Low-cost carrier easyJet could be in significant financial difficulty, according to its founder and major shareholder Sir Stelios Haji-Ioannou. The Greek-Cypriot entrepreneur has issued a stark warning that the airline could run out of money as soon as August if drastic steps are not taken soon.
Stelios pushing for order cancelation
easyJet founder Sir Stelios Haji-Ioannou has issued a warning today that the low-cost carrier could find itself strapped for cash by mid-summer if action is not taken soon. The easyJet founder and majority shareholder had previously expressed a desire for the airline to cancel its order with Airbus in a bid to ease cash worries caused by the current travel downturn.
easyJet currently has 108 Airbus aircraft on order, all of the fuel-efficient A320neo family line. Sir Stelios claims that this order, estimated to be worth £4.5bn ($5.5bn), is jeopardizing the future of the airline, and has demanded that it be canceled immediately. If it is not, he says the airline will run out of money by August. In a letter published on the easyGroup’s website, Haji-Ioannou said,
“If this 4.5 billion pound liability to Airbus is preserved – and not cancelled - by the easyJet board then, I regret to report, easyJet will run out of money around August 2020, perhaps even earlier.
“I will certainly not be throwing good money after bad. For the avoidance of doubt, I will not inject any fresh equity in easyJet whilst the Airbus liability is in place.”
He goes on to call into doubt the validity of the order, noting the outcome of the Airbus bribery case as determined by the UK’s Crown Court in January.
Removing directors
Stelios had, in his earlier letter, stated that he would seek to remove one non-executive director every seven weeks until the airline complied with his request to cancel the order. He had already attempted to remove Andreas Bierwirth, who he describes in his latest communication as “a failed ex-Lufthansa executive who lost his employer a lot of money and got sacked from Austrian Airlines.”
His attempt to remove the director had been squashed by easyJet management, according to today’s letter. He claims that he requested a vote on the 1st April to discuss Bierwirth’s ousting, but was denied the holding of such a vote.
Now, he is demanding a similar vote in a bid to oust Andrew Findlay, the company’s Chief Financial Officer. He says that this is “the best way to stop him writing billion pound cheques plus to Airbus every year.”
easyJet’s CEO Johan Lundgren has previously indicated that the airline could seek financial support from the UK government in order to ensure its survival. However, Sir Stelios claims that, if the Airbus order is canceled, no such bailout would be required. In his letter he states,
“If easyJet terminates the Airbus contract, then it does not need loans from the UK taxpayer and it has the best chance to survive and thrive in the future.”
He concludes by reiterating his stance that the airline should look to contract its operations down to just 250 planes, from the current level of 350. He reaffirms his intentions to pursue the removal of more directors every time the company denies him the vote.
What do you think? Does Sir Stelios have a point, or is this just more drama from the outspoken airline founder? Let us know your thoughts in the comments.