Stelios threatens to sell family stake over easyJet squabble

Oh dear. Stelios is on the warpath again. This time over easyJet's plans to buy more aircraft as part of the airline's expansion plans. 'If the board places another order for aircraft, it will destroy shareholder value into the future,' he says.

by Rebecca Burn-Callander
Last Updated: 09 Oct 2013

EasyJet's colourful founder, Stelios Haji-Ioannou, has penned an open letter to shareholders, threatening to sell off his family's stake in the business if management push on with expansion plans.

And this is no empty threat. He, his brother and his sister have already fired a 'warning shot', each selling off 200,000 easyJet shares last week, which takes their combined holding to just below 37%. This is 'a clear message to our directors' says Stelios.

What is it about the easyJet expansion that's making Stelios and his siblings throw their toy planes out of the pram? Well, Stelios, the largest single shareholder in the business, doesn't want the airline's profits to be ploughed back into the business (though buying new aircraft, patching up the old fleet and expanding routes) because he would like to see that profit paid out as dividends instead. Ergo, he wants the cash.

But Stelios would also argue that his position is motivated by more than mere money. He believes that investing in expansion now could stretch easyJet's resources during an uncertain economy. 'Instead of ordering new aircraft, Easyjet should aim for a 10% profit margin, up from 1% four years ago and against the current level of 7%,' he says.

The board may regard him as a thorn in their side but Stelios argues that his interventions have borne fruit for the company. Over the past four years, easyJet's share price has tripled. This, despite the fact that he quit the airline's board back in 2010 over 'irreconcilable differences' on strategy.

His resignation did not put an end to the squabbling. Remember when he tried to get board member Sir Michael Rake fired? Or when he went to the papers bemoaning 'fatcat' bonuses for board members last year? Stelios may not run the compay any more, but that won't stop him acting like he does.

Given his 'difficult' relationship with easyJet's management, you may think they would jump at the chance of allowing him to sell off his entire family stake. However, while it would mean that McCall and her comrades would be free of the easyJet founder for good, it could substantially weaken the airline's share price and leave the company open to a takeover attempt by a rival airline.

This is why Stelios so confidently writes: 'If they place such an order [for more planes] now I will be looking to dispose of more of my stake.' You can almost hear the implicit 'ner ner ner ner'.

The question is, what will easyJet's management do now? Risk courting the unknown by calling Stelios' bluff? Or acquiesce and admit that, despite being absent from the management table, Stelios will always call the shots...

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