That’s quite some boardroom brawl brewing between EasyJet and founder Sir Stelios Haji-Ioannou.
The Greek entrepreneur and shipping tycoon is refusing to sign off on the airline’s annual accounts, in a statement, attached to EasyJet’s annual results out today. The boardroom spat centres on the airline’s expansion plans — though today’s escalation revolved around rather technical accounting issues. Selected excerpts are below:
After extensive discussions with the easyJet Board and having taken appropriate professional advice at my own expense, I regret to inform you that I as a director of easyJet PLC I am unable to approve the annual accounts for the following reasons. I am concerned about the application of certain of the accounting policies adopted by the board in a way that I believe is at odds with current commercial realities and the macro-economic climate. Their implications only became obvious to me this year because of the acquisition of GB Airways:
….
2) I believe the methodology by which easyJet ascribed value on its own balance sheet to the Gatwick landing slots that came for free with GB Airways is based on optimistic assumptions about future revenues, particularly in the current economic climate. Given the fact that many airlines have already ceased operating from Gatwick I believe that slots will be freely available and hence it will be more prudent not to create Gatwick slots as an “intangible asset” on our own balance sheet this year.
3) In our accounts we state the following: “the fair value of Gatwick landing slots of £72.4 million and goodwill arising of £50.2 million from the GB Airways acquisition”. Assuming the GB Airways Gatwick slots are not worth carrying as assets on our balance sheet that increases the goodwill from the GB acquisition to approximately £122.6m. I believe this amount should be tested for impairment annually as a separate CGU using the same NPV used for the slots…
Way to pick your fights, Stelios.
Just for background, EasyJet agreed to buy GB, a former British Airways franchise, last year for £103 million pounds. The valuation of takeoff and landing slots in the deal is almost incidental — EasyJet bought the company for wider strategic purposes — to gain a larger foothold at Gatwick and overtake BA as the biggest operator at the airport.
Regardless, EasyJet is down about 14 per cent in trading today — the market is either not looking kindly on the boardroom spat or the 45 per cent fall in annual profit (still better than BA’s reported loss, however). So, what’s Stelios hoping to achieve here?
There are whispers of depressing the share price so he can buy back the company, or perhaps preparing it for a sale (odd way to go about getting the best price), entirely unsubstantiated, of course. For sure he’s looking to gain more strategic control of the company, as for his other motives, however, The best FT Alphaville can guess is that Stelios is being uber-cautious.
We’d hazard his airline outlook is being coloured by what’s happening in shipping — one of the few industries that’s arguably in a worse state than the airlines. Uber-cautious is not a bad world view in the current environment per se, but starting a very public boardroom brawl isn’t really the way to protect yourself from it either.
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