat by 6%, ancillary revenue per seat by 3% and load factor by two percentage points.

Fuel is modelled through cash fuel CASK. The central case uses 1.92 pence in FY2026E, 1.68 pence in FY2027 and 1.62 pence in FY2028, before a gradual rise to 1.72 pence by FY2032. The downside adds 0.35 pence. The fuel stress is intentionally simple. easyJet hedges fuel and currency, so spot moves do not transmit immediately, but a multi-year owner cannot rely on a single hedge book to protect the full holding period. Q3 guidance indicated that each $100 per metric tonne change in fuel price had an approximately £17m effect on Q4 fuel cost, a useful reminder of the operating sensitivity.¹⁶

Ex-fuel cash CASK begins at 4.04 pence and ends at 3.98 pence in the base case. The improvement is modest because airport charges, crew, maintenance and disruption remain real. Management had identified approximately £250m of annual cost savings from upgauging across FY2027 and FY2028, but the model does not drop the full amount into free cash flow without accompanying growth and inflation.¹⁷

Holidays is forecast separately. Customers rise from 3.09m in FY2025 to 6.01m by FY2032. Revenue per customer increases from approximately £466 to £525, and EBITDA margin reaches 20%. easyJet's public ambition is £450m of holidays PBT by FY2030 and more than £1bn of group PBT over the medium term.¹⁸ The model's operating path is consistent with achieving those ambitions, but the return case does not assume that holidays removes the airline's seasonal cash needs.

07Cash generation after aircraft and leases

Aircraft investment is the binding part of the underwriting. easyJet's H1 FY2026 presentation showed approximately £1.7bn of gross capex in FY2026, £2.3bn in FY2027 and £3.3bn in FY2028. It also showed 17, 30 and 43 deliveries in those years against 3, 19 and 35 retirements, and 287 firm Airbus orders through FY2034.¹⁹ The capex figures include aircraft payments and pre-delivery payments, maintenance, leased-aircraft items and other investment. They cannot be removed merely because ownership changes.

Base-case financing covers or monetises 50% of gross capex. This is the single most important model assumption. Apollo has not disclosed a financing commitment at that level. The cash benefit is matched by an aircraft-financing obligation. New financing is charged 6% cash interest, amortises at 10% of opening balance and reaches £4.21bn by FY2032. Added to the remaining lease liability, the model deducts £5.05bn of lease and aircraft financing obligations at exit. Sale and leaseback proceeds are therefore not treated as free cash with no future cost.

A close-to-year-end stub makes seasonality visible. Closing is assumed on 31 March 2027, close to easyJet's seasonal cash trough. The H2 FY2027 stub uses 85% of full-year EBITDA, 55% of full-year capex and a £1.1bn reversal of unearned revenue, anchored to the £1,106m H1 FY2026 build. After debt interest and the preference dividend, the stub consumes £769m. The RCF supplies £669m while cash falls from £3.6bn to the £3.5bn minimum.

FY2028 remains negative after financing cost. It draws a further £462m, bringing the RCF to £1.13bn. Only in FY2029 does the RCF begin to repay. Acquisition-debt cash sweep starts meaningfully in FY2031. By FY2032, acquisition debt has fallen from £3.18bn to £1.08bn, but total obligations do not fall at the same pace because aircraft financing has replaced cash capex.

08Debt capacity under a fuel shock

Bridge capacity should not be confused with the permanent capital structure. Public financing documents and specialist credit reporting identify £3.5bn of senior secured note bridge capacity and a £1.3bn multicurrency RCF.²⁰ Takeout pricing, final maturity, amortisation and covenants were not disclosed in a form suitable for a permanent debt schedule by the cut-off. The model uses 8.0% cash interest on acquisition debt, 4.5% on existing debt and 9.0% on the RCF, with a 150-basis-point stress in the downside.

In the central case, total cash interest peaks at £584m in FY2029. Interest coverage, defined as headline EBITDA divided by cash interest, falls to 3.85x in that year before recovering to 5.85x in FY2032. Net debt including leases and aircraft financing peaks at £5.77bn in FY2028 and FY2029. It declines to £4.28bn by FY2032, or 1.50x headline EBITDA.

Minimum cash is set at £3.5bn, close to the H1 FY2026 policy reference of unearned revenue plus £500m. The seasonal test compares cash plus undrawn RCF with a £3,556m H1 threshold. FY2028 is the narrowest year: total available liquidity is £3,669m, only £113m above the threshold. The annual model passes, but the margin for delayed aircraft financing, a deeper fuel shock or a working-capital reversal is small.

Downside removes the capex financing assumption, adds 0.35 pence of fuel CASK, lowers yield and load factor, delays holidays growth, increases financing cost and turns the preference to PIK. The RCF reaches its full £1.3bn and the reverse stress fails the minimum liquidity test. At exit, acquisition debt remains at the £3.18bn opening amount in the stressed return case. I do not read that result as a default forecast. It means the modelled LBO capital structure does not self-correct under that combination of operating and financing pressure.

