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EasyJet’s Squabble With Founder Over $5.5B Airbus Order Intensifies With Insinuations Of Bribery

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EasyJet’s troubles with the airline’s founder, Stelios Haji-Ioannou, have gone from bad to worse, with a two-page statement published overnight that insinuates that the airline’s top management may have accepted bribes for placing orders of Airbus planes, and is therefore reluctant to cancel an order for 107 aircraft worth £4.5 billion ($5.5 billion).

In his open letter, published on his easy brand website, Haji-Ioannou describes the aircraft as “useless.” He raises the issue of bribes, saying: “The monopoly aircraft supplier to easyJet is Airbus, a Franco-German company that has been convicted of bribing airline executives around the world as proven before a UK Crown Court judge.”

At the end of January of this year, Airbus reached an agreement with prosecutors from France, Britain and the United States to pay $4 billion in order to settle the bribery case against it. This settlement agreement launched several investigations around the world into wrongdoing by airline executives. One of the high-profile investigations involved AirAsia founder and CEO Tony Fernandes and the airline’s executive chairman Kamarudin Meranun, who stepped aside during an investigation. They were cleared of wrongdoing by independent auditors, who found that the airline’s aircraft acquisition was “justifiable and at prices favourable to [AirAsia],”  and returned to their jobs in the middle of March.   

EasyJet’s Haji-Ioannou has unsuccessfully pushed for a similar investigation of aircraft purchases at the European low-cost giant since the Airbus settlement was announced. “John Barton (chair of the board of easyJet) has refused to instigate a full independent inquiry if bribes from Airbus have been used in securing orders from easyJet,” Haji-Ioannou claims in his letter. He later repeats the claim saying, “Airbus should stop bribing airlines executives to buy more commercial planes that they can profitably fly.”

The easyJet founder claims that the existing Airbus orders risks that the airline may run out of money by August of this year, “perhaps even earlier.” Haji-Ioannou cites what he describes as an “optimistic forecast” from Credit Suisse published on April 2 which shows easyJet suffering a cash short-fall of £164 million ($201 million) by September 2020. 

Haji-Ioannou aslo accuses Credit Suisse of being complicit with the airline’s management in downplaying the risks. Instead, Haji-Ioannou predicts a slow recovery for the airline industry which will require higher cash reserves than Credit Suisse suggests.

“The CS forecast is based on wildly optimistic assumptions that the easyJet fleet will return to the skies in June, bringing in profitable revenues of £1.5 billion ($1.84 billion) in the summer months,” he writes. “This is pure fantasy. It must be noted that almost every country in Europe has now closed its borders to foreigners. Nobody really knows when they will open again. And even then, nobody believes that people will be willing undertake foreign travel in such large number by June 20. Fear has now taken over human behaviour when it comes to any form of foreign travel. Each country will want to keep others out for much longer than the date that their own local national lockdown ends. I think that easyJet at the end of national lockdowns will feel more like a start-up trying to find a few profitable routes for a few aircraft at a time. How many Brits will want to fly to northern Italy or Spain on holiday this June and v.v. ? Not many I think.”

Haji-Ioannou also characterizes Credit Suisse’s assumption as “crazy” that easyJet will have demand for all of its existing aircraft, return to full capacity by October, and earn higher profits in 2021 than in 2019.

“The only reason the house broker CS is publishing such wildly optimistic forecast is to provide ‘cover’ to the directors to preserve the contract with Airbus and convince naïve new investors to inject additional equity into easyJet just to pay Airbus,” Haji-Ioannou says. “Even then the CS optimistic forecast fails to prove there is sufficient cash in the company – in fact the optimistic forecast would be short of breakeven by about half a billion pounds of cash assuming they continue to pay Airbus.”

Haji-Ioannou criticises the airline’s chairman John Barton for failing to hold the vote to remove Andreas Bierwirth as a director. “Bierwirth is a failed ex-Lufthansa executive who lost his employer a lot of money and got sacked from Austrian airlines. He is also a long-time friend of Airbus,” Haji-Ioannou says, adding. “They are desperately trying to deprive shareholders of a vote because they know they will lose. They will then have to go home and let other people navigate this company through this mess they created by ordering all these unwanted planes. I hold them personally liable for their mistakes.”

The airline’s founder says he will “up the ante” by calling “for the removal of two directors” selecting Andrew Findlay, the airline’s CFO as the second.

While easyJet has adapted to lower demand during the coronavirus crisis by grounding the fleet, it was legally obliged this March to pay over £170 million ($208 million) in dividends for 2019 performance, including a payment of £60 million ($74 million) directly to Haji-Ioannou.

An easyJet spokesperson said the airline had not “received a new formal request [from Haji-Ioannou] as yet” and offered the following statement:

“The Board is managing the unprecedented challenges facing the airline and the aviation sector as a whole. We remain absolutely focused on short term liquidity, removing expenditure from the business alongside safeguarding jobs and ensuring the long-term future of the airline. We believe that holding a general meeting would be an unhelpful distraction from tackling the many immediate issues our business faces.”

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