easyGroup Questions for the easyJet General Meeting

At the shareholders meeting on 22 May 2020, easyGroup asked the Chairman of easyJet three questions. The answers given, or not given, raise important points for today’s General Meeting.

Please click here to view the full statement.

Media Coverage

05/07/2020 – thisismoney.co.uk
10/07/2020 – The Times
10/07/2020 – Daily Mail


 

1.
At the shareholders meeting on 22 May 2020, easyGroup asked the Chairman of easyJet three questions. The answers given, or not given, raise important points for today’s General Meeting.

2. GOING CONCERN

2.1.
easyGroup asked thedirectors to confirm if the company was a going concern.

2.2.
Despite the directors confirming that it wasa going concern on 22 May “As of today and based on our current likely scenario and current availability of funding we believe we are a going concern”), justone month later, on 24 June, the directors felt it necessary to raise more equity before publishing the half year results. We therefore have to conclude that the answer of 22 May was dishonest as, without the additional £419 million, the company would not have been a going concern.

2.3.
Why did the directors not admit before the vote of the shareholders on 22 May that more equity wouldneed to be raised?

2.4.
What did they discover between 22 May and 24 June, that they did not know on 22 May, that required them to raise equity?

2.5.
Were the directors hiding bad news in order to convince shareholders to vote for them so that they could cling on to their jobs and the Airbus order? In a reply to the Mail on Sunday purporting to answer the same question by easyGroup published on 5 July 20 the directors said they “had always kept all options open”. What does that mean? Shouldn’t the raising of additional equity which dilutes current shareholders be more clearly flagged or ruled out ahead of a crucial shareholder vote? When will the directors raise more equity next?

2.6.
If, on the other hand, it was simply amonumental error of forecasting by management on 22 May, that was proven to be wrong less than a month later, have the NEDs demandedthe resignation of the CEO? The CFO who would normally be responsible for such forecasting has of course already resigned.

2.7.
The Chairman has refused to terminate or substantially to renegotiate the questionable purchase obligations imposed on easyJet by the Airbus deal, contributing to the company having to raise capital including a £600 million loan from the Bank of England and HM Treasury. The repayment of that loan from the UK taxpayers, due March 2021, is now in serious doubt, as admitted by the directors in their recent announcement: “Although thesesevere downside scenarios are not considered likely, in the event that some or all of these occur the Group may need to secure additional funding to ensure the business meets its obligations for the next 12 months. … Sources of additional funding are expected to include an extension to March 2022 of the £600m of current COVID Corporate Financing Facility (CCFF) government funding.”

2.8.
Has the Bank of England or HM Treasury been in contactwith thecompany in relation to concerns about the company’s ability to repay the £600 million loan on time or at all?

2.9.
Has the Bank of England or HM Treasuryagreed to an extension of the loanto March 2022? If so, what are the terms of that extension?

3. AIRBUS CONTROL


3.1.
easyGroup also asked about the degree of control that Airbus has on other shareholders in easyJet.

3.2.
The matter is now the subject of a High Court action for libel against The Telegraph newspaper and the journalist Ben Marlow who, on 7 May20,accused Sir Stelios of lying when he asserted that Airbus controls three fund managerswho hold shares in easyJet. Neither the newspaper, the journalist nor Airbus haveso far denied the assertion made by Sir Stelios. Surely this constitutesreasonable groundsto believe that Airbus does indeed control the three fund managers. The truth will, in any event,be exposedin the High Court action.

3.3.
Will the directors now accept that thereare strong grounds for easyJet to serve astatutory notice on Airbus to disclose itscontrol over shares in easyJet?

3.4.
If not,why not? It would cost easyJet almost nothing to ask the questionand shareholders deserve to know whetherthe biggest supplier to easyJet controls any shareholders in easyJet.

4. MARC BONNANT QUESTION EVASION

4.1.
easyGroup also asked the directors toconfirm if any current or former directors of easyJethad ever met with or had any dealings, directly or indirectly, with certain Swiss lawyers including Marc Bonnant.

4.2.
The Chairman blatantly evaded this direct question, answering instead that Marc Bonnant and the others had never represented the company. That clearly was not the questionthat had been asked.

4.3.
Why did the Chairman refuse to answer this question?

4.4.
Did the Chairman think shareholders would be easily fobbed off with this deliberatelydisingenuous reply?

4.5.
Will the Chairman answer this question now?

4.6.
As the Chairman knows, easyGroup has informationfrom 4 separate whistleblowers(who are naturally keen to retainanonymity for their own safety) suggesting that Marc Bonnant acted as a facilitator/intermediaryof the 2013 Airbus deal and its amendments(additionalorders of aircraft), which may have been agreed to by easyJet after financial or other incentives were offered or given by Airbus to certain easyJet directorsthrough offshore companies created, controlled or directed by Marc Bonnant.

4.7.
The whistleblower information suggests that Airbus may have employed a similar mechanism to pay bribes in this case, as itdid in the cases for which it accepted liability under its Deferred Prosecution Agreement (“DPA”) with the Serious Fraud Office (“SFO”) on the 31 January 2020.

