EasyJet (EZJ) has been a sometimes-turbulent ride for those who have been on board since its flotation in 1995. Founded by Sir Stelios Haji-Ioannou, easyJet has copied a business model exploited by Southwest Airlines that focuses on low-cost pricing and efficiency. Despite Ryanair being the clear leader in this sector, with its tacky yellow and blue livery (a classic ‘no frills’ trick to make us believe little money has been spent on design), easyJet has forged a robust business and enjoys being a member of the FTSE 100. Long-term shareholders may now begetting frustrated, however, as the shares traded below 900p in October 2018, rallied and doubled by July 2018, only to come back and tag the same level around 900p again just 12 months later.
Looking at Chart 1, we can see that the price rose again to a high of 1,550p, but in just a few weeks has tumbled and fallen out of the sky thanks to the effects of the coronavirus pandemic. Given that easyJet’s planes are grounded, this means that not only is it not taking any revenue, but its costs are still required to be met. The company was in the media recently for receiving £600m in government-supported loans despite paying out a dividend to shareholders. Many accused the corporation of robbing Peter (the taxpayer) to pay Paul (the shareholders).
However, the ex-dividend date was 27 February, only three days after the FTSE 100 began to make its lurch downwards. It was also after the ex-dividend date, the point at which the company was legally forced to pay the dividend to shareholders; withhold the dividend and shareholders could claim they had been sold the shares under false pretences – an argument I agree with. Sir Stelios himself also came under pressure from media suggestions that he should forfeit his dividend – but he argued that his business and charitable donations are separate, and asked why should he give up his dividend only for it to end up in the pocket of another corporation such as Airbus?