EasyJet agrees deal in Stelios row

Low-cost airline easyJet today announced a deal to end its long-running row with founder Sir Stelios Haji-Ioannou and secure its use of the "easy" brand.

The budget carrier has agreed a multimillion-pound-a-year package for Sir Stelios in order to resolve an increasingly bitter dispute over a strategy which threatened to see it forced into a rebrand.

It will pay Sir Stelios 0.25% of its revenues each year, fixed at £3.9 million and £4.95 million for the first two years, plus another £300,000 annually.

In return, Sir Stelios - who along with his family owns around 37% of the airline - has revised the terms of the licence agreement, giving easyJet more freedom and scrapping clauses which previously allowed Sir Stelios to step in as chairman.

He described the agreement as a "win-win for all concerned".

Shares in easyJet rose around 5% on news of today's settlement, which will be put to a shareholder vote in the next three months.

It will remove licence restrictions on easyJet to enter co-branding promotions with other travel firms and allow it to work with so-called "white label" partners across car hire, hotels and travel insurance.

This was core to the airline's argument with Sir Stelios, which led easyGroup to start High Court action in 2008.

A judgment was due later this year, but easyJet said it was in the interests of all shareholders to reach an out of court deal.

Carolyn McCall, easyJet chief executive, said: "This is a sensible resolution of a difficult dispute that provides a fair, clear, workable outcome that is an improvement for both sides.

"It provides easyJet with operational flexibility and commercial freedom to grow our business and it provides both sides with clarity."

Sir Stelios - who was paid £1 a year under the existing brand licence agreement - added the payments should outweigh any competitive disadvantages to easyGroup.

He said: "The way low-cost airlines make money has changed over the 10 years since the original licence was signed. This amendment allows the airline to now grow its business even further by removing some of the restrictions imposed by the original agreement.

"I am content this is a fair deal for both sides. The agreed amendments will result in increased competition from the airline for the other easyGroup licensees (such as easyHotel, easyCar and easyBus).

"However the agreed royalty payable provides appropriate remuneration for easyGroup thereby aligning the interests of both parties."

The entrepreneur threatened to withdraw rights to the "easy" brand in the summer as the row intensified.

He quit the board in May and stepped up his attack on the group over the following months, hitting out at delays and cancellations and saying he wanted the firm to stop buying aircraft and begin dividend payouts.

Sir Stelios could previously appoint himself as chairman and appoint two directors, but will no longer have this right as part of the new deal.

A separate agreement worth £300,000 a year will also see easyGroup commit to not using the "easy" brand to compete with easyJet in the airline market.