EasyJet deal heralds expansion into non-core sectors

Easyjet has resolved a two year row with founder and largest shareholder Sir Stelios Haji-Ioannou which allows the carrier to keep using the Stelios-owned brand name.

The agreement ends Sir Stelios’ right to appoint himself as chairman of Easyjet’s board and will give the airline more freedom to use the name and enter co-branding agreements with other companies.

EasyJet is now expected to ramp up its efforts to drive more sales of non-core product including car hire, hotels and travel insurance.

The deal will allow the company to use the brand for 50 years, with a minimum commitment of ten years in return for an annual royalty payment of 0.25% of easyJet’s revenues, to be paid to Sir Stelios.

The payment will be capped at £3.9 million and £4.95 million for the first two years of the agreement, a statement said.

“Upon obtaining shareholder approval for the revised brand licence, Sir Stelios has agreed to give up the right to appoint himself as Easyjet chairman and end easyGroup’s rights of representation on the Board of Easyjet,” the statement said.

The airline added: “Operational flexibility is considerably improved and Easyjet will have the freedom to enter new co-branding agreements with other travel service providers as well as white label partners.”

Sir Stelios owns, along with his family, 37% of the budget carrier along with the rights to the brand name. Until now he has been licensing the name back to the company for a fee of £1 a year.

Sir Stelios said: “The way low-cost airlines make money has changed over the 10 years since the original licence was signed.

“This amendment allows the airline to now grow its business even further by removing some of the restrictions imposed by the original agreement. I am content this is a fair deal for both sides.

“The agreed amendments will result in increased competition from the airline for the other easyGroup licensees (such as easyHotel, easyCar and easyBus).

“However, the agreed royalty payable provides appropriate remuneration for easyGroup thereby aligning the interests of both parties.”

The airline’s chief executive Carolyn McCall said: “This is a sensible resolution of a difficult dispute that provides a fair, clear, workable outcome that is an improvement for both sides.

“It provides Easyjet with operational flexibility and commercial freedom to grow our business and it provides both sides with clarity.”

 

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