A decision easyJet (LON:EZJ) made in the weeks after Russia’s invasion of Ukraine has resurfaced more than four years later as a $72 million legal dispute. The British budget airline is being sued by STLC Europe Eight, an Irish unit of Russian state-owned aircraft lessor GTLK, over six Airbus aircraft whose leases easyJet terminated in 2022 following European Union sanctions.
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For easyJet (LON:EZJ) investors, the headline number is hard to ignore. But there is an equally important distinction: $72 million is the amount being sought by the claimant, not an established liability for the airline, and easyJet (LON:EZJ) has said it intends to defend the claim in full.
Bull Case
easyJet’s (LON:EZJ) position is that its actions in 2022 were driven by the sanctions regime introduced following Russia’s invasion of Ukraine. According to the lawsuit as reported by the Financial Times and Reuters, easyJet notified STLC in April 2022 that it was terminating the six leases because EU sanctions prevented the airline from maintaining or repairing the aircraft. That explanation is consistent with easyJet’s (LON:EZJ) own reporting from the period. In its 2022 annual report, the airline said it had worked with its legal team to assess the sanctions regime affecting its operations and assets and ultimately terminated leases on six aircraft that were owned by the Russian state.
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Most importantly for shareholders assessing the current lawsuit, easyJet (LON:EZJ) has not accepted the allegations or the $72 million claim. A spokesperson told Reuters that the airline intends to defend the case in full and declined to comment further because litigation is ongoing. That makes it important not to treat the amount being sought as a confirmed cost to easyJet. The case will determine whether STLC’s allegations have merit and what, if anything, easyJet (LON:EZJ) ultimately owes.
Bear Case
The lawsuit nevertheless puts a substantial claim in front of the airline. STLC alleges that easyJet (LON:EZJ) unlawfully abandoned the six Airbus aircraft after terminating their leases and left them in Madrid and Cyprus without maintenance while airport storage charges continued to accumulate. At the center of the dispute is whether the sanctions actually required easyJet (LON:EZJ) to take the actions it did. STLC argues that the restrictions did not apply because the aircraft remained outside Russia and the leasing entity was based in Ireland. easyJet, by contrast, had said in 2022 that sanctions prevented it from maintaining or repairing the aircraft.
The condition and value of the planes also form part of the claim. Three aircraft left at Larnaca International Airport in Cyprus were eventually recovered and sold. STLC alleges that they fetched at least $32.5 million less than expected because of their poor condition. The other three aircraft, which remain in Madrid, had not yet been sold at the time of the report. Those figures remain allegations made by STLC rather than losses that a court has determined easyJet caused. The case is ongoing, and easyJet (LON:EZJ) has said it will contest the claim.
Conclusion
For easyJet (LON:EZJ) shareholders, this looks more like an issue to keep on the radar than one that can already be priced as a $72 million hit. The amount is being claimed against the airline, but easyJet disputes the case and has committed to defending it.
What makes the lawsuit worth following is the disagreement over the airline’s actions in 2022. easyJet (LON:EZJ) says it terminated the leases after assessing sanctions affecting Russian-owned aircraft, while STLC argues those restrictions did not apply in this case. Until the court weighs those competing positions, investors have a sizeable legal claim to monitor, but not a confirmed $72 million bill.
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This article is originally published at Insider Monkey.
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