McCall's easyJet success could catch the eye of a retailer

On the July day in 2010 that Carolyn McCall arrived at easyJet’s head office – a hangar on the edge of Luton airport – the company’s share price closed at 459.82p. It had made a pre-tax profit of £54.7m in the last full financial year and didn’t pay a dividend. Nor the year after.

On Tuesday, McCall will preside over full-year results expected to deliver pre-tax profits of £575m-£580m, some 10 times greater. The airline’s share price closed at £15.48 on Friday night, valuing easyJet at £6.15bn, some three times greater than when she joined. It is also on course to pay a dividend at a ratio of 40pc after tax, up from 33pc in the prior year.

As such, whatever the guidance McCall gives on Tuesday morning for the current year will not matter. For, having come from Guardian Media Group, where she rose from

a research planner in its commercial department to chief executive, with little knowledge of the airline industry, she has delivered consistent growth, which will mean significant financial returns to investors for some years to come.

The easyJet McCall inherited was one which had, frankly, seen better days. Under-invested, in part the result of a continued spat betwen its founder and her predecessor over the level of returns, the airline was struggling to get its planes in the right places at the right times, a basic in aviation.

Customer service was also not what it might have been and, with its fleet beginning to tire, customers were questioning whether easyJet really was a low-cost alternative to national carriers.

McCall went back to basics. She realised that customers needed to be happy and her first task was making sure flights flew on time.

She did this through fundamental logistics management, ensuring planes were in the right places overnight. She also worked on staff, training cabin crew in customer service and what to do when things go wrong.

McCall appreciated what her rival at Ryanair, Michael O’Leary, has recently caught on to, that being nice to customers pays off. To ensure the “sleazyjet” nickname was consigned to the past, she aimed to make the carrier the first choice for both families and solo fliers.

As well as focusing on the basics, she moved ahead quickly in a number of more strategic areas.

The first was to reduce the noise around the company by making sure Sir Stelios Haji-Iaonnou was more content with his position than had previously been the case. Although this was not a quick fix, it has largely worked.

By delivering significant dividends, and increasing the value of his and his family’s 34.5pc stake, Sir Stelios has grown quieter when it comes to all things easyJet. He has even moved to trim the family stake a couple of times, a sign that he appreciates the higher valuation McCall has delivered.

Her business strategy has focused on route expansion to cities that customers want to fly to, within Europe, or just a little bit further afield where demand exists and regulations allow – as in Moscow, for example.

The pitch has been very much focused on creating easyJet not as a low-cost carrier, some form of second choice if British Airways is too expensive, but as first choice in many instances. Sticking to and improving the model of flying to a city’s main airports pays off and keeps customers onside. McCall has even made reference to perhaps one day flying out of Heathrow were the slots to be available, a signal of her intent.

The third prong of her strategy has related to business customers, who perhaps previously eschewed the airline. She has made considerable inroads in the commercial market thanks to a membership club, allocated seating and the eponymous speedy boarding. In addition, all of the other developments she has overseen – such as ensuring flights are on time and friendlier customer service – don’t go unnoticed by business travellers either.

In essence, in less than five years, she has fine-tuned an airline that was beginning to lose its strategic direction and delivered financial results that many of her FTSE 100 rivals would envy. And, if analysts are to be believed, there is more to come. Goldman Sachs analysts said last week that easyJet’s valuation is “attractive” and “compelling”, operating on a price-earnings multiple of 11.2 times for 2015.

As such there is still much for McCall to oversee but, as she nears her fifth anniversary in the job next summer, some in the City are starting to wonder whether she will stay the course, or divert to another major challenge.

Having never previously run a public company, McCall has proven she is more than up to the task.

Financially literate, adept and with a strong marketing brain, she is well liked by her peers and her employees across the organisation. When the subject of her tenure is raised in private, she simply says that she is busy enjoying the role she has,and emphasises how much she enjoys the easyJet culture.

But, given her skills in turning around a consumer-facing behemoth with its own problems, one wonders whether her abilities might be in demand from one of the UK’s troubled retailers or similar before too long?

FCA may have to fight for payments

The Financial Conduct Authority (FCA) had a hectic week last week, with the focus on its co-ordinated £1.1bn fine against five banks for foreign exchange fixing.

But one matter which perhaps got overlooked somewhat was the release of a document on Thursday outlining how it intends to regulate the £75 trillion payments system.

Buried within the document is a move to strip the Payments Council (PC) of management of the system. Senior bankers – the PC has all the big banks as its members – are, I believe, somewhat surprised at the way the FCA is going about this.

The PC has not been as adept in the past as it might have been – the FCA blames it for delivering the Paym mobile payments network seven years late – but few in the banking world want to see the FCA take over.

Although some countries are ahead in certain areas when it comes to specific payments – Kenya is ahead on mobile phones, the US on cheque imaging – the UK is felt to be very much ahead of the curve when it comes to the whole range of payment products.

Quite why the FCA is staging this land grab remains to be seen but, based on the discontent to date, the regulator may yet have a fight on its hands.