Barbara Cassani: Go (part 2)

Go founder and London's Olympic bid chairman Barbara Cassani tells you how to discount successfully, what her plans beyond the bid are, and why you've got to be ready to walk away.


A good deal of water has passed under the bridge since the airline Barbara Cassani built was sold to easyJet for £374m, against her wishes. Having left her Go experience behind, she’s now chairing the London Olympic bid and has a book out to promote.

In the first part of our two-part exclusive interview with Cassani, she spoke candidly about the deal that saw her leave Go in the hands of entrepreneur Stelios Haji-Ioannou. Here, she gives her views on creating a successful discounting business model, her future plans are, and why you’ve got to be ready to walk away.

What’s your view of the pile it high, sell it cheap model?

I really love the concept of discounting. It’s incredibly powerful at changing the way an industry works and consumers behave. Turning convention on its head. I think discounting was a very powerful and positive business model for my business. In big companies cost cutting is seen as negative. ‘grrrrrr’ you know, ‘take 10% out of there’ every time budget comes around ‘grrrrr, take 10% out’ and it just feels like taking. But if what you plan to do is to find a slightly better way to run the mouse trap and you can lower your unit costs so that you can lower your prices, and by lowering your prices you generate a lot more business. It’s just so virtuous. If you can explain that to your employees it never feels like you’re taking anything away. It feels like you’re building when you’re lowering costs. And building is good, building means more jobs, building means higher profit share. And it’s making sure that everything you do in the company supports that. So not giving people big pay rises and instead sharing profit, because if it all comes in they were part of it, but if it ain’t coming in you’re in a position where you’re paying higher wages. It’s just being consistent. Sam Walton’s story ‘Made in America’, the book, is great. It’s a small paperback and what comes through is that it was very positive setting up. It wasn’t about screwing suppliers, which is how a lot of the discounting world works.

How would you describe yourself in a business context?

I’m really not an entrepreneur. I was trying to figure out what I was. And I think I’d describe myself as a maverick and I think that’s why I’m doing the Olympic job. I’m just not standard issue. When I was at BA I wasn’t standard issue either. What did I have, seven jobs at BA, and six of them didn’t exist before I was in it. When I worked that out I wondered if I should tell people that. Is it good or bad? I don’t know. It’s sort of odd. But it is what it is.

Would you set up a business again and grow it organically? Is that on the horizon?

I’m waiting for inspiration. And I haven’t been inspired and I don’t feel the need to re-do starting up an airline. That’s not to say I won’t work in business again. That’s why I was available when the Olympic job came along.

So in 2005 when then decision is made, what are you going to do?

No idea. I’m not one of these people who has any idea what I’m going to do after my current adventure. But whatever it is it’ll be so big.

Were you tempted to go for Concorde?

No, no. I trust BA. I feel that they have amazing engineers. They know those planes inside out. And if they feel it was time to retire it was time. They have the safest airline and the best safety culture. You wouldn’t want the cost of taking care of Concorde make airlines feel they have to cut corners. And I know BA would never do that. I really trust them. When I was a general manager in America I used to hear Bob Ayling and Sir Colin Marshall answering questions all the time about Concorde, in 1995-6, and they were saying it would be in service until about 2004. I agree that they haven’t sold to Branson or anyone else because if it’s time for them to be retired, it’s the time. It’s not about who should be flying them. It’s an extraordinary plane. There are so few of them. And every part is custom-made. So every time a part needs to be replaced it has to be manufactured. A Concorde could be out of commission for months while they make it. It’s prohibitively expensive to do well. And if you’re not going to do it well you shouldn’t be in the air. It’s a no-compromise issue. But it’s probably not the answer you were looking for.

How difficult was the period in which you were still waiting to know from BA what share of Go you would get?

It was very tough. And I’d also been working for two years and still didn’t have my deal. So all I was doing was busting a gut, not knowing if I actually even owned any of it, because I’d been silly enough not to get the deal done before starting work. And that’s a characteristic of me, I trust people. ‘You say you’re going to do a deal, what’s more important, sitting around for three months and negotiating or getting on with the business? Let’s get on with the business.’ I have to say, I’ve become a little harder headed in the way I work. I’m not quite as trusting with people as I used to be. But I don’t think it was a bad thing, just risky.

How much room is there for compromise generally in the way you do business?

