Archive for the ‘Easyjet’ Tag

Climate Watch: update on airlines

Posted April 8, 2020
Filed under: Easyjet, Environment | Tags: , ,
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As predicted, the airline industry is now trying to wriggle out of its commitments on carbon emissions and climate change. Only last month, the industry agreed a protocol whereby airlines would pay to increase carbon emissions (through offsetting) based on some sort of average for 2019 and 2020. As we now know, 2020 will be a record low carbon year, and the airlines, many of which have all planes grounded because of Covid-19, are now saying that committing to this new level would make them bankrupt, notwithstanding that many of them are already.

To be fair, the industry body, ICAO, has not yet shifted, but it is being lobbied hard – understandably – by airlines to re-evaluate the threshold. Seemingly, it was already going to cost the industry between £4bn and £18bn (not much of a difference there, is there?) – which just goes to show how much more carbon they intended to put into the environment on growth projections (now, of course, unlikely).

And then there is easyJet. Readers may already have been following the story of how founder and major shareholder, Stelios Haji-Ioannou, wants the firm to cancel its order for 107 Airbus A320 Neos, planes that are necessary if easyJet is to meet its targets for carbon reduction. However, for Haji-Ioannou, that is no longer viable. By which he means under the current easyJet and industry business model and not under an ICAO – or other – environmental commitment. At what point does he smell the coffee?

Pic: Adrian Pingstone

Shareholders against the planet – knowingly or unknowingly

Posted March 31, 2020
Filed under: Covid-19, Easyjet, Environment, Politics | Tags: ,
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Stelios Haji-Ioannou (right) is founder and major shareholder (about 34 per cent) in easyJet, the budget airline. When he established the airline that challenged incumbent “full-service” airlines back in 1995, climate change was not well understood in business circles (though as we know, the science was maturing and the Earth summit had taken place 3 years’ earlier in Rio). Easyjet is now a very large airline with over 300 aircraft and a market capitalisation of £4bn.

In recent times airlines have become environmental villains responsible for almost 3 per cent of all carbon emissions (and about 12 per cent of all emissions from transport). The low-cost model of easyJet and others has encouraged travel and made it possible to commute over long distances. This has been regarded as a good thing economically. A global pandemic, however, sees airlines at the forefront of a new battle against another invisible enemy, Covid-19. That market capitalisation has collapsed, and the 300 aircraft grounded indefinitely. Easyjet – along with other airlines – may well seek state aid to support the business through the crisis.

The question of state aid for airlines – major contributors to climate emissions and hence climate change – puts the Government in a difficult position. Neo-Liberal Governments like that in the UK are generally opposed to state support. Indeed they do not even protect strategic industries and businesses from foreign buyers. So any support eventually given to scheduled airlines serving a free market (I accept that some airlines serve niche, fragile and social markets such as Logan Air) will challenge neo-liberal ideology and raise questions about ministers’ proximity to business leaders in the industry. Cash transfers to easyJet would lead to Richard Branson’s Virgin Atlantic receiving similar. That would be difficult to countenance.

The management at easyJet now has an added problem. Knowing full well that their industry is a problem in the carbon economy, there are two – what one calls – mitigating policies. One is more effective that the other, but neither are a solution. The first is offsetting; in the easyJet case, that involves committing to planting trees, though there are many offset schemes that involve investing in developing countries’ own mitigation policies. The second is buying a fleet of more efficient aeroplanes. Easyjet has opted for a fleet of Airbus A320 Neos and they are arriving in batches.

Stelios Haji-Ioannou is not, seemingly, very happy with this. He is now calling for the whole order to be cancelled. He believes, with some justification, seemingly, that the order threatens the solvency of the company. Moreover, as Nils Pratley in the Guardian writes, the company may need to be recapitalised: “Haji-Ioannou says he would support a rights issue – as he should given that his family has collected £620m in dividends since 2011, including £60m this month – but he is vowing to make his backing dependent on an Airbus cancellation. Given the size of his shareholding, he has some clout.”

So here is the conflict of capitalism laid bare. Without the new planes the company will see carbon emissions increase and probably be subject to some regulation or tax (or both). The company will also lose considerable customer credibility on anything it says in the future about caring for the environment. But with the planes, at best shareholders will have to recapitalise, at worst, the company goes under. Plus, very rich man determines the future of the planet. Which side are you on?

Picture: Audiopedia