EasyJet shares surged on Monday morning after the UK low-cost carrier agreed to a £5.5 billion takeover bid from US private equity manager Castlelake. The budget airline’s stock price rose sharply shortly after 8:15am in London, hitting a new 52-week high and increasing by 10.5%.

Castlelake’s improved offer comes after EasyJet rejected a previous proposal of £4.93 billion last month. This is the fifth time Castlelake has made a bid for the carrier, with the latest representing a cash offer of $6.90 per share. Under the terms of the deal, Castlelake now has until August 3 to make a firm offer or walk away from the transaction.

The takeover bid comes amid a challenging period for the global aviation sector, with airlines facing significant pressure due to rising jet fuel costs. The International Air Transport Association warned last month that global airlines could see their profits halved this year due to increasing fuel prices, which are expected to be around 70% higher than last year.

EasyJet itself reported a pre-tax loss of £552 million in its latest half-year earnings, despite a 12% jump in revenues to £4 billion. The carrier warned of price rises and slower bookings, highlighting the difficulties faced by airlines in the current market. Castlelake has stated that it is supportive of EasyJet’s fleet modernization programme, which it sees as crucial for the company’s long-term competitiveness.

In a joint statement on Sunday, EasyJet and Castlelake said they had reached an agreement “in principle” to the takeover bid. The statement emphasized Castlelake’s respect for EasyJet and its people, as well as its intention to support the carrier’s future growth and transformation into a stronger, more resilient European airline.

The offer comes amid a period of stress for the global aviation sector, with airlines navigating a jet fuel squeeze caused by the conflict in the Middle East. The International Air Transport Association last month warned that global airlines could see their profits halved this year due to rising jet fuel costs, which are expected to be about 70% higher year-on-year.

EasyJet and Castlelake’s joint statement highlighted Castlelake’s support for EasyJet’s fleet modernization programme, which it sees as essential for the company’s long-term competitiveness. The statement also emphasized Castlelake’s respect for EasyJet and its people, as well as its intention to support the carrier’s future growth and transformation into a stronger, more resilient European airline.

The deal is subject to regulatory approval and Castlelake’s ability to make a firm offer by August 3rd. If successful, the takeover would be one of the largest in the UK aviation sector this year.