Easyjet founder claims expansion plans are wrong turn

• Bitter row between founder and airline moves to high court
• Imprudent growth concerns Sir Stelios Haji-Ioannou
EasyJet plane on the tarmac in Geneva
The long-running row between easyJet's founder, Sir Stelios Haji-Ioannou, and the company has gone to the high court. Photograph: Martial Trezzini/AP

EasyJet has expanded into other businesses to the point that "it is no longer really a low-cost airline", lawyers representing the carrier's founder, Sir Stelios Haji-Ioannou, argued in court today.

The comments were made in opening remarks as the long-running and bitter dispute between Haji-Ioannou and the airline reached the high court.

Haji-Ioannou, who has been fiercely critical of the airline's management, is due to be the first person to take the stand in a case that is likely to last two weeks. He resigned as a director last month. Andy Harrison, easyJet's outgoing chief executive, is also expected to give evidence.

The case centres on the brand licensing agreement between the tycoon and easyJet. When easyJet was floated on the stock market, it agreed that at least 75% of its revenues would come from the core airline, in order to prevent the company from launching services using the "easy" brand that might compete with Haji-Ioannou's other operations, which include businesses from hotels to pizza delivery and men's toiletries.

Haji-Ioannou is arguing that easyJet, which has launched products including a credit card and hotel-booking website, has disregarded the agreement. But behind that dispute is a wider row over the direction the airline is taking, with Haji-Ioannou, who remains the largest shareholder – with 38% – complaining that the business is expanding and adding to its fleet too quickly at the cost of paying dividends.

The airline's founder is determined to stop easyJet spending another $2bn (£1.38bn) on 59 more aeroplanes that it is contracted to buy. He wants an extraordinary general meeting to halt the spending and claims he has the support of other shareholders.

Michael Bloch QC, representing Haji-Ioannou's company, easyGroup IP Licensing (EGIP), said when the licence was issued easyJet was a "straightforward, focused, low-cost airline". He told Mr Justice Henderson the dispute between the two sides centred on what constituted ancillary and core activities.

Both sides agree ticket prices are core, but food sold during flights, travel insurance, hotel bookings and car hire are said by Haji-Ioannou to be ancillary and by easyJet to be core. Haji-Ioannou is even arguing that easyJet's baggage check-in charges, which raised £238m last year, are ancillary to the airline's business.

"The wider dispute centres around the number of aircraft easyJet is purchasing and the strength and transparency of the case for doing so," Bloch said. "As a shareholder, Sir Stelios is concerned that what he considers to be imprudent growth ties up capital, reduces ticket revenue per passenger, depresses profit margins and prevents easyJet paying dividends."

He said the growing easyJet fleet appeared to depend on expanding the range and significance of non-ticket revenues and stepping into sectors which could be occupied by other "easy" brand licences. The original licensing agreement, restricting ancillary revenues to 25% of the total, drew a line which easyJet is not permitted to cross, he added. "On any sensible view, easyJet is operating either on the wrong side of, or perilously close to, it."

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