The MT interview: Sir Stelios Haji-Ioannou of easyJet

Sir Stelios on the frustrations with the easyJet board that prompted his conversion to shareholder activism.

by Chris Blackhurst
Last Updated: 18 Aug 2014

Stelios wants to show me two pieces of paper. One is a chart of easyJet's share price relative to the rise in the size of its aircraft fleet. It's clear: while it has added more planes over the past 10 years, from 19 to over 180, the shares have not soared as a result.

'Look at Ryanair,' he says. 'It's gone from 36 aircraft in 2001 to having 218 in November last year. Now tell me, are investors in Ryanair better off because it's bought more planes?'

It's true: the line for arch-rival Michael O'Leary's airline mirrors easyJet's. All that expenditure on Boeings and Airbuses – and no tangible benefit, not for shareholders anyway.

That's the point. We're at breakfast and to emphasise it, Stelios jabs at a sausage with his fork.

His frustration is evident. 'EasyJet is seen as a huge success, which I'm happy about, because I own the brand. But easyJet is a publicly listed company. The share price has gone up and down as it's got bigger and things have happened – but overall, really it's gone sideways.'

He spears another piece of sausage. 'Basically, it's created no shareholder value for 10 years.'

And as the 38% shareholder, along with his family, in the no-frills carrier, that makes him extremely annoyed.

So angry in fact that he's had enough: he's quit the board of the company he founded because he wants to force the management to scrap their expansion plans. It's easier to fight, he reckons, on the outside than inside the boardroom.

Others might prefer to campaign quietly and with subtlety. Not Stelios. I hesitate to say this for fear of upsetting Hellenes everywhere but there's no denying it: he's Greek, after all. He was born in Athens to Greek Cypriot parents, through whom he gets his UK citizenship.

He does not do things by halves. Take the breakfast at the house he uses in west London when he is in town – his main home is in Monaco. It's vast, 'a full English', he says, beaming.

Stelios clears his plate with relish. He's a giant of a man – large head, big body, but soft, wide, brown eyes – with the appetite to match.

To be with Stelios is to spend time with an unstoppable force of nature. His gestures are over-the-top, his language direct and strong. He'd make a hopeless diplomat.

The word personality is often used to describe those who have made it to the top. Yet, when you meet them, the experience can be disappointing. That's not the case here. Even his title is indicative: he's known as Stelios, never his full moniker of Sir Stelios Haji-Ioannou.

Not only is it a mouthful, but it's not him. He's Stelios, in advertisements, to taxi drivers and passengers and in boardrooms. He's one of the few entrepreneurs who need little introduction: Branson is one, Sugar another.

There's a friendly familiarity about Stelios.When he's not raging about easyJet and where, in his view, it has lost its way, he is jocular and extremely self-confident, as he has every right to be: he's a billionaire, and still only 43. He's a knight, too – for services to entrepreneurship. As well as easyJet, he's founded lots of 'easy' businesses – although only a few have been successful.

He calls himself a 'serial entrepreneur'. The son of a Greek Cypriot shipping magnate, he was born into money-making. He went to the LSE and City University's Cass Business School. In 2005 he and his family made £94m from the sale of the Stelmar Tankers shipping line Stelios founded at 25 with the backing of his father.

EasyJet was launched in 1995, with £30m of his father's cash, and floated on the stock market five years later. Today it's the largest UK-based airline and Europe's second biggest, after Ryanair. This April, it carried 3.49 million passengers – a fall of 7.6% year on year and below the 4.3 million expected before the Icelandic eruption. That would have represented growth of 14%.

The company said its load factor, the number of passengers as a proportion of available seats, increased from 84.2% in April last year to 85.2% this time. It has carried 46.9 million passengers in the past 12 months, up from 44.4 million.

Stelios was easyJet's non-exec chairman until 2002, left the board, then rejoined as a NED in 2005, until quitting again on 14 May in order to pursue those strategic differences. He remains by far its biggest shareholder.

