EasyJet Company’s Conflict

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EasyJet is a British airline company which offers low cost flights to different parts of the world. The company has become one of the largest low cost companies in Europe, which serves the flights both inside the country and internationally in about 378 directions between 104 airports in Europe (EasyJet 2011). The main problem which is going to be discussed in this factsheet is the brand licence contract and the violation of the brand name properties.

The company has faced the problem in 2010 which was raised by the increase of the company revenue connected with the ancillary services. The problem background is the brand licence contract EasyJet signed up with Sir Stelios Haji-Ioannou, the owner of the brand name.

According to this contract, ‘no more than 75% of EasyJet’s revenue must be derived from its core activity of flying passengers, as opposed to revenues that are “ancillary” to that main activity’ (Milmo 2010, n.p.). According to the brand licence, the company has an opportunity to use the brand name, logo, and other facilities stated in the contract as well as follow the obligations mentioned there (Abrahams 2008).

The main idea of the contract violation is that the company has gained £238 m last year with the help of baggage check-in charges, which the licensor considered as the ancillary service provided by the company. The problem is rather contradictory and unusual as when Stelios founded the company, it possessed 122 aeroplanes.

The company plans to have 208 by 2012, but ‘the airline’s founder is determined to stop easyJet spending another $2bn (£1.38bn) on 59 more aeroplanes that it is contracted to buy’ (Milmo 2010, n.p.). Stelios wants to get the profit he seems not to have for the revenue the company has got for ancillary services. Thus, according to the calculations the revenue of the company has increased by 5.3% (to £759.2m), while the revenue per seat within the same period of time has increased only by 3.5% (to £53.23).

The difference is really huge (Parsons 2010). The company agrees that it ‘was restricted from making more than 25 per cent of revenue from ancillary services’ (Clark & Johnson 2010, p. 20), but it does not want to agree that the baggage check-in charges are connected with airline services.

Long-term dispute is finished and the decision is made. The company leaves its ‘easy’ name, but it has to pay for this opportunity. ‘For the next 50 years, with a minimum term of 10 years, it will have to pay Haji-Ioannou’s easyGroup an annual royalty of 0.25% of revenues, capped at £3.9m and £4.95m in the first and second years respectively’ (Teather & Kollewe 2010, n.p.). At the same time, Stelios is not a chairman in EasyJet anymore, and does not have the right for brand name, but, it still remains the holder of 26% stake.

Even though the company has remained free from brand licensing contract, it has to pay high fee for using the brand name in personal use and without paying the brand name holder necessary revenue if it exceeded 75%.

Reference List

Abrahams, D 2008, Brand risk: adding risk literacy to brand management, Gower Publishing, Ltd., Farnham.

Clark, P & Johnson, M 2010, ‘EasyJet settles dispute with Stelios’, Financial Times, p. 20.

EasyJet. 2011. Web.

Milmo, D 2010, ‘EasyJet feud descends into court battle’, Guardian. Web.

Parsons, R 2010, ‘Stelios paves easyJet’s way into joint marketing deals’, Marketing Week, 33, 42, p. 8.

Teather, D & Kollewe, J 2010, ‘EasyJet and Stelios agree terms after two-year brand-name row’, Guardian. Web.

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EasyJet Company’s Conflict

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