by Barbara Cassani with Kenny Kemp, Time Warner Books, 2005.
This is American businesswoman Barbara Cassani’s story of how she founded the no-frills European airline Go for British Airways in 1998. Of how she took the original £25 million investment, built the airline virtually from scratch in just six months, and made a profit in three years. She led a management buyout before the company was sold to easyJet in 2002 for £374 million. It’s a compelling read, a great cliffhanger; as one reviewer says, it’s a “pacy tale of the buccaneering spirit that drives many entrepreneurs.”
(Reviewed by Edgar Wille in August 2007)
(These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in.
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Cassani describes herself as an “unlikely businesswoman”, having flirted at university with a career in government or the diplomatic service. She worked early on as a management consultant in the US and the UK (having married an Englishman she had met at university). In 1987, she joined BA as an internal consultant. BA had recently been privatised and was undergoing a revolution to transform it from a “public-sector dinosaur” to a service-led private company. As a “sparky and confident” American, Cassani found herself held up as a symbol of the changing organisation (although she says the message about service did not always penetrate through to head office thinking; she thought head office detachment from the customer was unhealthy and this framed her own future thinking).
Cassani eventually found her internal consultancy role limiting. She says she knew what had to be done but didn’t have a patch of her own. Too many BA managers were content to preserve the status quo rather than trying something new. Cassani’s break came when she was offered a senior job in UK sales in 1989 where, for the first time, she found herself managing a large team with responsibility for meeting tough revenue targets. After two years, she became a member of the team responsible for integrating the recently-purchased Dan-Air, an experience that taught her, she says, that merging airlines doesn’t work. She learned that, if you want part of the company to be really low-cost, you need to separate it completely from the rest of the business.
Her next job, as BA’s General Manager in the US, taught her more about why (in her view) airline mergers don’t work. Here, she helped to manage BA’s investment in USAirways, a troubled airline that had been formed by merging several quite disparate regional operators. The company suffered from different fleets, divergent cultures, and politics generated by people’s retained loyalties. The network looked powerful on paper and big gains in market share, rationalisation and synergy were foreseen. But it proved impossible to fulfil in real life.
According to Cassani, if you want to benefit from a merger, you have to be clear about whether you are trying to build a partnership or want a “marriage of convenience”. If it is the latter, secure the best deal you can and recognise it won’t last long. But, if you want a long-term partnership, both sides must make money from the deal. When bosses change, “the whole game is up for grabs”.
When in 1997 BA decided to set up a stand-alone low-cost airline, Cassani was asked by Bob Ayling (who had become BA’s CEO in 1996) to return to London to develop the business plan, known as “Project Hyacinth”.
The project had started a year before to respond to the threat of increased competition after the European Union fully deregulated the airline industry in April 1997. By then, deregulation had been proceeding for 10 years. BA was late into the game. easyJet had started flying in 1995 and Ryanair had reinvented itself into a low-cost airline by the same year. This made it all the more difficult for Project Hyacinth.
BA intended that its new airline would become a profitable company, not another loss-making subsidiary and insisted that Cassani draw up a fully-fledged business plan. The aim was to be profitable within three years. In contrast with BA’s usual expected return on investment of 8% on its capital projects, the new venture would be required to make 18%.
How was Cassani going to create something different? One of her first actions was to draw up a list of “what not to do” (e.g. she was determined not to build an expensive and inflexible central cost base such as aircraft maintenance; they were not going to charge business customers enormous fares because the company paid; nor were they going to treat leisure travellers with disdain and make it difficult for them to get low fares). She then flew to the US see at first hand how the “pros” – Southwest Airlines, the original low-cost airline – did things. She admits that she copied some of Southwest’s ideas but moulded them to suit contemporary European experience, basing her approach on the belief that customers wanted to “have it all”: low prices with great service.
Cassani says that she and the small team of talented individuals she enlisted to help her did not have many friends in BA, apart from Bob Ayling (who would be chairman of the new airline). The CEO’s support, however, enabled them to stay independent and left alone to get on with it. That was important because they needed low costs to be competitive; they could not be closely tied to BA and its traditional structure of pay and conditions, the high overheads and operational procedures appropriate for a global, complex airline.
