EasyJet’s Stelios Spat Intensifies Before Shareholder Meeting

EasyJet Plc (EZJ)’s public spat with founder Stelios Haji Ioannou intensified after Chairman Michael Rake rejected claims that too much is being spent on planes and the investor labelled the carrier’s cost calculations “phoney.”

Stelios, who goes by his first name, overstated the value of an order for Airbus SAS A320-series jets and made assertions about the size of bonus payments for executives that were also incorrect, Rake said at a capital markets day in London held in advance of EasyJet’s annual shareholder meeting on Feb. 17.

“It is repeatedly said that these aircraft committed the company to $1.5 billion of expenditure,” Rake said, according to a copy of his speech supplied by EasyJet. “The actual amount involved is substantially less than a half of this figure.”

Stelios, who controls about 38 percent of outstanding stock at Luton, England-based EasyJet, has been in dispute with the management of Europe’s second-biggest discount airline for more than three years after calling for slower growth in November 2008 and refusing to sign off on annual accounts.

“I have more years of experience than anyone else on that board in buying aircraft, and I can tell a bad deal when I see one,” Stelios said in a statement e-mailed after Rake’s speech. “My interests are aligned with shareholders, unlike his.”

Calculations used to determine EasyJet’s return on capital employed, used as a basis for 8 million pounds ($12.6 million) in bonuses, create a “moral hazard” and are confusing for investors, while comparisons with the ROCE at Air France-KLM Group (AF), Deutsche Lufthansa AG (LHA) and British Airways are unwelcome since their returns are poor the entrepreneur said.

“This company used to have a ROCE several times higher than now, and it is depressed now because of the expensive airbuses that produce no profit,” Stelios said.

Rake said in his address that EasyJet has already capped the winter fleet at 204 planes to focus on improving yields, or fares, and working to improve returns on existing routes. He added that the success of that plan has been evident in recent quarters, with increased business bookings boosting sales.

EasyJet closed little changed at 446.4 pence in London and is up 14 percent this year after falling 11 percent in 2011.

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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