Since 1999, he has set up 16 other 'easy' ventures, which are separate from easyJet. They are owned by easyGroup, the private investment vehicle for his Stelios Trust. EasyGroup owns the 'easy' brand and licenses it to various 'easy' operations, including easyJet. This private side embraces easyBus, easyCruise, easyOffice, easyCar, easyPizza, easyHotel, easyInternetcafe – all with the same distinctive orange logo as easyJet.

Most of them are run as franchises. None has come close to matching easyJet. Some spin-offs, like easyCinema, easy4Men (men's toiletries, meant to compete with Gillette but never did), easyMoney (credit cards, since withdrawn) and easyMobile (shut down) have failed.

Stelios sees himself as another Branson, in that companies are marketed under the same banner identifiable with one person. The comparison is apt for another reason: Branson, too, has arguably not enjoyed the same success with his other ventures as with his airline.

Like Branson, Stelios courts publicity and enjoys stunts – when rival low-cost airline Go launched, he boarded its inaugural flight in an orange boiler suit handing out easyJet tickets.

Also like Branson, he is fond of fighting his corner. Undeterred by his flops, he is fond of saying his favourite business is 'the next one'. To that end, he will soon enter court to seek clarity on the brand licence agreement struck when the airline went public in 2000. Under the deal, easyJet was limited to making 25% of its revenues from non-core, non-airline activities.

It was his way to safeguard the 'easy' identity and prevent the airline from encroaching on his other operations. The deal was made when easyJet was not as big as today and the web in its infancy. The airline wants to direct passengers to links to car hire and hotels, for a commission.

One consequence of the court case may be that easyJet may have to give up the 'easy' name. Stelios denies the litigation has anything to do with the row over strategy – that's about aircraft, he says, not the brand.

His first move in the battle over the firm's strategic direction? Contact other shareholders with a view to getting the airline to change its plans, to stop buying more aircraft and make better use of the ones it owns.

All of which makes the job of easyJet's newly appointed CEO (she starts on 1 July), Carolyn McCall, the ex-chief of Guardian Media, extremely difficult. Stelios was part of the selection process. 'Would you take the job without meeting me?' he asks, laughing. 'No,' he says, before I can answer.

McCall's switch from leftwing newspaper group to budget airline raised eyebrows when it was announced. Aren't they chalk and cheese? 'The appointment came as a result of a rigorous process. It was led by Sir Mike Rake (easyJet's chairman), one of the best-connected people in the City. He was chairman of KPMG and is chairman of BT and on the board of Barclays.'

There are, insists Stelios, 'more similarities than one would think between the Guardian and easyJet. They're both consumer-facing, in tough environments and dealing with changing events, and both about making money.' McCall, he adds, 'knows the consumer pretty well – she was on the board of Tesco too'.

There are other reasons, he claims, that make her the right choice. 'Although my objectives are not the same as the Scott Trust (the charity that controls the Guardian), Carolyn is used to dealing with a complex ownership structure. She also works with journalists, so she is accustomed to dealing with people with strong opinions. Anyone who can deal with Alan Rusbridger (the Guardian's editor) can deal with me. EasyJet is set up like The Guardian: who runs the Guardian, its editor or Carolyn?'

Yes, but how will she cope with O'Leary and his onslaughts (in the most recent one, the Ryanair boss challenged Stelios to a race round Trafalgar Square, after O'Leary likened him to Pinocchio and Stelios threatened legal action)?

'O'Leary is a bit of an anomaly – most people don't behave like Michael O'Leary and they're not expected to behave like him.' The Ryanair maverick, says Stelios, 'runs a serious risk of alienating his customers (in April alone, Ryanair said it would charge to use on-board toilets and initially refused to compensate those whose flights were cancelled because of the ash cloud) and he has to find more customers every year because he is buying more planes.'

