Overview: Easyjet’s former chairman questions its accounts


We’ve all heard of auditors qualifying the accounts, but a former chairman?

Sir Stelios Haji-Ioannou, now a non-executive director of easyJet is refusing
to sign off its numbers. Despite only holding a NED role these days, he still
owns a substantial stake in the airline.

Sir Stelios is feeling a bit queasy about the company’s taking-off and
landing slot accounting. And there are no easy answers here.

What’s happened?

A refusal by a company director-even a non-executive one-to sign off the
accounts is almost unheard of.

‘It is quite unusual. Under normal situations if a director is unhappy or
unsatisfied with accounts they would resign rather than sign-off. [Sir] Stelios
is still a major shareholder in the company, so he is not simply going to give
up,’ said Neil Mirchandani, partner at Lovells.

Sir Stelios’ astonishing move reflects a boardroom row, as he tries to get
two non-executives of his choosing appointed to the board.

The move is even pitting him against the company’s auditors,
PricewaterhouseCoopers, who signed off the numbers.

Sir Stelios said he did not agree with the accounting for the acquisition of
GB Airways.

The airlines landing and taking off slots at Gatwick were, according to
easyJet’s founder, too generously accounted for.

‘Given the fact that many airlines have already ceased operating from Gatwick
I believe that slots will be freely available and hence it will be more prudent
not to create Gatwick slots as an “intangible asset” on our own balance sheet
this year,’ said Sir Stelios. the airline valued the slots at £72.4m.

Airlines have only recently started to value landing and taking off slots on
their books, but when they began, with bmi an early adopter, nobody predicted
that they would provoke such a row.

What’s going to happen?

The stand-off is continuing. easyJet’s share price plummeted in the wake of
the revelations, down 35p or 12.8% by the early afternoon after the announcement
was made.

Overall, the numbers are not too bad. easyJet’s interim results for the six
months to 31 March 2008 revealed strong revenue growth.

Total revenue grew by 24% to £892.2m with underlying pre-tax margin in line
with expectations. Passenger numbers also increased 15% to 18.9m.

But the prospects, with jet fuel prices still relatively high, and cost
pressures at Gatwick, it could be tough for Sir Stelios’ company. Uneasy times.

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