As EasyJet Grounds Fleet, Founder Threatens Board Demanding Airbus Order Cancellation

As if managing the fall-out from coronavirus-related travel restrictions in Europe and grounding its entire fleet was not enough, low-cost airline easyJet is reported to be embroiled in a dispute with its founder, Sir Stelios Haji-Ioannou.

Skynews reported overnight that Haji-Ioannou had threatened to remove most members of the board if they fail to cancel the airline’s order for Airbus aircraft immediately.

EasyJet had announced plans to cancel the majority of its flights last week, and had been conducting limited repatriation flights. The airline announced the grounding of its full fleet in a statement to the London Stock Exchange this morning.

“Over recent days, easyJet has been helping to repatriate customers, having operated more than 650 rescue flights to date, returning home more than 45,000 customers,” the airline stated. “The last of these rescue flights were operated on Sunday, March 29. We will continue to work with government bodies to operate additional rescue flights as requested. At this stage there can be no certainty of the date for restarting commercial flights. We will continuously evaluate the situation based on regulations and demand, and will update the market when we have a view.”

It is this uncertainty which concerns Haji-Ioannou, and which prompted him to insist that easyJet cancel its aircraft orders in order to contain fixed costs.

In a letter sent to easyJet chairman, John Barton, and seen by Skynews, easyJet’s founder warns that he would “call an extraordinary shareholder meeting every seven weeks to remove one of its non-executive directors” if they fail to cancel the aircraft order.

“Even with a resumption of air traffic, any income from passengers is likely to be too low to keep up with outgoings and would most likely render easyJet insolvent if it continues to pay Airbus for more aircraft,” Sir Stelios wrote. He also threatened legal action.

“This crisis may result in the insolvency of easyJet PLC and if it transpires that a single penny from the company has been paid to Airbus between the grounding of the fleet and the date of the insolvency or any equity-raising which would prevent insolvency, I will personally sue all the easyJet directors for gross negligence and for defrauding easyJet’s creditors with the favoring of one creditor (Airbus with dubious rights to these monies) over all others.”

While the Skynews story references an order for 107 aircraft, valued at £4.5 billion ($5.57 billion),  Airbus’ published February order book showed easyJet had open orders for 95 A320neo and 19 A321neo aircraft. The airline operates an all-Airbus fleet consisting of 337 Airbus A320 family aircraft, divided among the group’s UK, European and Swiss AOCs. I have reached out to both Airbus and easyJet to clarify and comment, and will update if and when more information becomes available.

The airline’s statement to the market this morning makes no mention of possible aircraft order cancelations, though it does leave the possibility open by referring to cost-cutting measures.

“We continue to take every action to remove cost and non-critical expenditure from the business at every level in order to help mitigate the impact from the coronavirus. The grounding of aircraft removes significant cost,” the airline stated. “We are in ongoing discussions with liquidity providers who recognise our strength of balance sheet and business model.”

The airline also announced that it had reached an agreement with its cabin crew union to furlough staff for the next two months, while paying “80% of their average pay through the Government job retention scheme.”  

EasyJet’s CEO, Johan Lundgren, added: “We are working tirelessly to ensure that easyJet continues to be well positioned to overcome the challenges of coronavirus.”

However, Skynews reports that Haji-Ioannou also objects to Lundgren’s suggestions that the airline could pursue government loans on commercial terms that might help easyJet weather the crisis. The availability of such loans is vague as the U.K. government has said it would offer aid to U.K. airlines as a “last resort.”

Haji-Ioannou, who received a £60 million ($74 million) dividend payment from the airline last week, is also reported to have expressed an interest in acquiring a greater share of the airline in his Sunday letter to the chairman. He has set a deadline for easyJet to act on the aircraft order cancelation by Wednesday of this week.