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EasyJet is 'no longer low-cost airline' claims founder Stelios Ioannou
27 June 2010 @ 02:19

Lawyers for easyJet founder Sir Stelios Haji - Ioannou claimed the carrier is 'no longer a low-cost airline' because of additional charges customers are hit with.

On the first day of a two-week hearing in London's High Court, Michael Bloch QC, representing Sir Stelios, claimed the airline is in breach of its rights under a brand licence agreement that limits the amount easyJet can make from these non-core activities to 25pc of revenues.

The legal battle is the latest in a series of high-profile conflicts between the founder, who still controls 38pc of the airline, and the easyJet board.

Sir Stelios has been an outspoken critic of the board's expansion strategy, calling for the airline to slow aircraft orders and start paying a dividend.

Bloch said easyGroup was concerned the growing easyJet fleet of Airbus planes appeared to depend on expanding the range and significance of nonticket revenues - so- called ancillaries - and thereby changing the public perception of the business, as well as taking up space in sectors that could be occupied by other 'easy' brand licences.

He added: 'The focus on ancillaries disguises the fact that for many customers easyJet is no longer really a low-cost airline.'

The agreement was put in place when easyJet floated in 2000, when it was a ' straightforward, focused, low-cost airline'. It allows the carrier to use the 'easy' brand name, owned by Sir Stelios's easy-Group empire.

It means the carrier must comply with the 75:25 rule that restricts sales of non-core activities to a quarter of revenues.

Ticket prices are agreed to be core. But food and drink, travel insurance, hotel bookings and car hire are said by easyGroup to be ancillary. easyJet disagrees.

The 2000 agreement defines the airline's core activity to be 'the transportation of passengers in fixed wing aircraft'.

The Cypriot tycoon claims easyJethotels and easyJetholidays could be confused with his other easyGroup ventures such as easyHotels and easyCruise.

Bloch said: 'On any sensible view, easyJet is operating either on the wrong side of, or perilously close to, it (the 75:25 rule).'

According to easyJet's latest accounts, ancillary activities account for 20pc of its income. But easyGroup claims that if the definition of the figures follow the guidelines under the licence, the true amount is more than 25pc and growing.

EasyJet (up 8.1p at 426.1p) insisted it is operating 'well within the ambit of the rule on any reasonable interpretation of it'.

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