Stelios takes easyJet to court over brand, income streams and scratch cards
16.08.08
Sir Stelios Haji-Ioannou is taking easyJet, the airline that he founded, to the High Court to try to limit its ability to make money from activities that may clash with his other ventures. The surprising development between the budget airline and its founder has stunned the City and threatens to limit the airline’s ability to raise revenues from non flight activities.
Sir Stelios founded easyJet in 1995, is still a board director and owns 16 percent of the airline. He also owns the easyJet name through a company called easyGroup IP Licensing, which has brought the High Court action.
In legal documents filed with the court, Sir Stelios outlines his concern that easyJet has associated itself with non-flying activities such as hotels, car hire, hotels, airport parking and insurance.
When easyJet was floated in 2000 a rule was included in the brand licensing contract that required the carrier to make 75 percent of its income from ‘core activities’. The airline calls this the 75:25 rule.
The dispute between the airline and its founder centres on the definition of ‘core’. easyJet believes it includes activities associated with transporting passengers such as additional baggage charges, airport parking and hotels.
Sir Stelios is understood to be concerned that these clash with his other ‘easy’ ventures. For example, the court documents highlight easyJethotels and easyJetholidays as potentially confusing with Sir Stelios’s brands such as easyHotels and easyCruise.
It is understood that the airline’s management and Sir Stelios have tried to resolve the dispute amicably, but these talks have broken down. In the High Court action, Sir Stelios also attacks some of the revenue-raising tactics used by easyJet, including the sale of scratch cards to passengers.
The court documents say: ‘A declaration that the sale of scratchcards held out to be in support of a charity, where the actual charitable contribution made is less than 50 percent, is materially detrimental to or inconsistent with the good name, goodwill, reputation and image of the licensor [Sir Stelios].’ easyJet said that less than 5 percent goes to charity.
The dispute has arisen as easyJet - along with its rival Ryanair - is seeking to raise revenues from ancillary services to offset fuel cost rises. The airline is limited in how quickly it can raise fares, and so has introduced additional charges, including fees for checking baggage, and is pushing other services such as hotels and airport parking.
Sir Stelios said: 'Given my commitment to the highest standards of corporate governance and my obvious conflict of interest as a director and shareholder of both companies, I feel it is best to ask a judge to interpret certain clauses in the brand licence, and in particular the so-called 75:25 rule.’
Sir Colin Chandler, chairman of easyJet, said: ‘Based upon our clear legal advice, we fully comply with the 75:25 rule in the brand licence and significantly more than 90 percent of revenues are derived from core activities, including passenger ticket revenues, credit card booking fees, infant charges and speedy-boarding fees as well as revenue from services linked to or that can only be taken in conjunction with a flight, such as baggage charges.’
‘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.’
A date has yet to be set for the case.
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