09The 14% preference share changes the waterfall

Midco 1 preference shares define the economics. They carry a fixed 14% annual cash dividend payable quarterly. If the cash dividend is not paid in full for a period, the shares accrue at 15% per annum, accumulating daily from closing or the relevant payment date and compounding quarterly. The rates increase after a required-redemption failure or covenant breach, subject to caps of 16% cash and 17% accrued. An issuer call is subject to holders receiving at least 1.5x invested capital.²¹

Quarterly compounding is applied exactly. A £900m preference balance on a 15% PIK path becomes £1,879m after five years:

For the cash-pay path, annual cash dividends are £126m, with £63m in the six-month closing stub. Cumulative cash dividends reach £693m by FY2032. The term sheet says an issuer call is subject to a 1.5x minimum MOIC but does not fully resolve, in the short-form language available, whether prior cash dividends reduce the redemption floor. The model uses the conservative ordinary-equity interpretation: redemption proceeds are at least 1.5x initial capital, and prior cash dividends are additional. That gives £1,350m of redemption plus £693m of cash dividends, or 2.27x on the preference.

The convention has an unusual effect. On the same base operations, cash pay generates a 3.48x combined Apollo MOIC and 28.3% IRR, while PIK produces 3.21x and 26.3%. PIK protects near-term cash, but the five-year compounded balance of £1,879m is lower than the modelled £2,043m total of cash dividends plus the conservative redemption floor. A different legal interpretation of the floor would change that comparison. The workbook isolates the convention so it can be replaced when long-form documents are published.

Priority matters more than the headline ordinary percentage. At exit, enterprise value is converted to equity by deducting acquisition debt, existing debt, RCF, leases and aircraft financing obligations, then adding cash. Preference redemption is paid before Topco ordinary value. Only the residual is split among Apollo ordinary, rollover holders and the EU Trust. The ordinary shares may rank equally with each other while all remaining subordinate to the same fixed layer.

10What Apollo can earn

In the base five-year case, £1,620m invested by Apollo returns £5,635m. Preference proceeds are £2,043m. Apollo's 49.9% share of the £7,199m ordinary residual contributes £3,592m. Combined MOIC is 3.48x and IRR is 28.3%. The ordinary component earns 4.99x and 37.9%; the preference earns 2.27x and 17.8% under the conservative cash-pay convention.

Earnings recovery, rather than a large net-debt reduction, drives the result. Acquisition debt falls by £2.10bn, but the model adds £4.21bn of aircraft financing. The exit still carries £5.05bn of lease and aircraft-finance liabilities. EBITDA expansion from the FY2026 trough to £2.85bn and the 4.5x exit multiple create the largest part of value. The entry reference is 3.46x FY2025 EBITDA, so the model assumes some multiple expansion, but far less than the operating uplift.

Downside is more revealing. Exit EBITDA is £2,052m and the multiple 3.5x. Acquisition debt remains at £3.18bn, the RCF is fully drawn and the preference follows the PIK path. Apollo receives 1.35x and 6.2% combined. The preference still produces 2.09x and 15.9%, while Apollo ordinary falls to 0.43x and a negative 15.4% IRR. Rollover ordinary receives the same per-share residual and bears the same subordination without owning the preference protection.

Upside reaches 4.69x and 36.2%. A seven-year base hold increases combined MOIC to 3.91x but lowers IRR to 21.5%. Preference cash dividends reach £945m, while another two years of aircraft obligations and a longer time denominator reduce annualised performance. The seven-year PIK balance would be £2.52bn under exact quarterly compounding.

Rollover changes funding more than it changes Apollo's modelled ownership. Founder-only rollover requires £3.50bn of acquisition debt and produces 3.38x and 27.6%. The central case produces 3.48x and 28.3%. Maximum rollover lowers closing acquisition debt and produces 3.56x and 28.9%. The range is meaningful, but it is smaller than the effect of operating performance, capex financing or the preference convention.

11The underwriting verdict

The transaction can work, but the central return is conditional on financing access as much as airline execution. easyJet must recover headline EBITDA above £2.0bn by FY2028, preserve at least £3.5bn of cash, secure external funding for approximately half of gross fleet investment and prevent the RCF from becoming permanent purchase financing. With those conditions, Apollo's preference is paid in cash, acquisition debt falls to £1.08bn and the combined return reaches 3.48x and 28.3%.

Central returns do not imply a loose capital structure. RCF headroom falls to £169m at the peak. H1 total liquidity exceeds the modelled threshold by only £113m in FY2028. Cash interest reaches £584m. The most important assumption is the 50% capex financing rate, followed by the EBITDA recovery and exit multiple. The reverse stress places the approximate financing threshold just above 40% at an 8% acquisition-debt rate. A lower rate helps, but it does not remove the aircraft requirement.

