Sir Stelios Haji-Ioannou takes his battle with easyJet to the skies by launching Fastjet.
It's been an eventful few weeks for the board of budget airline easyJet (LSE: EZJ).
The easyJet set
Sir Stelios Haji-Ioannou founded easyJet, with the budget airline first taking flight in November 1995. Since then, Sir Stelios has built the airline -- famous for its orange livery and low fares -- into one of Europe's leading low-cost carriers, chasing market leader Ryanair (LSE: RYA).
Today, Luton-based easyJet carries more passengers than any other UK-based airline, employs 8,000 people, and is a member of the second-tier FTSE 250 index. In 2000, Sir Stelios floated easyJet on the London Stock Exchange and the company's market value today exceeds £1.5 billion.
I covered easyJet's second-quarter results in July.
Scrapping with Sir Stelios
For many months, easyJet has been engaged in a very public spat with its founder. Sir Stelios wants the airline to scrap its ambitious expansion plans and cancel its plans to buy more aircraft to add to the existing fleet of 200 jets.
Last Thursday, easyJet blinked and, in a trading statement, announced a decent dividend and a return of capital.
easyJet expects to pay an ordinary dividend of 9p a share (totalling £40 million) for the 2010/11 financial year. In addition, the board recommended a one-off return of capital of £150 million, via a special dividend of around 35p a share.
At the same time, easyJet reported 'robust' commercial demand, particularly from business and short-break travellers. Thus, it expects pre-tax profits of between £240 million and £250 million for the year ending 30 September 2011.
A new rival in the air
As if Carolyn McCall, easyJet's chief executive, hasn't had enough to deal with of late, Sir Stelios has turned up the heat once again.
This afternoon, easyJet announced that '...it has received notice from Sir Stelios...that he intends to set up an airline branded Fastjet and that a website, Fastjet.com, has already been established.' The website in question is merely a holding page with a single message: Fastjet.com by Stelios. Coming soon!
However, easyJet 'has a number of rights under agreements with Sir Stelios and easyGroup', which are likely to restrict his entry into the airline industry and his ability to set up in direct competition with easyJet.
Thus, the airline 'will take necessary action to protect the rights of easyJet and the interests of its shareholders', but 'continues to seek constructive dialogue with easyGroup and Sir Stelios.'
No winners
In such public corporate spats, very few emerge as winners -- other than both firms' lawyers, of course.
As I write, easyJet's shares are down 0.1% at 351.6p in a rising market. However, if Sir Stelios does move his tanks onto easyJet's lawn by launching a competing low-cost airline, then both firms are likely to suffer financially.
In July, I turned down easyJet shares at 366p, when they traded at 12.2 times earnings and yielded 1.6%. Although the dividend yield has since improved to 2.4%, I'm still not keen.
In fact, I wouldn't touch easyJet shares until Sir Stelios and Ms McCall have stopped throwing their toys out of their prams and settled their differences once and for all!
More from Cliff D'Arcy:
