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EasyJet Founder Increases Stake, Wants New Strategy

14/11/2008 15:35

EasyJet founder Stelios Haji-Ioannou has raised his stake in the British low-cost airline and wants to appoint two new directors as he pressures the company's board to adopt a more cautious business strategy.


The carrier said on Friday that Stelios had increased his shareholding by around 11 percent and wanted the company to reduce an order for new planes and start paying a dividend in response to a growth slowdown caused by the worsening economic climate.


"I am merely applying my rights... to protect my investment in easyJet," Stelios responded in a statement. A spokeswoman declined to comment further.


EasyJet's chairman, Sir Colin Chandler, said in a statement he supported the management team's current strategy, although the board was discussing the future strategic direction of the company amid the current economic background.


"This appears to be open warfare," said Stephen Furlong, airlines analyst at stockbroker Davy.


Stelios had transferred shares owned by his sister to his holding company easyGroup, increasing his stake to 26.9 percent from 15.6 percent.


His brother Polys owns a further 11.3 percent through investment firm Polys Holdings.


EasyJet said Stelios now wanted the airline to scale back its 315-aircraft order with Airbus and start to make dividend payments. EasyJet has never paid a dividend in its eight year history as a quoted company.


The two parties are already locked in a separate court battle over the airline's brand licensing agreement with easyGroup.


EasyJet said Stelios wanted two new non-executive directors to be appointed at the company, and reserved the right to appoint himself as chairman if the move was blocked.


It added that the proposed new directors were both employees of easyGroup.


"In all the circumstances I would like to make it clear up front that the other non-executive directors and I fully support the executive management of the company." Chandler said.


Stelios, 41, floated easyJet on the stock-market in November 2000, but remained chairman until 2002. He stepped down from the board for around three years, but in 2005 took on a non-executive director role that he still holds.


Shares in easyJet, which reports its full-year results on Tuesday, closed down 4.8 percent at 266.25 pence, valuing the company at close to GBP1.1 billion pounds (USD$1.63 billion).


The shares have more than halved in price since the beginning of the year, costing Stelios a paper loss of about GBP170 million, but are down just 3 percent in the past six months.


Douglas McNeill, airline analyst at stockbrokers Blue Oar, said the market was still mulling how to read the comments.


"On the one hand you have conflict at board level, which is undesirable. But there is also the prospect of a change of strategy and the distribution of cash," he said.


"The rapid rate of expansion that has been planned requires a huge amount of cash to be spent on new planes. Stelios clearly thinks that cash could be better used elsewhere."


EasyJet told analysts at a presentation in September it expected cash at September 30 to be around GBP900 million. It has a total order for 315 aircraft from Airbus, of which 120 have already been delivered.


Its current fleet is 165 aircraft. It said in the presentation the figure would be 200 by 2011, although a group spokesman said the number was under review.


Stelios now holds close to the 29.9 percent of the company that would trigger a takeover bid.


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