Some BA colleagues thought creating a new company would cannibalise the existing business but Cassani says they missed the point. The deregulated market had changed things forever. A new, more profitable sector was emerging in which BA should participate and reap the benefit for its shareholders. The new low-cost airline would be owned by BA, but customers needed to know they were not going to get BA; it would be a totally separate brand, service, rules and sales.
The brand must guide everything in the business: “no-frills needn’t be cheapskate”. Early consumer research feedback indicated that some people, the British especially, were embarrassed about flying on a low-cost airline so the new company’s image had to counteract that.
Cassani was ready and eager to present the business case to the BA board, but suspected that opposition to the project within BA’s top executive team was delaying her presentation. Astonishingly, Cassani tells us that the project’s opponents never properly analysed the potential impact of the new low-cost airline on BA’s mainstream business. She neither had the information to do so, nor was it her brief, she says.
Cassani finally presented the business case to the BA board in October 1997. She was surprised that a subject so important to BA’s future European strategy was shoe-horned in to the last 20 minutes of the meeting (the board was “peckish” and ready for lunch). Cassani told the meeting that a large new segment was emerging in the European short-haul market for low-priced, no-frills, point-to-point services, as evidenced by the rapid growth of easyJet, Ryanair and Virgin Express. Ayling emphasised that BA should not miss this new opportunity and that, even if BA did not enter the new segment, its new low-cost rivals would attract customers away from its standard services. He wanted to defend the revenues and capture that value by launching BA’s own low-price airline in 1998, now code-named “Operation Blue Sky”.
The board were willing to risk £25 million – and no more – to back the CEO’s “whim” (as Cassani says, a relatively small amount for an airline that was used to buying aircraft at $100 million each). She was upset, though, by the board’s half-hearted support and its seeming assumption she would fail. “Screw ‘em,” she thought, “we’ll make the best low-cost airline in the world and it’ll make money.”
When Operation Blue Sky was announced to the world in November 1997, it had no planes or employees, although it did have an airport having just negotiated a deal with Stansted. Cassani told the press that her pledge to customers was that her new airline would fly to the best cities in Europe, at the best prices and offer the best no-frills service. She was amused by the Sun newspaper’s headline “Mother of Two Launches Airlines”.
Operation Blue Sky was faced with two deadlines: selling seats in April 1998 and the first flight itself a month later. They needed to find aircraft they could lease and operate (they were very fortunate in securing the first three aircraft at knock-down rates when lease prices plummeted during the Asian financial crisis). They had to get an Air Operator Certificate from the Civil Aviation Authority (CAA). They also needed to negotiate destination airport contracts, select and train ground handling agents, arrange a full servicing organisation, set up a telephone call centre and a marketing campaign, and install computer systems to run daily operations. One task was to cut aircraft turnround time to 20 minutes from 30 minutes; this included the development of an “amazing” eleven-step guide for check-in people which trimmed check-in time to 71 seconds. Cassani admits that in these early days, being owned by a large company was a big financial benefit to a start-up business; suppliers also took them more seriously.
According to Cassani, easyJet had gone “ballistic” at the announcement of Go and immediately accused BA of anti-competitive practices. She says she found easyJet’s advertising campaign suggesting that Go was trying to put them out of business “sheer ridiculousness”. Her concern was how to differentiate her new airline from the existing low-cost competitors. The trick, she says, was to figure out how to have good service without undermining the low-cost structure. BA always persuaded itself that customers would pay for the frills. She knew her customers would not pay extra for good service; her people would therefore have to provide good service because they took pride in giving it.
The example of Southwest certainly gave her the confidence that she could run an airline that was enjoyable to work for, popular with customers, and safe and profitable. What makes Southwest a truly great company is that it is “simultaneously profitable, has an efficient and punctual operation, treats employees like they matter, and inspires enormous customer loyalty through low fares and good service”. No other airline had done that – “until we came along”, she says.
With only 18 weeks to go before the April launch date, they still had to choose the new airline’s name. The final contenders were “The Bus” (suggested air travel could be as easy as taking a bus) and “Go Direct”. Cassani pictured “ancient double-deckers billowing exhaust fumes” and insisted on Go; it was fresh and different. The design team now had a very short time to give the name a real identity stamp and create designs that encapsulated all the thinking: “cheap and chic”, to sum it up. The result was the distinctive Go logo with the coloured circles (Cassani says this had “a wonderful Carnaby Street feel about it).