4.8.
According to the whistleblower information, the process mayhave involved Airbus or a relatedparty retaining the services of anintermediary such as Marc Bonnant, who would take his cut, toset up and control at least two off shore companies. The intermediary would first ensure transfer ofmonies from Airbus or a related party into the account(s)of one of those companies(under Swiss secrecy laws it would be very difficult to track that payment). The second companywould then offer some sort of notional serviceto the first in return for payment of thosemonies, which would then in effectbe held by the intermediary for the benefit of the corrupt airline executive(s)in a sort of unofficial trust or fiduciary arrangement. According to the SFO DPA Statement of Factsand an article in The Times on the 6 July2020,the bribe paid by Airbus for the SriLankan Airlines2013 order of 14 aircraft was US$17 million paid via an offshore company. So, it appears thatthe going rate for a bribe by Airbus to corrupt airline executives at that time wasin the order of US$1m per aircraft.

4.9.
Yet, despitethewhistleblowerinformationand the serious concerns about Airbus’s misconduct at the exact period in time in which easyJet placed its own sizeable order with Airbus, the Chairman has repeatedly refused easyGroup’s request for easyJetto instruct an independent QC-led investigation.

4.10.
Can the Chairman explain why, in the light of significant new whistleblower informationand Airbus’ recently admitted massive bribery and corruption on a global scale,not publicly known at the time of the 2013 BDO process report,he still refuses to exercise good corporate governance in opening an independent investigation?Lawyers for easyJethave suggested that the information provided is insufficient to start aninvestigation and that the time andcosts of undertaking suchan investigation areanimpediment. easyGroupbelievesthis to bea disingenuous argument when we are dealing with the ordering of c 300 aircraft where the total cost to the company could be c US$20 billion and the potentialbribes could be US$300m.

4.11.
Carolyn McCall was the CEO of easyJet at the time of the 2013 deal with Airbus and remained in post until 2017 during whichperiodfurther amendments were agreed to by easyJet.

4.12.
Can the Chairman confirm whether the companyitself has examined the question of whether Carolyn McCall had any direct or indirect dealings, in whatever capacity, with Marc Bonnant or any of his associates during her tenure at easyJet from 2010 to 2017?

4.13.
Has the company, for example, reviewed itsrecords relating toCarolyn McCall and other directors of concern(e.g., company emails and travel expense logs), or interviewed persons of interest(e.g., in the finance department who may have, according to the whistleblower information, forwarded private flight hire invoices for payment totheunrelated third party, Marc Bonnant)?

4.14.
Additionally, and more specifically, does the company’s investigation, if any, reveal answers to the following questions:

4.15.
Did Carolyn McCall meetMarc Bonnantin Lucerne in the fourth quarter of 2016?

4.16.
Did Carolyn McCall have any knowledge of or dealings with offshore companies known or believed to have been created, controlled or directed by Marc Bonnantor any of his associatesincluding, but not limited to,‘Well Vision Holdings Limited’(BVI registered) and ‘Circle Point Holdings Limited’(Hong Kong registered)?

5. ADDITIONAL QUESTION


5.1. BOARD LEVEL RESIGNATIONS

5.1.1.
Immediately following the shareholder vote on 22 May,at which the main argument against removal of easyJet directors was the damage that would be done to the company if there was to be achange in the team, the company announced the departure of three directors.

5.1.2.
Did the Chairmanknow about these imminent resignations from the boardat the time of the shareholders meeting on 22 May? If he did, why were these imminent resignations not disclosed prior to or at thatmeeting?

5.1.3.
If it was important for the future of the company not to ‘change the team,’ as argued by the Chairman, does the Chairman now believe thatthe future of the company is damaged by virtue of these departures from the board?

5.1.4.
If he does not think so, then doeshe accept that his main argument against removal of directors was disingenuous and invalid?

5.1.5.
Does the Chairman believethat the three resignationsin quick successionhave anything to do with Sir Stelios asking questions about certain directors potentially having contacts with questionable Swiss lawyers, who, by the Chairman’s own account,have no relationship witheasyJet?

5.1.6.
Additionally, Sky News reportedon19June 2020 that Moya Greene has resigned or is about to resign as Chair of easyJet’sRemuneration Committee, a post she has apparently held for less than a year.

5.1.7.
Is that report correct? When will the market be informed? Why did she resign?

5.2. RNS 26 JUNE 2020


5.2.1.
We weresurprised to see the RNS of the 26 June 2020 in which a sale and lease back transactionwas announced to the market. We wereparticularly surprised to see the net book value of the aircraft being disclosed to the market. It isrelatively simpleto deducethe priceeasyJet is paying to Airbus for a new plane. Threequestions follow from that:

5.2.2.
Why has the company chosen to reveal this information at this point in time, when it had refused to do so in the past when repeatedly asked by us and other shareholders?

5.2.3.
Did the Financial Conduct Authority (“FCA”)put pressure on the company to make such disclosure of what is a class 2 transaction?

5.2.4.
If the real prices are now known to the market, will the company now drop itspathetic excuse that the easyJet-Airbus contract is confidential,and give the market full disclosure of the sums paid and to be paid to Airbus?