EasyJet has rebuffed concerns raised by founder Stelios Haji-Ioannou over the way in which it records the value of the London Gatwick slots it acquired through its acquisition of GB Airways, and also the value of the GB Airways aircraft it plans to sell, on its balance sheet.
Haji-Ioannou raised the concerns in a letter attached to easyJet's full-year financial results, in which he explained that he was "unable to approve the annual accounts". On the subject of the Gatwick slots, he said: "I believe the methodology by which easyJet ascribed value on its own balance sheet to the Gatwick landing slots that came for free with GB Airways is based on optimistic assumptions about future revenues, particularly in the current economic environment.
Given the fact that many airlines have already ceased operating from Gatwick I believe the 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."
But in a conference call with analysts today, easyJet group finance director Jeff Carr countered that Gatwick "is slot constrained - this is not open to speculation", adding that when something like the collapse of Gatwick-based Excel Airways happens "the slots go back in the pool but are snapped up quickly". EasyJet values the Gatwick slots obtained through its acquisition of GB Airways at £72.4 million.
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Haji-Ioannou has also taken issue with the value easyJet has recorded on its balance sheet for seven Airbus A321s owned by GB Airways, which it is in the process of trying to sell. "I believe that the aircraft owned by GB Airways, which are treated as assets held for sale in the balance sheet, should be written down to their estimated market value," he says in the letter. "I have produced evidence found in the Ryanair published accounts that their market value has probably fallen since we first placed them for sale in February 2008."
Carr argues that easyJet has discounted the seven aircraft down by 10% from the February valuation, adding: "In terms of who's right or wrong, this won't become clear until we sell the aircraft."
The rift between easyJet and its founder emerged last week when Haji-Ioannou informed the carrier that his company, easyGroup Holding, had increased its shareholding in easyJet from 15.6% to 26.9%, and was unhappy with the rate of expansion of the airline.
EasyJet chief executive Andrew Harrison says the carrier's contract with Airbus gives it the flexibility to defer half of its planned deliveries, and points out that the airline has already decided to defer four aircraft deliveries scheduled for mid-2010. "We shall continue to take a prudent approach to growth and take advantage of the flexibility of the Airbus contract," he says.
Of the now public debate between Haji-Ioannou and the rest of the easyJet board, Harrison adds: "Everybody on the board recognises that we're facing a difficult economic situation and we all feel that it's normal and healthy to have a rigorous debate. We're all committed to finding a consensus as to how the company deals with the uncertainties we face."
Despite his concerns, Haji-Ioannou has said he continues to consider Sir Colin Chandler "to be a suitable chairman for the company".
Source: Airline Business
