EasyJet founder escalates feud with board over plane order

Bloomberg

EasyJet Plc’s founder escalated his feud with the board, calling for the ouster of a director in a bid to pressure the discount airline into cancelling a 4.5 billion-pound ($5.6 billion) aircraft order.
Stelios Haji-Ioannou, EasyJet’s biggest owner with a 34% stake, proposed a general meeting to remove director Andreas Bierwirth, according to a letter sent to the airline’s chairman, John Barton. He threatened to challenge one non-executive director every seven weeks, tying up the board with a series of cumbersome and divisive general meetings until it succumbs.
Haji-Ioannou, who has long opposed buying new aircraft, turned up the heat on a low-simmering campaign to halt the purchase of more than 100 Airbus SE narrow-body jets. The 53-year-old entrepreneur, emboldened by the coronavirus crisis that’s suddenly turned large spending commitments into a millstone, demanded the deal for A320-family planes be terminated.
“The board is focussed on managing the unprecedented challenges facing the airline and the aviation sector as a whole,” EasyJet said in response to Haji-Ioannou’s letter.
“We believe that holding a general meeting would be an unhelpful distraction from tackling the many immediate issues our business faces.”
Bloomberg News reported that EasyJet is considering options including raising new debt and equity to provide a buffer against the downturn, which has forced the UK airline to ground its fleet.
The UK carrier is exploring various fundraising scenarios, including commercial and government sources, as well as a delay in plane orders to conserve cash if needed for a longer-term downturn, people familiar with the matter said, asking not to be named because the discussions are confidential. The airline would prefer loans to selling new shares, one of the people said.
EasyJet, which is seen as one of the European airlines better-equipped because of its existing cash and credit lines, is discussing the best options to navigate the pandemic-related slowdown and traditionally slower winter season, the people said.
Adding liquidity would fortify EasyJet as it digs in for an undetermined period with little revenue. While it’s considering other ways to boost cash, raising equity would align with the UK government’s preference for private solutions to the coronavirus crisis. The International Air Transport Association this week warned that airlines will burn through as much as $61 billion worldwide in the second quarter as travel hits bottom.
Haji-Ioannou has also called on the company to raise 600 million pounds in equity through a rights issue to existing shareholders. He quit the board in 2010 in a dispute over growth, and has consistently objected to the airline’s growth plans.
“There is no doubt in our mind that all airlines have to attempt to delay all capex in the immediate future,” Bernstein analyst Daniel Roeska wrote in a reasearch note. He said he’s uncertain how practical it would be to cancel the order outright, given the potential penalties. “From a strategic point of view, we would see the new aircraft strengthening EasyJet’s long term position.”