Cassani and her colleagues sought a way to explain to new recruits how Go was different. They developed a shorthand equation: “3X + Y”, where 3X means all the basics done cheaply and simply, and Y is for the little surprises which wouldn’t cost much but which would make Go different and make customers notice. Some of the Ys included:
Cassani says they wanted to recruit friendly, humorous, professional people who wanted to give good service and would make customers feel comfortable. They were hired for personality, not for size, shape, sex or age. Cabin crew were a mix of people – quiet, loud, mixed nationalities, a range of different sizes and shapes, and all ages. One of Go’s values was “Be Yourself”. They looked for pilots who could cope with the informal, “can-do” Go culture where everyone pitched in without being asked; they wanted pilots to become involved and learn about the whole business.
At the same time that the name Go was announced to the public in January 1998, easyJet were preparing a legal action to stop BA setting up a low-cost airline. Stelios, easyJet’s founder, claimed that BA was illegally cross-subsiding Go and that its real strategy was to force him out of business. Cassani and her team were worried that until the lawsuit was cleared up, potential customers would avoid Go.
Cassani says that easyJet’s legal action generated a “media circus” that raised Go’s profile and generated the equivalent of hundreds of thousands of pounds worth of advertising for them (Go could never afford lots of glossy advertising, she says). None of easyJet’s claims resembled her view of reality; it was all just a huge publicity stunt for them. What annoyed her most about easyJet’s “fatuous” claims was that Go did not use any of BA’s systems. BA’s sophisticated and global systems were not appropriate for Go’s simple, low-cost approach.
The new planes arrived just three weeks ahead of the launch; every day the planes weren’t flying was costing them a small fortune. Even if Go received the go-ahead from the CAA, easyJet’s legal action might still stop it flying. The court decision was due nine days before Go’s first flight. In Cassani’s view, the judge “fudged” the decision. He refused to strike out easyJet’s claim but granted Go the right to fly. But that was all that mattered to Go. The effect of the lawsuit was to keep Go completely separate from BA. Cassani had always feared that, while they might be allowed to do their own thing at the start, BA’s “tentacles” would eventually envelop them. Thanks to easyJet, they would be left in peace to develop the business.
The CAA’s approval arrived with three days to go before the inaugural flight to Rome. Cassani admits to many sleepless nights in the run up to the launch as she worried whether it would go smoothly, especially when she discovered that Stelios was planning to travel on the flight with some of his managers. Stelios and his “gang of ten” turned up for the flight wearing orange boiler suits that spelled “GO EASYJET”. Cassani responded by greeting him and his party with a big boarding pass sporting the Go logo. The press loved it and the coverage was a bonus for both airlines. As Cassani says, it was all oddly civil given that they had been battling Stelios in the High Court.
From the moment the first plane took off, Go was in a battle to survive, Cassani says. According to Cassani, one result of BA’s entry into the low-cost market was to validate the safety and acceptability of the sector. Go actually made easyJet and Ryanair more desirable to fly with.
Go was now a tiny but real European low-cost airline. “We were the adventurers who had created an airline in a breathtaking six months,” says Cassani. Now they needed a customer service and operational machine that would work well each day, every day. And it had to grow fast. Good management and great people would be the key to the company’s future success.
Cassani says they aimed to make Go a better, more fun place to work than anywhere any of them had worked. They did not want the “cradle-to-grave” culture of a big company where people joined because they wanted rules and to be part of a successful, established business. They wanted Go to be entrepreneurial but to use the method of a corporate manager. If they could take the best of both, they could be both nimble and systematic which would help them grow fast, become true discounters and meet all their objectives: financial, punctuality, safety, customer service and happy employees.
They therefore wanted to recruit flexible people who did not need thick rule books and were happy to let their own personalities shine through, people who would understand that cost cutting was not about “miserably squeezing budgets”, but an exciting challenge to think up clever ways to do things differently and get costs down.
