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easyJet case continues; Ryanair offers larger check-in baggage allowance

Analysis

Shares in easyJet slipped 0.9% yesterday. As the easyJet legal action continues in London, founder Sir Stelios Haji-Ioannou stated that if his dispute with the carrier is not resolved he may withdraw easyJet's brand licence and offer it to another carrier. Sir Stelios has also suggested he could lease the name to a large online travel retailer, such as Expedia or Travelocity.

Summary
  • easyJet founder, Sir Stelios Haji-Ioannou, threatens to withdraw the brand license and offer it to another carrier or online travel retailer if his dispute with the airline is not resolved.
  • easyJet CEO, Andy Harrison, confirms the airline has contingency plans for a new name.
  • Sir Stelios expresses concerns about easyJet's expansion beyond its core activities and its potential impact on other businesses in the easyGroup.
  • easyJet and Sir Stelios are in disagreement over what constitutes ancillary revenues, particularly regarding baggage fees.
  • Ryanair introduces a larger checked-in bag allowance of 20kg as an alternative to the standard 15kg allowance.
  • Ryanair's share price remains stable amidst these developments.

easyJet outgoing CEO, Andy Harrison, admitted the LCC has developed plans for a new name for the carrier but "only as a contingency plan". Sir Stelios stated he is concerned easyJet's expansion beyond its core activities could damage the interests of other businesses in the easyGroup.

While easyJet and Sir Stelios argue over what actually constitutes ancillary revenues (Sir Stelios has argued that easyJet's new charges for checking in baggage, which raised GBP238 million in 2009, are an ancillary business, while easyJet claims the baggage fees are as integral to its main business as fares), Ryanair announced it now offers a larger (20kg) checked-in bag allowance.

The new Ryanair allowance, priced at EUR/GBP25, is as an alternative to the standard (15kg) checked-in bag allowance of EUR15/GBP15. Passengers who require a second checked-in bag can also purchase an additional 15kg allowance for EUR/GBP35. Shares in Ryanair remained stable yesterday.

Selected LCCs daily share price movements (% change): 17-Jun-2010

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