Sir Stelios Haji-Ioannou is squabbling with easyJet. Again. The airline founder is unhappy that current easyJet directors could order expensive new aircraft.

Stelios would prefer easyJet - whose shares have soared by three times in recent years - to focus on returning shareholder value, rather than on more expansion and risk. Who's right?

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Shareholder value vs Growth

Sir Stelios is so exercised by the issue, he claims, that he's sold 200,000 easyJet shares in protest. His brother and sister have also sold similar amounts of shares, cutting their combined investment to just under 37% - still worth the best part of £1.3bn.

"Since November 2008," Sir Stelios says, "I have been front and centre of a campaign to make the easyJet board more focused on shareholder value and less on top line growth. I had become increasingly concerned that our company had an expansion at any cost policy, built on ordering more overpriced aircraft from Airbus, a monopoly supplier."

Part of the reason why easyJet has become more profitable - current profit margins are around 7% - is that, like Ryanair, it's charging passengers more to fly. It also hasn't had to buy new aircraft for some time.

"easyJet has move on," says City financial adviser Jon Horton from Chamberlain de Broe. "It's got to a certain point where it's no longer a cheap airline. If it gets bigger then it needs bigger maintenance facilities. More HR departments, more training. All that bureaucracy will undo that cheapness."


Time to sell?

Horton likens a need for new planes to consumers wanting a more efficient, more reliable car. "Every generation of new jets are considerably more fuel efficient. Many airlines are desperate to get rid of their old fleets."

Currently easyJet has 214 Airbuses. The cost to order 70 plus new Airbuses would come in at around £58m each; not small beer. Especially when last week Airbus hiked the list price of its aircraft by an average 3.6%.

"The only reason," says Sir Stelios, "that the profits have kept pace is due to the average customer now paying 33% more than they did four years ago. Such price increases are only possible with a slow growth in fleet numbers."

A longer wait for more capital expenditure spent will likely sustain dividends - handy when you have a holding as large as Sir Stelios, supplying him more leeway to sell, if he wishes (and why would you not consider it, given the share price rise?).

More options are also useful if there are other interests to fund. We'll know more from easyJet itself on Thursday when it reports first-quarter numbers.

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