While low cost meant that they could not afford a plush working environment for Go’s people, they aimed to make it interesting. One approach was “shadowing” where individuals spent up to a day with a colleague to understand their role – telesales people shadowed cabin crew, for example, or flight crew shadowed the ground handling team.
Cassani also took a special interest in meeting new employees during their training and making she sure she remembered their names – when the CEO not only acknowledges you but remembers your name, you know that this is someone you will enjoy working for. The month-long cabin crew training ended with a graduation ceremony attended by families, with a cabaret produced by the crew, champagne, the presentation of the Go wristwatch and a photo with Cassani.
Go was an exacting and demanding place to work. They were doing so many things for the first time, it was interesting but exhausting. To survive they had to keep the emphasis on low cost and keep improving the way they ran the business. Cassani felt that if everyone in the company could see things from where she was sitting, they would understand the need for change. The key was communication and they tried anything and everything to stay in touch with colleagues, including:
Cassani says that the airline was full of everyday heroes who just did their jobs well and pitched in when needed. She believes that saying thank you is a big part of running a business (though she thinks she didn’t do it enough). For example, money was put in a People Fund so that every manager could buy each employee something special each year to say thanks. “Even swashbuckling adventurers like to feel appreciated.”
Despite the enthusiasm of Go’s people, Go’s business plan was not working out in the early days. It was flying city breaks to Milan and Copenhagen and business flights to Edinburgh but they were not growing fast enough. Even though it had dropped its average prices to 50% below its big competitors, planes were still taking off barely half full. Instead of losing £13 million in the first year as originally expected, Go now expected to lose £20 million. She expected an “eruption” from BA.
Go’s performance partly depended on where it decided to fly. They had initially looked for destinations that would grow because of its low fares and aimed to avoid direct competition from their established competitors. However, as a latecomer, it had the disadvantage that many of the most promising routes had already been taken by a low-cost airline.
By the autumn of 1998, Cassani knew they had to make some drastic changes if they were to reach break-even point in year three. Passenger numbers were only 51% of budget and forward sales were dismal. At the rate they were going, they would keep losing money and BA would pull the plug on them. Go needed to grow faster to spread its fixed costs over a larger business. If they grew too slowly, their competitors would beat them to all the interesting new routes.
The only bright spot was the launch of Go’s Internet booking service in September 1998 which exceeded expectations from the start. At this juncture, Jack Welch of GE, which through its finance arm was the largest lessor of commercial aircraft in the world, gave Go a new lease of life.
Finding good planes to meet their original plans had been a difficult problem for Go. They now found that GECAS (GE Capital Aviation Services) was about to take delivery of six brand new Boeing 737s. Go by now had four planes with three more on the way; it only needed two more planes to hit the target of nine aircraft agreed with BA for the second year of operation. Securing the GECAS planes would make Go substantially larger than planned for year two.
Cassani met with Jack Welch to discuss a deal. GE was willing to offer a competitive price but only if Go took all six aircraft. This was a major opportunity for Go. The planes would offer savings in engineering costs, certainty on delivery dates, and a chance to boost punctuality and customer satisfaction. But it meant a big increase in pace for Go’s people.
At a crucial strategy meeting with Bob Ayling, Cassani explained that the firm was at a crossroads and outlined three options. They could stick with their existing plan to operate seven aircraft. It could grow a bit faster and lease three more planes to achieve slightly more economies of scale. Or, it could go ahead with the GECAS deal to give Go 13 planes by end-1999. Ayling agreed to go for the GECAS deal.
The new GECAS planes helped them level the playing field with easyJet and Ryanair. Looking back, says Cassani, it was a huge commitment to spend over £100 million on the aircraft over the next six years. But, if they hadn’t gone for growth, they would not have survived. How Ayling managed to persuade the BA board to approve the doubling of the size of the company while it was forecasting a doubling of its losses, “I’ll never know”, she says.
Cassani described her aims in a speech she made in March 1999 (attended by Stelios sitting in the front row): “At Go we aim to deliver low prices with great service. We don’t accept that low cost means poor service and late flight.” She was still promising publicly that Go expected to break even in three years, but this would greatly depend on the airline’s ability to find some promising new routes for the new planes.
