4th May 2020 09:58
(Alliance News) - easyJet PLC's founder on Sunday warned the FTSE 100 airline will become insolvent by December should it proceed with a GBP4.5 billion order from aircraft manufacturer Airbus SE, who he labelled as "masters of bribery".
Stelios Haji-Ioannou, who owns roughly a 34% stake in the budget carrier, has frequently took aim at easyJet's senior leadership, and has called on four board members - including Chair John Barton, Chief Executive Officer Johan Lundgren, and Chief Financial Officer Andrew Findlay – to be ousted.
"Paying GBP4.5 billion to Airbus for 107 unnecessary planes will make easyJet insolvent in December 2020," he asserted.
Haji-Ioannou, who does not sit on easyJet's board, has frequently criticised the company's decision making over the Airbus order and his statement on Sunday was more of the same.
He explained: "Our entire fleet of 337 aircraft is grounded with zero revenues. It is my belief that, if the Airbus order is affirmed by these directors, the most likely outcome is that our shares will become worthless on or about December 2020. If the Airbus contract is terminated, even at a cost, we have much longer to survive and reach cash flow breakeven operations with a much smaller fleet.
"I have not seen any month-by-month cash flow forecast showing we can pay Airbus GBP1.5 billion in the next nine months and remain solvent. If the directors think it is possible to maintain solvency whilst paying Airbus this gigantic sum they should officially publish a supporting cash flow forecast, removing marketplace uncertainty, as is their obligation. I will sue the directors personally for breach of their fiduciary duty if the company is placed into administration having paid to Airbus even a single penny post the grounding."
The travel industry has been battered by the Covid-19 pandemic and Haji-Ioannou warned it will take three years for demand to return to pre-crisis levels.
He explained that it took four years for US airlines to climb back to regular traffic levels after the 9/11 terrorist attacks, which grounded planes for four days.
He also noted that several other airlines have issued profit warnings, forecasting two to three years of financial and demand strife. Haji-Ioannou said that although such a warning as not come from easyJet CEO Lundgren, the carrier will incur "significant losses for a number of years".
The now contentious GBP4.5 billion order of 107 aircrafts from Airbus has not been cancelled because of easyJet's "massive failure in risk oversight" and a "failure in governance", according to
Haji-Ioannou.
He criticised the "lack of transparency" and "the secrecy of the Airbus back room deals".
Haji-Ioannou made reference to the French plane maker back in January being made to pay a massive EUR3.6 billion in fines to Britain, France and the US to settle corruption inquiries sparked by suspicious equipment sales.
Airbus will pay EUR2.1 billion to French authorities, as well as EUR984 million in Britain and EUR526 million in the US, according to a deal approved by a French court.
"Investigations covered many countries but did not focus on UK airlines. The real victims of these crimes are the shareholders of the privately held airlines that never got compensated. AirAsia Berhad was amongst the airlines that Airbus bribed for deals of a similar size to easyJet. Tony Fernadez, the CEO of AirAsia, owns QPR football club that Airbus paid more than GBP100 million in sponsorship," Haji-Ioannou said.
"The easyJet 2013 Airbus contract and subsequent secret 'top-up orders' were made during the heyday of Airbus' corruption. Why does Airbus and easyJet enjoy such a secrecy privilege in blatant contravention of the Listing Rules? We have asked the Financial Conduct Authority to investigate and they are doing 'it' as we speak."
Earlier in April, in response to the founder's stinging attacks, easyJet issued a statement of its own, noting that it would be forced to pay heavy costs should it cancel the Airbus order.
It added that it cannot cancel the contract through a force majeure, meaning an unforeseen circumstance outside one party's control which prevents it from fulfilling its contractual obligations with another.
Haji-Ioannou however said the French government, a major Airbus shareholder, has cancelled contracts through force majeures.
He also called the prospect of easyJet paying costs for cancelling the order "another unquantified threat by the directors on behalf of Airbus".
"Why did John Barton sign such an one-sided and onerous contract in the first place," he added.
easyJet will hold a general meeting on May 22, where shareholders will vote on the future of four out of its 11 directors.
Haji-Ioannou's easyGroup Holdings Ltd, the founding company behind a number of 'easy' branded companies, such as the airline and easyHotel PLC, at the end of April called on easyJet to hold the meeting using video conferencing software instead of "behind closed doors in a secret room in Luton airport".
easyJet's stock was down 4.6% at 542.00 pence each in London on Monday morning.
By Eric Cunha; [email protected]
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