Stelios Haji-Ioannou, founder of easyJet and a host of other branded businesses, is a man obsessed, as Karina Robinson discovered.
Act 1: The interview with Stelios Haji-Ioannou, founder of Europe’s second-largest discount airline and chairman of the easyGroup, is set to place on easyCruiseOne, the first boat in his new cruiseline venture, sailing between Barbados and Martinique.
Act 1 (Retake): The interview with Stelios (as he prefers to be known) does not take place in the Caribbean because the cost of the flights is astronomical; easyJet does not fly there. It takes place in easyGroup’s grotty offices in Camden, north London. Your editor perches on Stelios’s desk, part of a central pod where the in-your-face orange of the brand is particularly violent.
Act 2: The second part of the interview takes place in the Camden Brasserie, Stelios’s regular lunching canteen, where he always has steak and chips and a diet Coke. And following the launch of easyWatch, he will always wear a nasty orange watch from the collection, having ditched the Patek Philippe, and always drive an orange Smartcar on his home turf in Monaco.
The pleasures of life for others – beauty, quality, delicious food – are of little interest to the heavy-set 38-year-old. He may have owned a yacht at 25, but this is standard for the son of a Greek Cypriot shipping tycoon and, he admits, “with the brand extension, I have turned hobbies into work”.
Non-travel ventures
That, arguably, is what has made him. The question is whether he can extend his brand into non-travel related businesses and continue making money. The jury is still out, especially when his new ventures are private companies with no full accounts available. Still, the group says four of the stand-alone ventures are profitable while easyCar will break even this financial year.
But value in getting from point A to point B is understandable – easyJet, easyCar – or even when spending a couple of nights somewhere – easyHotel, easyCruise. But personal objects such as watches are not soap powder. Rather, they are extensions of a personality in a brand-conscious age and it is not clear the brand is attractive enough for that. Or how much money the brand extensions can make, if any. If they continue to be held privately, it will not be known.
EasyWatch is the 15th branded business launched by Stelios in the past decade. Others are easyMoney, easyCinema, easyJob and easyPizza.
Licensing model
His new model follows his experience with easyInternetcafe some years back where he acknowledges ambitious overexpansion led to a setback. Stelios, a London School of Economics alumnus, now lets other people take the risks of his new ventures. By using licensees or franchisees, easyGroup has low capital requirements; it is responsible for the brand name and marketing, although sometimes it has a stake in the company. For example, Zurich Financial Services runs easyMoney, his credit card and car insurance business, while TDC/Telmore, a Danish telecommunications company, agreed a brand licence agreement to run easyMobile. It must be said, however, that when you take less risk you also share less in the upside.
On the issue of risk, Stelios is intent on lowering his exposure to travel-dependent businesses, but this is difficult when easyJet is so much larger than the others – while, additionally, the most obvious brand extension is on the travel side. But, as he says: “If two September 11s [terrorist attacks] happen, I have to still stay in business”.
Stelios graduated from City University Business School with a Masters in shipping, trade and finance, which he put to use in 1992 when he founded shipping firm Stelmar Tankers. It is now a listed company, of which his family owns about 30% of the equity and where he recently fought and won a battle against the incumbent management. The first bank to finance him in this venture was Hamburgische Landesbank, due to its historical links with the shipping industry, and it was also involved in his next move into aviation.
When talking about 10-year-old easyJet and its competitors, Stelios is at his most outrageous – a carefully planned outrageousness – even to the point of issuing press releases aimed at getting maximum free publicity in the media.
Witness the following dialogue:
Karina Robinson: What message do you have for Willie Walsh, the new chief executive of British Airways?
Stelios Haji-Ioannou: “Good luck, you need it!” I flew BA yesterday from Hamburg and I was delighted that the level of service on offer is worse than easyJet. On the way into the plane there was a pile of sandwiches, and someone said to grab one. Coffee and tea in paper cups – that is not frills. Any remaining credibility they had that they were better on short haul has been lost after the Gate Gourmet dispute [where BA’s caterers went on strike].
They should pull out of short haul – do just enough to fill their long haul planes – and leave the short haul to easyJet and Ryanair.
KR: Ryanair shares have done much better than easyJet’s.
SH: Let’s face it, Ryanair has a better ROE [Ryanair’s return on equity is over 20; easyJet’s is 5]. Easyjet should do better. I get involved as a non-executive director with most of my net worth in it [Stelios’s family has more than 40% of the shares]. I have a right to step in but would only use it as a last resort. I think [chairman Sir Colin] Chandler is doing a good job but he is over 60 and I am 38 so I will see a lot of chairmen.
KR: What do you think of Icelandair’s surprise acquisition of an ever increasing stake in easyJet? It now owns 16.8%.
SH: Anyone who thinks easyJet shares are undervalued, I agree with! That is why we are not looking to sell. They probably doubled their money, a friendly reminder to the average London fund manager.
KR: Michael O’Leary, the head of Ryanair, sees ancillary services, including in-flight gambling, as the biggest profit growth area.
SH: His customers are willing to spend one and a half hours on buses. I doubt they have any money for blackberries, let alone money for gambling. I don’t think the answer for aviation is gambling vast sums of money on a blackberry on flight. [It is not obvious how this is different from the gambling offered on easyCruise].
KR: Do you have a sustainable long-term model in easyJet when it is simple to copy and you have new eastern European competitors with lower cost bases?
SH: Once it became obvious the model worked, it has been widely copied. We have economies of scale as we buy aircraft cheaper than most people as we buy more. We advertise less as we have an established brand.
The brand, according to Stelios, is about value and it is funky and entertaining. This man is neither funky nor entertaining. He is, quite simply, obsessed. “People should live the brand,” he says. “I don’t expect Donatella Versace to live in any other way.”
He says he has “not exactly been a Calvinist” but admits that, as he has grown older, luxury has become unimportant to him. His yacht is now used to scout out locations for his cruise ships.
As for his personal life, I put to him the quote from a London socialite: “I hear he has parties with loads of gorgeous women but few men, all ugly so no competition. He seems to prefer blondes.” He laughs and says it is not a bad model.
It looks likely that Icelandair’s owner, FL Group, is lining up to bid for easyJet. It recently bought Sterling, Europe’s fourth-largest no-frills airline, based in Denmark. Stelios may fight or he may agree – and his participation is crucial to the Icelandic company since he licenses the easyGroup brand to the airline. If he sold out it would certainly lower his exposure to travel, give him more cash and more time to launch other ventures. He has, after all, had “serial entrepreneur” printed on his orange business card and he says he wants to be focused on building the easy brand.
“Even if you told me I could be the wealthiest man in the world if I drilled for oil in Siberia I would rather stay poor. Or relatively poor,” he says.
Exit Stelios, stage left, to his orange world.