Following a chance remark by her personal assistant who had a holiday home in Spain and was complaining that the package tour operators charged a fortune for flying there, Cassani decided to look more closely at Spanish destinations like Alicante or Malaga (where it was already flying). For the routes to work, a lot of people needed to break their habit of flying charters, fly low-cost and take a lot more trips. However, more and more Brits were buying places in Spain and being able to fly down affordably for a long weekend would encourage more to buy places. Friends and relations would visit, and so on. There was a multiplier effect at work here.
With just a few weeks to the summer season, against a background of spiralling losses, and knowing that the airline’s future was on the line, Go took a chance on Alicante, Ibiza and Palma and increased the number of flights to Malaga. This involved a radical rewriting of the summer plans. There was a big chance of disruption as customers had already bought seats on flights that would have to be cancelled to make way for the new flights. Cabin and flight crew rosters would have to be changed, turning their lives upside down. Some people in the company were asking whether senior management knew what they doing. The turn-about would have been impossible to achieve at ay other company, says Cassani, but everyone knew they were fighting for survival.
Known internally as “Operation Summer Sun”, the routes were an instant success and bookings poured in. As Cassani says, it pulled Go back from the brink of financial disaster. They had found a new market for low-cost travel that had not been tapped. “It was a heady feeling to see the discounting model beginning to work. If you lower the prices, people will fly.” She believed they had found the key to a vastly profitable market; the prices they offered were low relative to the market but in Go terms were profit-making, especially with full planes.
Having capitalised on summer sun, Go now went for the winter skiing season with flights to Lyons and Zurich. It also started flights to Prague (“a perfect low-cost airline destination”) which quickly became one of its most profitable routes. Combined with eliminating the expensive overnight stops in Copenhagen and Milan, the year-end loss for March 2000 was held at £21.4 million (instead of the originally projected £12.5 million). This was hardly good news but Cassani says she couldn’t imagine the size of the losses if they had done nothing.
They were now faced with the challenges of running a much larger company. She was honest with Go’s people about the losses but reminded the Go team about the plan for the first year: start the airline; become well-known and well thought-of; grow very quickly; take an ever-increasing number of bookings; keep the cost low; have happy customers; and be punctual to please customers and prove they could use the planes productively. This was, as she admits, an “incredible wish list” but she felt they had achieved a lot against the benchmarks.
Competitors were making fun of their losses. easyJet, for example, ran a competition urging visitors to its website to “Guess Go’s Losses”. The effect, says Cassani, was to bond people at Go together.
While running a larger operation, Cassani was keen to keep the small-company feel. This was reflected in positive feedback from customers such as when, during a baggage handlers’ strike in Italy, the flight crew unloaded passengers’ luggage themselves (while other airlines’ passengers waited hours for theirs). Go’s “warrior spirit” (another term apparently borrowed from Southwest) also showed itself when, in the wake of the Korean Air crash at Stansted at Christmas 1999, the airline’s employees rallied to ensure that no Go customers were stranded during the holiday period; a “test that showed Go’s true colours”, says Cassani. On another occasion, one of Go’s captains personally unblocked a toilet to avoid a long delay. Cassani herself once helped clean planes between flights.
Cassani says that some of Go’s management approach was copied from what she saw and read and some of it was made up as they went along. She learned a lot, she says, about simplicity and following your natural instincts from the book Made in America by Sam Walton, the founder of Wal-Mart. She also gave copies of the book Nuts! about Southwest Arlines to help them understand what she wanted to do.
Go was certainly receiving favourable comment from business commentators. In December 1999, for example, Chief Executive magazine said: “What makes Go different [from easyJet] is that it’s doing things in style. As a child of BA, it’s a small company, acting with big company confidence – tough on costs and standards but not afraid to spend money on a classy image.” But, having grown from nothing in an incredibly short space of time, Go’s story was about to take an unexpected turn.
In January 2000, Go broke through the £1 million revenue a day barrier for the first time, helped by a promotion of discounted flights in The Times and Sunday Times. It was a major milestone but BA itself was now in financial trouble, having recently announced a 50% drop in profits.