More to the point, how will she deal with Stelios? 'She's only the third CEO easyJet has had in 15 years,' he says, in reference to the widely held City perception that easyJet's front door has been of the revolving variety. 'Carolyn will find a business that has reached maturity. What was innovative and revolutionary 15 years ago is now just another airline – everything we've introduced has been imitated or conceded. Look at food - that used to be free. Now nobody in Europe expects free food on a low-cost carrier.'

Today, the industry operates according to pretty much the same standard. There are far more routes as well. 'We used to fly out of Luton at a cost of £1 a passenger.' Stelios shakes his head. 'It used to be we'd fly out of Luton for £29, pay the £1 and keep the £28. Now we're the biggest operator in Gatwick, paying far more than £1 a passenger. Don't forget too, when I started, oil was $20 a barrel – now it's up to $50-$60.'

He continues: 'On a typical fare, one-third is going in fuel, one-third to the airport, so two-thirds is non-negotiable and is externally set.'

This is where, he says, he ran 'into dispute with the previous management, with Colin Chandler and Andy Harrison'.

Sir Colin Chandler, a British Aerospace executive who went on to head the Government's arms sales unit and negotiate the massive alYamamah deal with the Saudis before leading Vickers, was chairman of easyJet. Harrison is still - until the end of this month – its chief exec. Both fell out, spectacularly and decisively, with Stelios over the airline's growth.

The row reached new heights of animosity when Stelios attacked Harrison shortly after easyJet's first half results (a loss of £79m thanks to the ash cloud) were announced last month.

'Stelios thinks Andy Harrison is over-rated,' the FT was told by 'a source close to the airline's largest shareholder'. The source continued: 'Over the past five years, Andy Harrison has developed a love affair with Airbus ...

the share price has gone sideways ...

the only thing that went up was the size of his bonus. Stelios feels sorry for Whitbread shareholders (Harrison's new employers). If Andy Harrison applies the same philosophy, he will cut the dividend to zero, agree a contract to build 300 Premier Inns across the entire continent and five years later the share price will be about the same.'

Pretty intemperate language. So what is this extraordinary spat all about? Back in 2002, easyJet entered into a contract with Airbus for the supply of 109 A320 short-haul aircraft. The order was amended in late 2006. Even so, the bulk of the planes will have been delivered shortly. It incenses Stelios, who is convinced they're not needed. He believes the company should proceed more slowly and apply the brakes.

Hence his dramatic departure from the board. But support is in short supply – second-largest shareholder Standard Life has announced it is backing the management.

It's true he did sanction the contract in the first place. His attitude is: that was then, this is now – and circumstances have altered.

'I'm very keen to say this is not about the original 2002 deal, but the one subsequently voted upon by shareholders in 2006. The world has changed a lot since then. In 2006, the stock market was climbing, multiples still expanding.'

Companies since then that grew too quickly, said Stelios, have gone bust. He is determined easyJet should not suffer the same fate. He explains: 'Lesson one of low-cost airline economics is, fly your aircraft as often as you can with as many people as you can. In that regard, we have too many aircraft.'

EasyJet, he says, was 'growing for the sake of adding more aircraft. That makes Airbus and the passengers happy, but not the shareholders. EasyJet can make more money if it stops growing the number of aircraft. It should not grow them unless it can show shareholder value.'

As the owner of 38% of the business, he has no qualms about intervening. 'If the board says, "we want to buy 200 aircraft, we want to spend $6-$7bn", don't you have the right to ask why?'

He leans back in his chair. 'Now is the time for easyJet to think about its shareholders,' he says. Carolyn, are you listening?

'It has got to increase its profit margin - not by adding more planes. We've got to lose the unprofitable routes and stop capital expenditure.' And perhaps start paying a dividend, too, say some analysts - from which he would benefit financially, of course.

But aren't other airlines suffering similarly? That's precisely his point. 'The fact the industry is not profitable is a very good reason not to buy more aircraft. Look at BA, it's shrunk in the past 10 years. We need to do the same, to slow growth of our fleet and have a higher profit margin.'