Liquidity breaks before ordinary value. Under the downside, removing aircraft financing and combining weaker yield, lower load factor, higher fuel and financing cost exhausts the RCF. At exit, ordinary equity remains positive in the simplified waterfall but Apollo ordinary returns only 0.43x. The preference absorbs most of the value and still earns 2.09x. The ownership percentages alone do not show that economic asymmetry.

A 715 pence offer can therefore be expensive for public shareholders and still offer Apollo a strong base return. easyJet's cash balance moderates entry enterprise value, the preference protects Apollo before ordinary equity, and the business has a credible path to higher earnings through capacity, upgauging and holidays. Yet aircraft financing cannot be assumed into existence. Until the permanent debt and fleet funding package is disclosed, I would treat the investment case as conditional rather than settled.

12Sources and assumptions

This analysis uses only public information available as of 16 August 2026. The main documents are the Rule 2.7 announcement, the Alternative Offer Term Sheet, the public financing documents on easyJet's offer site, easyJet's FY2025 and FY2026 reporting, and the relevant EU and UK airline ownership rules.

Figures follow easyJet's September financial year. Historical numbers come from company filings or are reconstructed from them. Forecast years, financing assumptions and the 31 March 2027 closing date are my assumptions. Headline EBITDA is used consistently. Unearned revenue stays in working capital, while lease liabilities and modelled aircraft financing are deducted in the enterprise value to equity bridge.

The largest unknowns are the permanent debt package, the final rollover allocation, available aircraft financing and the legal treatment of the preference share's 1.5x minimum return. I have kept those items separate so the case can be updated when the long form transaction documents are available.

Key sources

1. easyJet plc and Eagle Bidco Limited, Rule 2.7 Announcement, 6 August 2026, pp. 1, 7–8 and 57–60; easyJet Offer from Apollo hub, accessed 16 August 2026.
2. easyJet plc and Eagle Bidco Limited, Rule 2.7 Announcement, 6 August 2026, pp. 1–2, offer price, equity value and premium analysis.
3. easyJet plc and Eagle Bidco Limited, Rule 2.7 Announcement, 6 August 2026, p. 93, sources and bases of calculation.
4. easyJet plc and Eagle Bidco Limited, Rule 2.7 Announcement, 6 August 2026, pp. 2–3, 36 and 96, irrevocable undertakings.
5. easyJet plc and Eagle Bidco Limited, Rule 2.7 Announcement, 6 August 2026, pp. 7–8 and Appendix I, timetable and conditions.
6. European Union, Regulation (EC) No 1008/2008, Article 4(f) and Article 2(9); European Commission, Interpretative guidelines on ownership and control, accessed 16 August 2026.
7. UK Civil Aviation Authority, Airline licensing guidance, basic licensing requirements, accessed 16 August 2026.
8. easyJet plc and Eagle Bidco Limited, Rule 2.7 Announcement, 6 August 2026, pp. 3, 24 and 99, expected Topco ordinary ownership.
9. easyJet plc, Annual Report and Accounts 2025, pp. 34, 38, 167 and 192, cash, borrowings, leases and net-cash definition.
10. easyJet plc, Q3 FY2026 Trading Update, 23 July 2026, p. 4.
11. Apollo investors, Equity Commitment Letter, 6 August 2026, schedule.
12. Eagle Bidco Limited, Alternative Offer Term Sheet, 6 August 2026, pp. 2–4.
13. easyJet plc, Annual Report and Accounts 2025, pp. 6, 31–35 and 163, FY2025 performance and segment information.
14. easyJet plc, H1 FY2026 results, 21 May 2026; Q3 FY2026 Trading Update, 23 July 2026, pp. 1–4.
15. easyJet plc and Eagle Bidco Limited, Rule 2.7 Announcement, 6 August 2026, pp. 37–41, strategic intentions and status of detailed planning.
16. easyJet plc, Q3 FY2026 Trading Update, 23 July 2026, outlook and fuel sensitivity.
17. easyJet plc, H1 FY2026 Investor Presentation, 21 May 2026, upgauging and fleet plan.
18. easyJet plc, Annual Report and Accounts 2025, medium-term targets and easyJet holidays target.
19. easyJet plc, H1 FY2026 Investor Presentation, 21 May 2026, pp. 35–37, fleet deliveries, ownership and gross capex.
20. Financing parties, Debt Commitment Letter and Interim Facilities Agreement, 6 August 2026; 9fin, Apollo's jet bridge to £3.5bn easyJet buyout funding, 10 August 2026, public snippet only.
21. Eagle Bidco Limited, Alternative Offer Term Sheet, 6 August 2026, pp. 2–3, preference dividend, accrual, step-up caps and minimum MOIC.