In March 2000, Ayling broke the news to Cassani that he had been removed by the BA board; Go was to lose its chief supporter. BA’s new CEO did not believe a traditional airline should own a low-cost airline and decided to sell Go. Cassani says she “shook with anger and disbelief” that BA was willing to sell the only part of the airline going up in value and at the worst possible time in its history, when it announced its second £20 million loss. Go had grown from nothing to 14 aircraft in only 23 months and had 600 people working as a team. Turnover was £100 million a year, it was improving the hit rate on its chosen routes, and its planes were 70% full compared with 60% a few months before. The Internet was delivering 40% of bookings and the figures were rising substantially.
Everybody in the company knew what they were aiming for – break-even by March 2001. “I didn’t need to exhort people every day to look for lower costs, it was as natural as breathing for us.” This was exactly the kind of culture that BA needed and it was about to abandon it.
When Cassani heard that BA was planning to sell Go to easyJet, she says a cold shiver ran down her spine. It was one thing to want to hive off Go from BA, but to combine Go and easyJet to create a much stronger competitor seemed “madness”. It was, she says, a slap in the face to all those who had worked so hard to create the airline.
What Cassani calls the “game of ownership” was to last two years. One thing was clear to her, she says. They had to continue to manage the business with the utmost integrity. But, if she did not keep freedom to run Go the way she wanted, with a significant stake in the business, she would have to leave.
Cassani accused BA of being in breach of contract over the proposed sale of Go to easyJet and refused to meet easyJet’s management team. She was “bolshy”, she says, because she was afraid that BA would sell the company and she and the Go team would be left high and dry. “It was difficult being the favoured child of one chief executive and a pariah to the next.” As it happened, the BA board turned down the easyJet offer for Go in August 2000 because it was in untraded easyJet shares. BA wanted cash and until it floated on the Stock Exchange, easyJet could not easily raise the necessary cash.
In November 2000, BA officially announced that it was offering Go for sale by auction. Cassani says she was clear that, if she didn’t like the buyer, she would not be part of the deal. Freedom to run the airline was critical, especially where safety was concerned; she was concerned that venture capitalists might push them too far on costs in the wrong places. Managing colleagues and the customer experience in the Go way was also non-negotiable. In the end, she and her colleagues staged a successful management buy-out from BA for £100 million supported by the venture capitalist firm 3i which took a majority share in the company.
While the complex MBO negotiations proceeded during 2001, Go’s financial results improved sharply (partly helped, Cassani acknowledges, by the Hatfield rail disaster in October 2000 and the ensuing chaos on the railways which made people more comfortable at travelling in the UK by plane). Further growth was boosted by the acquisition of a successful new hub at Bristol airport. In 2001, Go announced its first profit (£4 million). It was the beginning of a new era at the company: “We were independent, profitable, and adding new bases.” The company established a profit-sharing scheme where 10% of Go’s net annual profits would be distributed equally.
For Cassani, the summer of 2001 was Go’s “Golden Age”. In July and August, it made over £10 million alone. The Stansted operation was “humming” and Bristol’s first summer surpassed expectations.
But then came September 11 and its impact on the airline industry. Many traditional airlines, already suffering financially with inflated costs and inefficient operations, were hit by the loss of revenue from a halt in US domestic and transatlantic traffic. Go, however, was well positioned to survive and prosper. Despite a temporary collapse in bookings, a quickly-devised plan to lower costs, the falling costs of leasing aircraft and a start-up on the Stansted-Newcastle route helped to restore the situation. It was reassuring for everyone at Go to see the company growing when the rest of the airline world was “falling apart”.
There was a lot of press speculation that heightened security would destroy the low-cost sector and threaten punctuality. There were some delays in the early days but, as Cassani describes, Go soon integrated the changes into its way of working: “We just had to dig deeper, find other areas to compensate and use that Go Warrior Spirit.”
All the low-cost players were now back in the market, cutting prices and trying to get the travelling public back on their planes. The prices offered by both Ryanair and Go were “unbelievable”. Sam Walton was right all along, she says. You had to believe that continually lowering prices (in Go’s case to fill up planes) was the best way to run the business. It was counter-intuitive for those who had worked in traditional businesses who thought that cutting costs was a negative affair.
