THE budget airline Easyjet is planning its first share buyback with a proposal to purchase and cancel up to 10% of outstanding stock. Shareholders approved a special resolution authorising the buyback at their recent annual meeting.

The move follows a decision last month by Ryanair, Easyjet’s main rival in the no-frills airline industry, to buy €200m (£153m) of its own shares.

Buybacks - a popular method for companies with excess cash to return money to shareholders and support their share price - are uncommon in the airline business. Ryanair and Easyjet have not considered buybacks or paid dividends in the past.

But both companies now have large amounts of cash, yet depressed share prices. Easyjet closed last week at 409½p, down from a 741p 12-month high.

In the past three months it has underperformed the FTSE All Share index by 21%, and by 34% over 12 months. Investors have deserted the company because of rising fuel prices and nervousness over consumer sentiment, which they believe could hit demand for cheap flights.

Analysts and transport bankers now say there is a chance the company could be vulnerable to a bid. In 2005, when Easyjet shares last suffered a slide, it was circled by FL Group, an Icelandic company. FL eventually built a holding of almost 17%, but later offloaded its shares when it became clear that Easyjet’s founder, Sir Stelios Haji-Ioannou, did not want to play ball.

Stelios remains a key figure. He owns 16%, and members of his family hold another 24%.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive