Airlines founder plans a shareholder revolt

The airline industry has hardly been out of the news recently – whether the story is BA trying to gain legal decisions to outlaw the strikes being called by Unite, the continuing effects of the ash cloud, or major mergers between airlines like Continental and United in the US or BA and Iberia and BA in Europe. Another story over the weekend concerned the difficulty that can arise when the entrepreneurial founder of a business becomes a board member who has to share control with others.

Sir Stelios Haji-Iannou founded Easyjet, and later set up the more diversified Easygroup. He was, until Friday, a board member of the airline representing the interests of Easygroup, which has a 26% shareholding in Easyjet, but has become frustrated by what he sees as slow growth, lack of capital growth, and low dividend payouts to shareholders; Easyjet is seeking to expand their share of the European short-haul market from 7% to 10%. Sir Stelios however believes that they are not going about it in the right way, or providing enough reward to their owners; he said “How can you buy 200 aircraft with shareholders’ money and create no wealth for shareholders?”.

It is not unusual for those who have set up and nurtured a hugely successful business, like Easyjet, to share ownership and responsibility for strategy with others as the business expands beyond their control. Richard Branson reportedly considered buying back the 49% stake in Virgin Atlantic that is held by Singapore Airlines in 2007, but in any case has retained 51% control via the Virgin Group. There is, apparently, a long-running battle between Sir Stelios and the Easyjet board, which led to the resignation of Andy Harrison as Chief Executive in December, although the airline’s representatives say that the board’s decisions have been unanimous. He now has the scope to lead a move against the board without the conflict of interest that comes from being a board member. Could be used as another example of conflict between stakeholders, in an industry that seems rife with such conflicts at present.