Low-cost airline pioneer makes threat to sell 37% family stake in protest against directors’ plans to buy more new aircraft
Sir Stelios Haji-Ioannou has escalated his long-running confrontation with easyJet, the airline he founded, by threatening to sell his family’s dominant stake in the carrier if it orders more planes.
Stelios, who started the airline in 1995 when he was 28, said he sold 200,000 shares last week in a “token disposal” to send a “clear message” to easyJet’s board.
He warned in an open letter that if easyJet’s bosses “squander any more of our cash” on new aircraft, his family would sell more of their combined 37% in the carrier. The family’s stake is worth £1.3bn, with last week’s sale raising about £1.7m.
Stelios said ordering more planes would “screw up [easyJet’s] financial success story”. “If the board places another order for aircraft, it will destroy shareholder value into the future. If they place such an order now, I will be looking to dispose more of my stake before this happens.”
EasyJet’s 214-strong fleet of Airbus aircraft could grow to as many as 287 if the carrier executes options for 73 new jets, which cost $91.5m (£57.9m) each at full price. The prospect of such an expansion has riled Stelios since November 2008, when he went public with his concerns and launched an on-off debate with successive management teams over easyJet’s ambitions.
Stelios reiterated his argument over shareholder value, saying the airline should be run as a “mature cash generative company” that returns money to investors rather than ploughing it into orders for new aircraft in order to keep up with arch-rival Ryanair and wrest market share from struggling competitors.
WarningHe warned that his family would sell more shares if there was a new aircraft order within five years. “The alternative does not bear thinking about,” he said. “A brief look back in aviation history shows a depressing trend of countless iconic airlines (once mighty names of the skies) going bust because their managements bought more aircraft than they had profitable routes to service.
“Let’s avoid this happening at easyJet. I will be a loyal shareholder for the long term provided management doesn’t squander any more of our cash on new aircraft for at least the next four to five years.”
Stelios said the only reason easyJet posted higher profits – up a quarter to £317m last year – was because customers were paying a third more than they did four years ago. “Such price rises are only possible with a slow growth in fleet numbers,” he said.
He said he was delighted the airline had started paying out a third of post-tax earnings in dividend payments and said a “more healthy 50% distribution” was not far away. Stelios and his family will earn about £32m from the airline’s latest dividend, after taking home £72m from a special dividend in 2011.
The airline declined to comment on Stelios’s open letter. Airline experts are expecting the company to report strong first-quarter figures on Thursday. It carried 4.3m passengers in December and said the average number of seats filled on its planes rose to 87.9% compared with 85.6% a year earlier.