He was party to the initial 2002 contract, so isn't it a bit rich of him now to turn round and attack it? 'You make commitments years in advance when you don't know what will occur.'

Listen, he says, 'what's important is that easyJet cuts back on its capex, reallocates aircraft to profitable routes, focuses on costs and adds to the bottom line. This business only made £1 a passenger last year. If we could make it £3 or £4 a passenger, easyJet would be a lot more valuable.'

Crikey, I exclaim, who will run easyJet – him or McCall? 'EasyJet is a public company, where the founder and his family still own 38%. There aren't many of us, where the company is listed and the founder's family remains a force. Rupert Murdoch and his son run News Corporation, Mark Dixon runs Regus and Charles Dunstone Carphone Warehouse. The City either loves companies like that or it hates them.'

He shrugs. 'I've decided to comply with the new standards of corporate governance. The rules say I should not be chairman as the major shareholder and that the chairman should be independent and also not an employee. So we've got Mike Rake, who earns £300,000 a year, as independent chairman.'

Besides, he says, smiling, 'the fact I'm such a large shareholder means I've more to lose if anything goes wrong – it should make people more keen to invest. We're different from a BP or a BT. We were founded 15 years ago and the founder is still very much alive in the company.'

Hmm. Those corporate governance rules might also suggest, in spirit if not in letter, that once shareholders have had their say, they leave executives to get on with their job. But you still call the shots, I say. 'I wish I did, but I don't. The strategy is set by the board.'

Mind you, he adds, 'If I went to the AGM and voted against something, there would be chaos. You can't ignore a 38% shareholder for too long. But if the company wants to buy 100-200 aircraft from Airbus, it has to come to me.' I think I know how it works. It's easy, sorry, simple: whoever controls easyJet must stay on the right side of Stelios, or else. Carolyn, have you got that?

As for corporate governance, it's clear that as a shareholder he is dictating how the listed company is run. Who is most powerful: McCall? Rake? Stelios? It isn't clear and the result is chaos.

It is hard to imagine, I say to him, that easyJet is only 15 years old – it seems to have been around for ever. He agrees. It's because 'aviation attracts a disproportionate amount of attention relative to the size of the industry'. We're meeting on a day when the ash cloud has closed some airports again. It receives blanket coverage. Asks Stelios: 'What other industry would be on Sky News every 15 minutes the way we are?'

His face breaks into a broad grin. 'Mind you, it is a very powerful way to build a brand. If you want to build a brand, start an airline. Look at Virgin and ourselves. Airlines can create brands very fast.' He grabs a box of Corn Flakes. 'It's like Kellogg's. This is a great brand, but you don't agonise over your choice of breakfast cereal as you do with airlines.' That may be so, but most of the news coming out of aviation these past few months has been terrible. How much trouble does he think the industry is in?

'Airlines have a horrible habit of buying too many aircraft.' (He won't let his dissatisfaction with easyJet rest.) 'But, unlike other industries, it doesn't have exits. So there aren't many bankruptcies – national airlines are protected by governments. Why is Olympic Airways still flying? You think of Greece going bankrupt, but not the airline – yet Olympic has been flying while insolvent for 20 years.'

He spreads his hands wide and grins. 'But, hey, the good news is that easyJet has a terrific fleet of new aircraft!' (He can't leave it alone.) 'I come from a background where you made money from working old ships hard – that was the name of the game for the Greek shipowners.'

With airlines there is, in addition, the ever-present risk of catastrophe. Despite his insistence that McCall looks at costs, easyJet's major investor is worried, lest we get the wrong impression. 'We will never take safety for granted. As someone said to me only the other day, "if you think safety is expensive, try an accident".'

Away from easyJet, he concedes that some of his other ventures have hardly been triumphs. 'But I've not had a bankruptcy. Because I am so closely identified with the brand, I have to stand behind the company. I can't let them go under.'

