Demands for withdrawal, criticism of an order, dividend requirement: Easyjet does not have it easy with its founder. In order to relieve the pressure, the low-cost airline is raising money.
Stelios Haji-Ioannou is not a pleasant partner. Easyjet has noticed this over and over again over the years. The British entrepreneur and offspring of a Greek Cypriot shipping line family always spoke up when the low-cost airline had to make important decisions. And it is effective in the media.
It is not surprising that he is a major shareholder in the airline: after all, he founded it himself in 1995. Meanwhile, Stelios, as it can be called, is the largest single shareholder of Easyjet with 34 percent. And in the past few weeks, he has made pithy statements in the media in the UK almost every day.
One request for cancellation after the next
For example, he demanded the resignation of CFO Andrew Findlay and the expulsion of the German supervisory board member Andreas Bierwirth. Easyjet did not respond to the demands, which prompted Stelios to make bold statements about the company’s financial situation. It was a “dirty trick” not to vote on Bierwirth’s post.
He will demand the resignation of another board member every time a vote is prevented, he said, according to the Financial Times newspaper. And then, in an open letter earlier this week, he added that Easyjet should run out of money in August – a statement that didn’t exactly fuel the stock price.
Airbus order is a thorn in the side of Stelios
The founder’s feud with the airline is due to an order from Airbus worth 4.5 billion euros. Stelios demands that Easyjet now cancel them. Airbus had already said that it was working to postpone and reduce payments for the order. But that is not enough for the founder. He wants Easyjet to give up entirely.
Without the liabilities from the order, the airline can survive without state aid, the investor said. Easyjet always argued that plans should keep an eye on long-term strategy. The airline rejects an extraordinary shareholders’ meeting because it prevents one from concentrating on things that are currently more urgent.
Easyjet has raised money
To alleviate the pressure from Stelios, Easyjet acted and raised liquidity. The airline will receive £ 600m from a UK corona crisis fund. She also gets another $ 500 million from banks.
Easyjet now has £ 2.3 billion in liquidity – more than many other airlines. Stelios can no longer complain at first. The situation now looks different, of course, a spokesman for Stelios told the Financial Times. Nevertheless, one maintains that the Airbus order is not good for the corporate strategy and must be canceled.
Profit steadily increased
It is not the first time that a dispute over an Airbus order has escalated. Already in 2010, Stelios was waging an order for 59 Airbus aircraft. Management continued to expand the fleet with new planes, said Stelios at the time. This does not lead to more profits or more value for the shareholders.
However, the majority of the Supervisory Board supported the strategy of the management. Stelios withdrew from the board and was from then on only a shareholder. It remains to be seen whether the businessman was right in his criticism of Easyjet’s growth strategy. In 2010 the airline generated a pre-tax profit of around £ 154 million. In 2019 there were 430 million.
Sharp on dividends
This also shows that Haji-Ioannou does not just do all of this because he cares about “his” Easyjet and its healthy growth. Above all, the distribution of dividends is important to him, which he made clear in the past. He repeatedly mobbed general meetings against their expansion plans and instead demanded higher distributions.
At some point he was successful, and the payout ratio was increased to 50 percent. As a rule, it is between 20 and 30 percent in the industry. Airline Stelios paid £ 60m in dividends for 2019. There was a total of £ 174m for shareholders.
Also in Africa, arguing with their own airline
To waive the dividend in the face of the crisis is not an option at all, says the founder. He would certainly not donate 60 million to Easyjet so that it would then be passed on to Airbus. “I donate a lot to charities, but certainly not to Airbus,” he said.
Incidentally, Easyjet is not the only airline that is struggling with shareholder Stelios. In 2012 he founded the pan-African low-cost airline group Fastjet. However, things didn’t go very well for that, a look at the headlines of aeroTELEGRAPH in recent years shows: «Fastjet needs more money», «Fastjet saves itself at the last second», «Fastjet needs money again» – that’s just a selection . And in between, major shareholder and founder Stelios always spoke up.
Always hard past the bankruptcy
In open letters, he railed against management and described it as incapable – with the result that the airline’s share price continued to decline. It is unclear whether and how Stelios ’second airline baby survives the current crisis. Even before the pandemic broke out, it was announced that Fastjet was again in financial distress and wanted to sell the subsidiary in Zimbabwe.
If the sale could not be used to improve the finances, the reserves would only last until the end of March. Then Fastjet would have to shut down. This ultimatum has now passed.
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