A senior executive at EasyJet has told staff that investors "would be better off putting their money in the building society" than buying its shares.

Mike Szucs, chief operating officer of the budget airline, said in an internal memo seen by Times Online that the company needed to improve profitability as it was failing to match rivals Ryanair and British Airways.

He told employees: "In summary, our current profit level is nowhere near good enough to justify long-term investment by shareholders – they would be much better off putting their money in the building society. We need long-term investment to survive and grow, so we need to make more profit."

The memo, dated November 15, was sent to staff as part of EasyJet's pay negotiations with the British Air Line Pilot’s Association, which were ongoing at the time. It was distributed to all captains and first officers in advance of EasyJet's publication of full-year earnings.

A week later, the airline reported annual earnings before tax of £67.9 million, up 9 per cent on £62 million for the previous year. Shares jumped 11 per cent to 340p that day, the highest since February 2004, as the profit growth beat City expectations. They have since slipped back to around 331p each, which values the group at more than £1.3 billion.

EasyJet axed 10 per cent of its management and administration staff in the days following the earnings release.

Mr Szucs tried to dampen staff optimism in the run-up to the results. "If the analysts’ expectations are correct, we will not be meeting the planned results for the 2005 financial year, and our profits will be just a little ahead of last year," he wrote.

The memo goes on to explain that EasyJet makes "only one-third of the level of profit" that other companies on the British stock market manage.

This echoes comments made by Ray Webster, the company's departing chief executive, who last week told staff in a memo that earnings are "not enough to make us successful in the long run".

EasyJet proposed that pilots and first officers accept an average annual salary increase of 2.7 per cent for the year ending October 2006, introduced via phased payments of 1.5 per cent from October this year and a further 1.2 per cent in April.

The company also said it would consider freezing pay in France and Germany so it could offer bigger increases to its London-based staff.

"We do not propose reducing salaries of current staff, merely not to further exacerbate the situation," Mr Szucs wrote.

"It’s an increasingly tough environment with a constant requirement to increase our revenue and reduce our costs in order to be successful in competition with other airlines, and we think that this proposal reflects the principles of market rate and affordability, and provides an opportunity for all employees to share in the success of the business," his memo concludes.

A spokesman for EasyJet confirmed the contents of the memo but declined to comment further.

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