LONDON (Dow Jones)--U.K. budget airline easyJet PLC Tuesday said it has signed its first defense deal, which will see the Ministry of Defence save on baggage fees for military personnel who tend to travel with both oversized and heavy luggage.
The deal -- the first with the MoD -- will see easyJet provide "substantial discounts" on excess fees that are normally charged to passengers and also represents a first public deal for the airline's five-strong U.K. sales team who were appointed in June to focus on selling directly to companies and forge closer links with travel-management companies.
"This new partnership will deliver huge benefits and cost savings for the Ministry of Defence, who in this current economic climate are under enormous pressure to deliver savings for the taxpayer," easyJet Chief Executive Carolyn McCall said.
Previously the MoD, via Hogg Robinson Group PLC, had prevented people from traveling with easyJet because of their excess baggage fees.
The airline declined to comment on what rates it was giving the MoD but expects to carry over 50,000 MoD passengers a year.
The deal could be worth GBP3.5 million to easyJet in revenue, based on an average fare and baggage cost per passenger of GBP70, a person familiar with the matter said.
MoD head of defense travel Mike Holmes said the deal showed smarter procurement procedures.
Last year easyJet offered special rates to British soldiers who opted to pay for commercial flights from Cyprus themselves when returning home from Afghanistan, when the military aircraft that were intended to transport them kept breaking down.
easyJet's McCall said the carrier will seek further deals with public and private organizations.
Numis Securities analyst Wyn Ellis said easyJet was doing the sensible thing by pursuing business deals with the likes of the MoD and other corporate companies, but said it was relatively small compared to the some 54 million passengers that traveled with carrier last year.
Davy Research analyst Stephen Furlong said such corporate deals were an easier way to gain market share during the downturn and also hold onto customers when the economy eventually picks up.
The airline has recently been pushing for corporate deals and has already signed a handful of corporate deals, which include discounts based on the number of flights, an easyJet spokesman said.
Other incentives include offering business travelers a free leisure ticket if their flights are delayed by more than 15 minutes.
At 0721 GMT, easyJet's shares were trading down 1 pence, or 25% at 359.9 pence.
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