EasyJet reassures shareholders over expansion dispute

London
Source: Flightglobal.com
This story is sourced from Flightglobal.com

EasyJet is attempting to reassure shareholders that there is no reason for concern over the low-cost airline's strategy following the sudden resignation of founder Stelios Haji-Ioannou.

Haji-Ioannou resigned from his position on the board last week, citing frustration over the carrier's expansion strategy. By stepping down, he said, he would be better-placed to resist the airline's fleet expansion plans.

But EasyJet chairman Sir Michael Rake says the board is "surprised and disappointed" to be at the centre of the dispute for which it claims there are "simply no grounds".

In a letter to shareholders he says that the airline's share price has demonstrated "superior performance" to its European peers, including Ryanair - although the price is still some 40% below the peak achieved three years ago.

Rake says that the underlying performance of the airline - outside of the disruption resulting from the Icelandic volcanic activity - has been better than the board expected a year ago.

Haji-Ioannou had expressed irritation over the lack of a dividend to shareholders, and Rake hints that this could change: "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 time frame."

But the carrier continues to defend its fleet-expansion strategy, pointing out that it has not ordered additional aircraft for three years since firming options for 35 Airbus A319s in June 2007. At that point the carrier still held options and purchase rights for another 88 jets.

After Haji-Ioannou raised concerns over the expansion, EasyJet says it was able last year to gain "some additional flexibility" in its fleet planning after evaluating the possibility for renegotiating its agreement with Airbus. The airline aimed to allay fears of over-ambition by setting a medium-term expansion rate of 7.5% per year in June 2009, and Rake points out that this was unanimously agreed.

Rake says that new chief executive Carolyn McCall will join the carrier on 1 July, as will new finance director Chris Kennedy, and that no further aircraft orders will be placed before they arrive and review the airline's plans.

He also underlines to shareholders that the board is "committed to ensuring" that the airline achieves an "appropriate" financial return. Its target is 15% return on equity.