The increasingly bitter row between easyJet and its founder reached the High Court yesterday, with Sir Stelios Haji-Ioannou accusing the budget airline of breaching branding agreements over the "easy" marque.
Sir Stelios, who founded the Easy group in 1998, has fought a battle with the board of easyJet for two years, accusing it of a damaging and poorly conceived expansion plan, of failing to address a flagging share price and failing to pay a dividend throughout the company's history as a public company. Sir Stelios holds a 38 per cent stake in the business, which was listed in 2000.
The entrepreneur claims he has been ignored by the board, led by the outgoing chief executive Andy Harrison, despite being the company's biggest backer. While the hearing is specifically related to the issue of branding, it will be interpreted as a part of the power struggle at the company.
The case comes after Sir Stelios accused the company of a breach of branding rights over the "easy" name. A contract between the two parties states that the airline cannot derive less than 75 per cent of its revenues from its core business of flying. Sir Stelios claims that easyJet's baggage check-in charges, which raised £238m last year, is an ancillary business for the airline, while easyJet insists that baggage fees are just as integral to its main business as paying fares.
Both sides claimed yesterday they were confident of winning the case. A spokeswoman for Sir Stelios conceded the terms of the contract might not be appropriate for a modern budget airline, but stressed that the agreement was clear that baggage check-in charges was an ancillary business. Sir Stellios declined a request for an interview.
Michael Bloch QC, representing Sir Stelios, told Mr Justice Henderson that his client had chosen not to be chairman of the airline, a right pertaining to his holding in the company, "in order to be free to oppose the direction in which the board appears to be taking the company".
EasyJet also said that it "remained reassured" that it would win the case. In a letter to shareholders on 18 May, the airline's chairman, Sir Michael Rake, said that the company "has been proactive in trying to achieve a commercial settlement of the dispute within the limits of what we believe would be reasonable to our institutional shareholders". He also said that easyJet's lawyers, Herbert Smith, had advised that "the company's interpretation of the brand licence is well-founded and therefore the board does not feel it is right, in the interest of all shareholders, to offer material concessions to easyGroup".
The hearing is expected to last between eight and 10 days, with a ruling due towards the end of the summer.
Regardless of the outcome of the hearing, the dispute between the two parties is unlikely to dissipate. Sir Stelios has long claimed that both the business and share price performance of the group has been disappointing. A spokeswoman for the entrepreneur claimed yesterday that shares were at their initial public offering level, while the group has never paid a dividend.
In his letter in May, Sir Michael said that easyJet's share price had increased by 34 per cent since the listing, "a superior performance to its European airline peers". More vaguely, Sir Michael promised to "keep the issue of returns to shareholders under review", adding: "Given the strong underlying performance of the company this year, I believe the board could well be in a position to consider the matter of some sort of return within a reasonable timeframe."
There is unlikely to be any movement on the argument until Mr Harrison leaves easyJet later this year, to be replaced by Caroline McCall, former chief executive of Guardian Media Group.
Sir Stelios's Easy Empire
A year after founding the group, Sir Stelios tapped into the dot.com boom by establishing his EasyInternetcafe chain of internet cafes. Europe's biggest range of internet outlets, EasyInternetcafe has 75 locations.
In 2003, cinema-goers were offered the chance to watch a film for just 20p if they booked well in advance. The chain got into a dispute over rents with Odeon, before closing in 2006. The company now offers an online booking service.
Competing on the ultra-competitive London airport transport market, easyBus operates minibus services to Gatwick, Stansted and Luton airports.
*EasyCinema DVD rental
Not content with a cinema business, Sir Stelios also moved into the DVD rental market in 2005. In a partnership with LoveFilm, clients were offered films for £1.99 each, with no monthly membership fee.
While most cruises are associated with the retired, easyCruise, founded in 2005, targeted the 18 to 40 age range. Cruisers are offered no-frills cabins, with maid services incurring an extra charge. The company was sold to Hellenic Seaways for £9m in 2009.
A virtual mobile network offering a pay-as-you-go service was closed in 2006 after bad publicity. In 2008, easyGroup launched an international calls service in partnership with Rebtel.
With more than 10 no-frills budget hotels in London and a number of other European cities, easyHotel offers a basic double bed and en suite room. Toiletries and use of a television are subject to an extra charge, as is a room with a window.Reuse content