easyJet Asked To Focus On Core Activity

[August 18th 2008]

easyJet flight

The founder of low cost airline easyJet, Sir Stelios Haji-Ioannou, is taking the airline to the High Court to clarify the terms of its branding agreement.

Stelios is a non-executive director of the airline he set up and still holds almost 16% of the shares. He wants to ensure that easyJet is sticking to the terms of the brand licence that was agreed in 2000. This states that no less than 75% of easyJet's revenue must be derived from its core activity, which is defined as "transporting passengers in aeroplanes". This is commonly known as the 75:25 rule.

The budget carrier's charismatic founder is thought to be concerned about some of easyJet's non-core activities such as selling co-branded credit cards, car hire and hotels. The sale of scratch cards on board and the percentage of these sales that goes to charity is also thought to be a concern.

For its part, easyJet claims that 'significantly more than 90%' of its revenues in the last 12 months have been derived from core activity. It says this includes passenger tickets, credit card booking fees, infant charges and speedy-boarding fees, "as well as revenue from other services that are linked to or that can only be taken in conjunction with a flight, such as baggage charges - all elements of which are related to the running of an efficient low-cost airline".

easyJet chairman, Sir Colin Chandler, comments: "According to the draft Claim Form from easyGroup, this is not a claim with any monetary value, rather it is a mechanism to seek clarification of certain words and clauses used in the Brand Licence. Based upon our clear legal advice, we fully comply with the 75:25 rule in the Brand Licence and significantly over 90% of revenues are derived from Core Activity."

Because of his position as owner of the licensor, easyGroup, Sir Stelios has notified easyJet of his conflict of interest and will not take any part in Board discussions on the subject.

Written by: Nick Purdom

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