Sir Stelios Attacks easyJet Bonuses

On Monday, easyJet founder Sir Stelios Haji-Ioannou slammed executives at the airline over pay bonuses. His family holds a 38% stake in the airline, and he has tabled a motion at the February 23 meeting to block a pay deal that will award ten senior executives as much as £8 million in shares over the coming three years. Recent reports have suggested that some directors at the airline plan to resign if shareholders don’t vote in favour of the pay to executives.

In a statement, Sir Stelios, who founded the carrier in 1995, told the stock market that the directors are welcome to resign anytime, as they could easily be replaced with “talented executives and experienced non-executive directors”, whom he believes will cost half of the current directors in relation to bonuses. A stand must be taken against directors who seem to think the airline is their personal piggy bank which can be dipped into whenever they want. The “gravy train of £180 million free shares issued” in the last ten years needs to be ended now.

Without the backing of Sir Stelios, it will be hard for the easyJet directors to get the 50% approval they need to approve the pay deal. The founder says that, if the shareholders can vote against the bonuses, all listed companies will get bonuses. That’s good for shareholders, as well as pensioners, whose pensions are invested in the businesses.

The pay deal wasn’t the only issue that Sir Stelios objected to. He also attacked the easyJet board again for its decision to buy new aircraft from Airbus. He said that he will continue to insist that any new directors stop the current practice of purchasing technically obsolete, overpriced and oversized planes from Airbus to serve new routes that don’t exist. The $1.3 billion January 2011 order was a big mistake. These aircraft are simply not needed in the current European economic climate and will devastate shareholder value. If chairman Mike Rake thinks otherwise, he can report the profitability of the planes to the AGM. Sir Stelios is sure there’s a lot to hide, which is why they refuse to report it.

In response to the attacks, Rake says that easyGroup and Sir Stelios have decided to continuously slam the company in different ways and personalise the attacks more and more on individuals in the company. They have always refrained from joining that level of debate. He really needs to clarify the inaccuracies in relation to shares issued by the company. The £7 million of shares have been awarded to the top ten management staff and will only fully be settled in 2015 if the carrier reaches 13% return on capital employed in the three years, which is a tough challenge.

Rake added that there were references to £180 million of shares being issued in the last ten years. The airline will publish detailed information that shows 75% of these shares were pre-flotation shares allocated while Sir Stelios was chairman. He also promised investors that the carrier will publish three different ways of making the complex calculation of return on capital employed, for which they outperformed many of their traditional rivals.

This has prompted further criticism from Sir Stelios, who tells reporters that his message to Rake – the only British accountant with an Argentinian polo farm – is that he should return to school to remind himself that “capital employed equals equity, plus debt, plus capitalised leases”. Sir Stelios believes Rake’s method to be phoney and a moral hazard. He added that he will never meet with Rake in a room just to “chit-chat”, as “he rewrites history”.