EasyJet PLC's (LSE:EZJ) sprawling collection of airport slots is attracting almost as much attention as its aircraft fleet, leading Deutsche Bank to upgrade the budget airline and give a sharp hike to its share price target.
Swapping his former 'sell' rating for a 'hold' view instead, analyst Jaime Rowbotham raised his target price to 540p from 340p, arguing that growing investor interest has shifted the balance of risks around the stock.
The catalyst was US private equity firm Castlelake, which has built a 2.14% stake in easyJet and disclosed at the end of last month that it was considering a possible offer.
This led easyJet's board to say it "will consider any proposal", though the timing was described as "highly opportunistic" as coming after the shares have been hit hard by disruption from the fighting in the Middle East.
Rowbotham stressed that Castlelake's involvement "should not be taken lightly", as the US investor has more than two decades of experience in aviation assets and played a key role in the restructuring of Scandinavian carrier SAS, where it acquired assets during a period of industry stress before ultimately exiting. It also currently leases four Airbus A320neos to easyJet.
That has prompted speculation that easyJet's assets may be worth more separately than within the listed airline, with airport slots one area of interest highlighted by the Deutsche analyst, with others in the City estimating that the airline's aeroplane fleet could be worth double the recent share price.
Slots, in other words the take-off and landing rights at congested airports, are among the industry's most valuable assets and have historically attracted strong demand from airlines, lessors and infrastructure investors.
A full takeover and break-up would be "hard to do", Rowbotham said, with EU ownership and control rules requiring European airlines to remain majority controlled by EU interests, meaning Castlelake would probably need partners to pursue any transaction.
Even so, the emergence of a credible aviation specialist on the shareholder register has changed the investment case, though the analyst stopped short of predicting a bid.
