30th Mar 2020 11:09
(Alliance News) - easyJet PLC founder and largest shareholder Stelios Haji-Ioannou on Monday warned that he will seek removal of the entire board unless the company cancels a GBP4.5 billion aircraft contract with Airbus SE, as the budget airliner grounded its entire fleet.
Shares in the budget airline were down 6.2% on Monday at 558.00 pence each, valuing the FTSE 100 company at GBP2.22 billion.
In a letter addressed to easyJet's board, Haji-Ioannou said he will send notices of general meetings to remove non-executive directors of the company for dereliction of duty unless his demands are met. He owns 34.4% of the company.
Haji-Ioannou is asking easyJet to cancel its aircraft order with Airbus citing "force majeure" options for companies declared by the French government and arguing that the contract is null and void because the customer is unable to use the aircraft for the purpose they were intended, namely, the carriage of fare paying passengers by air.
"The "elephant in the room" and main risk to survival of the company is the expected GBP4.5 billion of payments to Airbus between 2020 and 2023 for the future delivery of 107 aircraft which the company CANNOT afford. That liability of paying Airbus GBP4.5 billion dwarfs today's easyJet market capitalisation of GBP2.4 billion," Haji-Ioannou said.
"Unless you accept to address my points above by 12 noon BST time on Wednesday 1st April, 2020, I will instigate a rolling programme to remove one non-executive director every 7 weeks by calling for general meetings until we find directors willing and able to carry out their duties to protect the company by terminating and if necessary renegotiating the Airbus contract," he added.
easyJet separately said that it has grounded its entire fleet due to "unprecedented" travel restrictions imposed by governments around the world in response to the coronavirus pandemic.
Airlines have taken a hit as countries around the globe close their borders and ordered citizens to stay at home as much as possible to help contain the virus spread.
easyJet said that at this stage there can be no certainty of the date for restarting commercial flights and will continuously evaluate the situation based on regulations and demand.
"We continue to take every action to remove cost and non-critical expenditure from the business at every level in order to help mitigate the impact from the coronavirus. The grounding of aircraft removes significant cost," the company said.
The carrier stressed that it maintains a strong balance sheet, with no debt re-financings due until 2022.
easyJet has operated more than 650 rescue flights to date, with the last of these rescue flights on Sunday. It plans to continue operating rescue flights as requested by governments.
The company and the Unite union have reached an agreement on furlough arrangements for its cabin crew. The agreement will be effective from Wednesday for two months and means that crew will be paid 80% of their average pay through the UK government job retention scheme.
Johan Lundgren, easyJet chief executive, said: "We are working tirelessly to ensure that easyJet continues to be well positioned to overcome the challenges of coronavirus."
By Tapan Panchal; [email protected]
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