He has discovered the hard way that the 'easy' name works best in travel, perhaps because his easy travel companies are seen as directly related to easyJet – so easyBus and easyHotel are doing well. He's proud of his latest find, an office block near the City for the easyHotel chain. It was on the market for £13.7m - he got it for £5.2m.

His 'easy' companies take about one-third of his time, as does easyJet, even though he has no job there. 'I read what the analysts are writing. I also answer passengers' emails and letters.'

EasyJet has a customer services department but people continue to write to him first, as Stelios. Again, another aspect of the company that McCall may find testing.

Similarly, Stelios says he's been deluged with requests from Greece for his thoughts on the financial crisis. 'I'm not a politician, I don't want to run the country. The government hasn't asked me for advice - not yet.' He's guarded but indicates that the Stelios solution would be radical. 'It's the first time a country with fiscal problems can't devalue its currency. Greece should be allowed to leave the euro and go back to its own currency, which could then be devalued.'

He's not willing to discuss it, because as a rule, he tries to stay out of politics. During the General Election campaign, he was asked to sign the letters supporting the scrapping of the National Insurance rise and warning about a hung parliament. While they were not explicitly pro-Tory, they were organised by the Conservatives and they got his backing – something he gives the impression of regretting, given the way the NI letter in particular became an election issue.

Stelios does not want to dwell on them – possibly he was taken aback by the furore and he's afraid of alienating some easyJet passengers; perhaps he's not as avowed a Tory as all that. All he will say on the election is that he wishes there had been 'a more decisive outcome'.

He is keener to talk about his philanthropic activities. He has sponsored scholarships at his old universities, LSE and City. He's working with Leonard Cheshire to fund a programme so that people with disabilities are encouraged to start their own businesses. He has been encouraging joint ventures in his native Cyprus between the Turkish and Greek Cypriots. 'It's a concept that could be tried in other areas of conflict - between Jews and Arabs, and in Korea.'

Stelios as global peace-maker. Now there's a thought. It will be interesting to see what McCall and her new colleagues make of that in the months and years to come.

Four challenges facing Stelios

1. To allow new CEO Carolyn McCall room to manoeuvre at easyJet, time to put her own mark on the airline and to make it more profitable

2. To show that easyJet was not a one-off, that other 'easy' ventures can also be resounding successes

3. To learn when it is best to shout and when to lobby quietly

4. To decide whether he prefers private to public ownership

Stelios in a minute

1967: Born into a Greek shipping family. Went to Doukas High School in Athens, then to LSE and Cass Business School

1992: Created Stelmar Tankers shipping line with financial help from his father. Sold it for £94m 13 years later

1995: Formed easyJet, flying out of Luton, again with his father's backing

2002: Stood down as easyJet chairman, wanting to develop other 'easy' businesses

2005: Returned to the easyJet board as non-executive director, became embroiled in a dispute with Sir Colin Chandler, the chairman and Andy Harrison, the CEO

2010: With Chandler and Harrison gone, and Sir Mike Rake installed as chairman, he played a key role in appointing Carolyn McCall as CEO

Chris Blackhurst recommends


Read more

Find this article useful?

Get more great articles like this in your inbox every lunchtime

A leadership thought: Treat your colleagues like customers

One minute briefing: Create a platform where others can see their success, says AVEVA CEO...

The ignominious death of Gordon Gekko

Profit at all costs is a defunct philosophy, and purpose a corporate superpower, argues this...

Gender bias is kept alive by those who think it is dead

Research: Greater representation of women does not automatically lead to equal treatment.

What I learned leading a Syrian bank through a civil war

Louai Al Roumani was CFO of Syria's largest private retail bank when the conflict broke...

Martin Sorrell: “There’s something about the unfairness of it that drives me”

EXCLUSIVE: The agency juggernaut on bouncing back, what he would do with WPP and why...

The 10 values that will matter most after COVID-19

According to a survey of Management Today readers.