Stelios refuses to approve easyJet accounts

The dispute between the easyJet board and the airline's largest shareholder escalated this morning after Sir Stelios Haji-Ioannou refused to approve annual accounts which showed a 46% fall in pre-tax profits. Haji-Ioannou, who has fallen out with board members over the budget carrier's strategy, said he was "unable" to back today's figures due to a number of objections related to easyJet's acquisition of GB Airways.

By Dan Milmo Transport correspondent guardian.co.uk.

The easyJet founder also ruled out becoming chairman of the airline but has proposed two lieutenants from his easyGroup business as non-executive directors.

In a letter to the board published at the end of easyJet's annual results, Haji-Ioannou again criticised the airline's ambitious expansion plans.

"I would like to place on record that I believe that with careful cash management and in particular more prudent capital expenditure, easyJet and its shareholders will be the winners in European short-haul aviation. We must focus on cash flows forecasts and not on carrying more passengers," he said.

Sir Stelios, who remains the airline's largest shareholder with a 27% stake, has demanded that the carrier begin paying dividends for the first time. The accounts were signed off by the airline's auditors PricewaterhouseCoopers.

EasyJet reflected its founder's concerns in a change in short-term strategy announced today. Europe's second-largest low-cost carrier said it had reduced winter growth plans from a 12% increase in capacity to zero and added that it had deferred four aircraft deliveries scheduled to arrive in 2010.

It added that, according to a multi-billion pound order with Airbus, it can defer up to half its 109 future aircraft deliveries for up to two years. However, easyJet refused to state whether it is considering pushing back those orders.

"EasyJet delivered a good trading performance in the financial year ending September 2008 ... We recognise that economic conditions will be very difficult and easyJet is planning accordingly," said Andy Harrison, easyJet chief executive.

Boosted by an expansion that added 28 aircraft to its fleet over the year, easyJet said revenues grew by 32% to nearly £2.4bn as passenger numbers rose 17% to 43.7 million. The passenger load factor, which states the amount of seats sold per flight and is an important indicator of the financial health of a low-cost carrier, was flat at 84%. Profits were hit by higher fuel costs.

Harrison said in a conference call with reporters this morning that the concerns raised by Haji-Ioannou were "not new news" and had already been considered by management, the audit committee and auditors. He said they were non-cash items and had "no impact on the value or commercial strength of the company".

Haji-Ioannou said in his statement that easyJet should monitor the profitability of GB Airways more closely by accounting the performance of each of its routes separately. He said the valuation of GB's Gatwick airport slots was too optimistic given the current economic climate, that the aircraft owned by GB should be written down in the easyJet accounts and that the impairment value of the GB assets should be tested separately on an annual basis.

"I am left without any other options but to abstain from voting on the accounts as a director of easyJet plc. I am doing so reluctantly, but I believe it is in the interest of all shareholders to be more prudent at the present time," said Haji-Ioannou.

The easyJet founder said the airline should pay a dividend from 2011 onwards, which would represent an about-turn in a company strategy that is predicated on growing the business much faster than all rivals except Ryanair.