Founder takes EasyJet to court over issues of airline's direction

Published on Monday 14 June 2010 21:10

EASYJET founder Sir Stelios Haji-Ioannou took the company to the High Court yesterday in his dispute with management about the budget airline's strategic direction.

Sir Stelios claims that the airline is exceeding its rights under a branding licence agreement which limits what it can make from everything other than flying passengers from A to B to 25 per cent of total income.

Michael Bloch QC, representing the EasyJet founder's company, EasyGroup IP Licensing (EGIP), said when the licence was issued, the airline was a "straightforward, focused, low-cost airline".

He told Mr Justice Henderson the dispute between the parties centred on what constituted core and support activities.

Ticket prices were agreed to be core. But Bloch said that whereas EasyJet claimed trolley food, travel insurance, hotel bookings and car hire at passengers' destinations were also core, EGIP maintained they were ancillary.

He said that according to EasyJet's latest accounts ancillary activities accounted for 20 per cent of its income – but that EGIP contended the figure was more than 25 per cent and growing.

Bloch added that the wider dispute centred on the number of new aircraft EasyJet was purchasing.

"As a shareholder, Sir Stelios is concerned that what he considers to be imprudent growth ties up capital, reduces ticket revenue per passenger, depresses profit margins and prevents EasyJet paying dividends," he said.

Bloch said this was indirectly related to the brand licence as Haji-loannou has a right to be chairman and appoint two directors to the EasyJet board as long as the brand licence continues and he has a shareholding in the company.

He said Sir Stelios had not exercised his right to be chairman and had recently quit as a director to be free to oppose the direction in which the airline was going.

Bloch said EGIP was concerned that growing the EasyJet Airbus fleet appeared to depend on expanding the range and significance of non-ticket revenues.

He said the 75:25 rule drew a line which EasyJet was not permitted to cross.

"On any sensible view, EasyJet is operating either on the wrong side of, or perilously close to, it."