EasyJet chief battles covid crisis and Stelios, but finds common ground with arch rival Ryanair

The chief executive of easyJet today added his weight to Ryanair’s objection to the idea of leaving the middle seats free in his planes in order to meet social distancing rules.

The idea emerged last week and appeared to be under consideration by EasyJet but it was quickly scotched by Ryanair chief executive Michael O’Leary, who said he would not be able to make enough money for flying to be worthwhile.

Johan Lundgren told the Evening Standard the idea had been floated as one of many from regulators trying to find a way to get airlines flying again. While easyJet would consider going along with the idea in the early weeks of the return to flying if bookings were low anyway, he said it would never work for longer than that.

“I agree with Michael [O’Leary]. This would totally change the business model. More importantly, whatever happens, we need to go with the evidence of the medical science and I can’t see how this would be an effective way of socially distancing. If you’re sitting in the window seat how can you possibly make sure the other person keeps two metres away from you?”

However, he said it was positive that regulators were considering all options and that they had been accelerating their planning on how to get flying started again in the past 10 days.

“This is good, but first and foremost, we have to make sure the start-up date is orderly and well thought through. We don’t want to have a situation where the industry comes back but then they bring in more restrictions after that.”

He also called for the approach to be consistent among all countries.

He said easyJet’s fleet could be ready to resume flying with two weeks’ notice.

“It is pretty surreal to be running an airline when you can’t fly,” he said.

Lundgren was speaking as easyJet published its official notice to hold a general meeting of shareholders on 22 May for them to vote on founder and rebel shareholder Sir Stelios Haji-Ioannou’s resolutions to remove him, chairman John Barton, finance director Andrew Findlay and independent non-executive director Andreas Bierwirth.

Sir Stelios, who owns 35% of the company’s shares, wants to evict the directors and force through his long-held proposal that it pulls out of a longstanding plane supply deal with Airbus.

In a rebuttal to Sir Stelios’s proposals, the company said terminating the deal would subject the airline to “significant financial and operational risk”. This was because it would require a lengthy legal fight and destroy its relationship with one of only two suppliers in the world.

Sir Stelios only has to win the approval of 50% of shares casting votes, piling huge pressure on the board to mobilise their supporters in the shareholder base.

Lundgren said the contract went back to 2002 when easyJet selected Airbus as its preferred partner and that it had brought huge efficiencies due to the big volumes of orders easyJet had made over the years.

Sir Stelios thinks the easyJet fleet should be cut down from its current levels of 337 to 250.

He argues the company should claim the coronavirus travel restrictions represented a force majeure and annul the supply contract.

Lundgren counters that this would result in a lengthy and costly legal dispute and that, since the covid crisis, he has negotiated “the most flexible contract in the industry” with Airbus, whereby the fleet can be cut down to 281.

He added Stelios had called for this plan at a previous shareholder vote, so his views were nothing new: “It is quite unhelpful at this moment in time,” he said.

Evicting the top team in this time of unprecedented crisis was also unlikely to help shareholders, the company said.

In a statement responding to the easyJet announcement, Sir Stelios responded: “I wish to congratulate the scoundrels on getting a second job. The official circular that defends their current positions and keeps the Airbus scandal in place, makes them sound just like an Airbus chief marketing officer.

“I hope the second job pays better than the first because they will be losing that one pretty soon.

“The scoundrels have not said how they can save easyJet from bankruptcy and keep paying Airbus. Cancelling the Airbus contract is the only chance we have to save easyJet.”

Lundgren countered that his team had raised enough capital since the crisis to have £3 billion in cash and reduced cash burn by grounding the fleet.

He will now be attempting to mobilise his investors to counter Sir Stelios in the forthcoming vote. Proxy votes can be cast online by 20 May.

Shareholders include Invesco, Blackrock, Marathon and others.