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EasyJet founder takes airline to court

EasyJet founder Sir Stelios Haji-Ioannou does not like the direction the now-public company is heading and took it to the High Court today.

He is claiming that the airline is exceeding its rights under a branding licence agreement which limits the amount it can make from everything not including flying passengers from A to B to 25% of total income.

Michael Bloch QC, representing Sir Stelios's company, easyGroup IP Licensing (EGIP), said when the licence was issued, easyJet was a "straightforward, focused, low-cost airline".

He told Mr Justice Henderson the dispute between the parties centred on what constituted ancillary and core activities.

Ticket prices are agreed to be core, but food off the trolley, travel insurance, hotel bookings and car hire at passengers' destination are said by EGIP to be ancillary and by easyJet to be core.

Mr Bloch said that according to easyJet's latest accounts, ancillary activities account for 20% of its income but EGIP claims if the figures are dealt with correctly under the licence, the true amount is more than 25% and growing.

"The wider dispute centres around the number of aircraft easyJet is purchasing and the strength and transparency of the case for doing so. As a shareholder, Sir Stelios is concerned that what he considers to be imprudent growth ties up capital, reduces ticket revenue per passenger, depresses profit margins and prevents easyJet paying dividends."

He said this was indirectly related to the brand licence as Sir Stelios has a right to be chairman and appoint two directors to the easyJet board as long as the brand licence continues and he has a shareholding in the company.

"Sir Stelios has not exercised his right to be chairman and he has recently resigned as a director in order to be free to oppose the direction in which the board appears to be taking the company."

He said what concerned EGIP was that the growing easyJet Airbus fleet appeared to depend on expanding the range and significance of non-ticket revenues and thereby changing the public perception of the business and taking up space in sectors which could be occupied by other "easy" brand licences.

He said the 75:25 rule drew a line which easyJet is not permitted to cross.

"On any sensible view, easyJet is operating either on the wrong side of, or perilously close to, it."

EasyJet denied this, but was only able to do so with its interpretation of what constituted core and ancillary business, he said.

"The focus on ancillaries disguises the fact that for many customers easyJet is no longer really a low-cost airline."

Sir Stelios, who floated easyJet in 2000, will give evidence during the expected two-week hearing.