As Cassani explains it: “We need to behave more like Asda if we are to win our share…Drive up volume and the profit will look after itself.” To prove her point, she points to Go’s load factor in November 2001: 83% compared to 77% the year before. “We were now real discounters, proud of it and with full planes to prove it.”
Go was now winning prestigious travel awards and Cassani herself won the Daily Telegraph award of Entrepreneur of the Year. With survival seemingly assured, business picking up, a dramatic 40% growth planned for 2002, and “accolades rolling in”, they felt poised to make big strides towards their goal of floating the company and becoming Europe’s best low-cost airline. Cassani says she was highly energised by Go’s positive culture, the Warrior Spirit that had seen them through the early losses and the September 11 crisis. There was a mood of real optimism at the company. And then it all changed again.
Cassani had agreed with 3i on taking Go to the stockmarket in three years. It came as a shock, therefore, when she found out that easyJet and Ryanair had approached 3i with a view to buying Go. She expected it to be just an annoying distraction from running the business. 3i had built their reputation through patiently backing management, not for flipping their companies to competitors to make a quick profit. But as she says, “the DNA of any venture capitalist is programmed never to close a door on a potential deal”. While the Ryanair enquiry proved to be a red herring, easyJet persisted with an offer of £390 million.
Cassani thought the price was a “steal”, compared with what Go might be worth in a flotation in three years’ time (she estimated £1 billion) but 3i was interested. To them, easyJet’s offer compared well with the total £137 million investment they had made in Go, just six months before. 3i itself was under pressure; it had recently taken heavy losses on some investments and its share price was suffering. They needed an investment success to offset their other problems and the easyJet offer promised a huge return on the investment in Go.
Go’s staff, says Cassani, greeted the news with “tears, shock and disbelief”.
She stonewalled on the deal to negotiate a better price for Go’s employee shareholders. In the end, the sale was forced upon her and she conceded defeat. The final price that easyJet paid for Go, announced in August 2002, was £374 million, (“with Go employees enjoying a price of £384 million”). It meant that they had increased the value of Go by £22 million a month since the MBO: as she says, “a phenomenal success in anyone’s books”.
The takeover, announced in May 2002, allowed easyJet to leapfrog Ryanair to become Europe’s biggest no-frills airline. Cassani rejected Stelios’ “vague” offer of a senior commercial role with easyJet. She says her disagreement with the deal was more than emotional reaction to her “baby” being painted orange. She had learned the hard way, she maintains, that airline mergers don’t work and that low-cost airlines are at even greater risk in trying to make a merger work. They need an enormous amount of flexibility and goodwill from employees to work through the inevitable operational problems. Employees have to feel they want to help out. You can’t mandate that goodwill and it’s near impossible to keep it in a merger. Growth through internal expansion is a much better route; an airline built to last needs to grow from within.
The story presented in the book is, of course, one person’s perspective. Others involved in the events will have their own views, although there is little doubting the vitality of the organisation that Cassani and her team created or the loyalty it engendered in its staff. And the financial results speak for themselves.
Despite her misgivings on airline mergers, easyJet appears to have gone from strength to strength and, notwithstanding continued intense competition in the low-cost sector, is forecasting a 40-50% increase in pre-tax profit for 2007.
In an interview, Cassani said that the thing she wanted to come across in the book was the culture of Go. To foster a can-do attitude like Go’s, you have to make every stage of people’s experience in the company consistent with the way you want people to behave. When you recruit people for an area where you want people to work together, you make sure that collaboration is an important part of their personality. It also concerns who you choose to make heroes within the company; this says a lot about what’s important in the organisation. As a leader, you need to demonstrate the behaviour you want people to emulate. If you talk about fairness a lot, try to show it in everything you do, and if there is a consistency, it will seep into the mindset.
At a talk she gave in February 2007, Cassani said leadership means giving a strong sense of direction, but letting other people come up with ideas to deliver plans, and listening to their views. A good leader needs to be strong in two areas: (1.) Innovating: trying new ways of doing things, and making sure the business is constantly coming up with new ideas, products or processes; (2.) Leadership of teams and people: ensuring there is a clear vision of where the business is going and what is expected of employees.
Inspirational leaders need three qualities:
Everybody who flies on or works for a low-cost airline should read the book.