What’s in a name ?

You probably all know EasyJet, the British low-cost airline.  What you probably don’t know, is that it doesn’t own its brand name.  Its founder, the young Greek-Cypriot businessman Stelios Haji-Ioannou (in the meantime Sir Stelios), has kept the name for himself when he floated the airline on the London Stock Exchange back in 2000.

That wasn’t an issue as Sir Stelios generously awarded the use of the name to the airline for £ 1 a year.   As he was also developing other EasySomething businesses, he restricted however the use of the name to airline operations with a maximum of 25% for ancillary services.

And here is the snag ! As anybody who has ever flown with a budget-airline can testify, ancillary services make up a growing part of the bill.  Therefore, Sir Stelios sued his company for breach of the license agreement and now a new deal has been reached that should provide Sir Stelios with some £ 100m in fees over the 10 next years.

I don’t know about you but, if I were an EasyJet shareholder, I would feel a bit cheated even if Sir Stelios stated that “It’s a fair deal” and that I am sure the original agreement was explained in the listing prospectus.

So a few lessons (beyond “always read the small print”, which you already knew),

–          Beware of investing in companies with unusual corporate governance practices and potentially large conflict of interests,

–          Costs (or revenues if you take Sir Stelios’s position) potential shouldn’t be judged by numbers alone, have a look at conditions, restrictions, terms …

–          Brands are worth a fortune, certainly in consumer markets

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