Easyjet founder blasts board over call for state aid, tells firm to raise cash
Easyjet’s founder and largest shareholder Sir Stelios Haji-Ioannou has blasted the airline’s calls for state aid, saying companies as big as Easyjet “do not deserve charitable gifts”.
Instead, the carrier should look to raise cash through an equity raise, he said, saying government loans “would only postpone the problem, [they] do not cure it”.
In a letter earlier today, Haji-Ioannou also threatened to sack an Easyjet board member every seven weeks unless the firm cancels a £4.5bn order of new aircraft from manufacturing giant Airbus.
The letter tochairman John Barton came just as Easyjet announced it would ground its entire fleet for the foreseeable future due to coronavirus. The airline warned there could be “no certainty” as to when flights would recommence.
Haji-Ioannou said the order for 107 new planes from Airbus was “the main risk to the survival” of Easyjet, which has been hammered by the collapse of the global aviation market.
He added that the “liability of paying Airbus £4.5bn dwarfs today’s Easyjet market capitalisation of £2.4bn”. And the founder called on the carrier to declare force majeure to get out of payment obligations.
If not, Sir Stelios, who earlier this month received a £60m dividend from the company, will call an extraordinary general meeting every seven weeks to remove non-executive directors for “dereliction of duty”.
In response, Easyjet’s board issued a statement saying that it was “removing cost and non-critical expenditure from the business at every level.
“[We are] working with suppliers to defer and reduce payments where possible including on aircraft expenditure”.
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Easyjet chairman John Barton has until Wednesday to reply to Sir Stelios’ demands.
The letter came as the UK’s airlines seek financial help from the government to survive the crisis.
Yesterday 38 MPs wrote to chancellor Rishi Sunak to add their voices to calls for industry-wide measures to be put in place to ease the pressure on the struggling sector.
However, Sir Stelios contradicted calls for state aid from Easyjet chief executive Johan Lundgren. Instead he said that if the Airbus payment is cancelled Easyjet will not need state aid.
“It would be an abuse of taxpayers’ money to obtain loans to pay Airbus for an unprofitable investment in 107 aircraft. We should raise equity,” he said.
Sunak warned airlines last week that financial assistance would only be forthcoming as “a last resort” if carriers hexhaust all other meanings of raising cash.
The decision was met with dismay by the airline sector at large. Industry bodies Airlines UK and the Airport Operators’ Association both wrote to the chancellor to lay out their demands.
Easyjet’s decision to ground its entire fleet follows that of fellow low-cost carrier Ryanair, which last week said it would do the same.
Easyjet said grounding its planes would strip out “significant cost” from the airline. It, and many other flyers, are trying to survive the coronavirus fallout on the transport sector.
It is holding ongoing discussions with lenders on accessing its liquidity, a point the board reiterated in their response to Sir Stelios.