Of course there’s room, but you have to have a point at which you walk away, whether it’s hiring employees, buying aircraft or performing a management buy-out. You have to say that ‘it would be great if it came out here, but at this point it’s not worth doing’. And there are a lot of companies who don’t have that walk away line and that’s when they end up paying too much and get themselves in trouble. If you only have one option you get yourself into trouble. It’s hard keeping negotiations going at the same time. When we were going to Bristol, we were negotiating with another airport and you couldn’t let either think they were ahead because if they did you wouldn’t get the best deal. And if you don’t get the best deal you can’t have the lowest costs, and if you don’t have the lowest costs you don’t have the best prices. Everything comes back in the discounting model that makes you really virtuous, which makes you a really good negotiator because there’s a good reason. And I liked the purpose because it wasn’t nasty, it was what it was. We had to do it for our customers. And we did very well on that basis.

Where do supposed discounting models go wrong?

I think it’s hard for business people not to want to fiddle with their business model, even if it’s working. You need to resist boredom in a low cost model and do it again, and again, and again, and again, and get your kicks out of something else. I almost fell into the trap. In that hazy 1999 period, one of my most talented directors Dominic Paul left his position and the Go brand was becoming so powerful and the whole internet boom was going on and I said, ‘why don’t we set up another business – a portal’. So Go would become a portal for everything, not just seats. And we looked into how we could raise more money, which we would eventually need. It probably wouldn’t come from BA or the market, so we talked about doing a ‘partial’ and how to get a better multiple and supercharged internet. I was in that whole dotcom-ish mode. And I said to Dominic that if this business plan makes sense you can go off and run it, and he went off to work with one of the other brightest people we had. And they came back a while later and were so dejected and I said ‘what’s wrong?’ and they said ‘we can’t even figure out how it could break even in less than five years and that’s assuming we launch in six other countries simultaneously’. Simultaneously? And I said ‘oh, I guess we shouldn’t do it’. It’s very disappointing, but of course they knew there was no financial logic behind it at all.

If only some of the other dotcoms had come to the same conclusion.

Isn’t it interesting. Let’s say that it had come to fruition in January 2000. The whole thing fell off the cliff in March. It was hard because at the time you thought ‘maybe we’re just missing something. There’s a trick here’. There is no trick. It’s just impossible, given the marketing costs of six countries, to get the volume, to get the business. The only ones that have actually been able to do it are people like Lastminute because they had so much capital in the bank. They sat on a cash pile that they just whittled down. And even now they make teeny tiny amounts of money. To be fair to them they’re washing their face, which is good, but it’s not exciting. It’s cute and interesting. It was a fascinating period. I was so lucky to have been a business person in that era. And in 50 years time we’ll talk about it as though it was the gold rush. And people say, ‘but didn’t you realise?’ and you say ‘no, we thought that gravity didn’t apply anymore’. It was an amazing period.

You’ve been both sides of the fence with BA and Go in terms of principles and ethos. How do you handle that now with the bid? You get the feeling these bids need to be quite extravagant, no expense spared.

I know, sometimes I’m a little cheap. I have to be careful. I’m very cheap. Fortunately we’ve got a chief executive who knows where the line is between extravagance and being too cheap. It’s a different world and set by different standards. But we’re using public money and I feel that very strongly that it’s important that we can pass any sniff test that comes down the road.

Does the British sense of failure before you’ve even begun frustrate you? It happened with Go and has been the same with the coverage of the Olympic bid so far.

I don’t think there are actually too many people that do that. I actually believe that people just want to win. And given that we’re up against eight brutally famous and wonderful cities all over the world if we don’t really want to win, we won’t win. It’s about taking the chance, putting your heart on the line and saying you really want to go for it. If you don’t go for it, you certainly will lose.

So will we win?

Yeah.

 

How did you feel when Go was sold and your senior management decided to keep the 2% shareholding you wanted to give to rank and file staff?

One of the points of this book was the notion that nobody is universally wonderful. You do the best you can. You try and work together as a team and it was sad to see it come apart and it did. Some of the directors thought it was very exciting the thought of being merged with easyJet. They don’t anymore, because they’ve left. It wasn’t up to me to convince them that they should fight it. It’s not the way I work. All through the management buy-out I went through a whole process to make sure that everyone around the table chose to sign up. I could very easily have manipulated it, but I didn’t. And if I did that it would be wrong as they wouldn’t be joining the management buy-out for the right reasons. I let them explore and gave them people to talk to about it and they had anonymous discussions and all of that was fed back to me, so that they could do what they wanted. I felt the same about the easyJet thing and the same about the shares.

So what would you do differently with the benefit of hindsight?

Nothing.

No regrets?

No.

How has it changed you since then?

I’ve been spoiled rotten. I had the chance to work with people I personally chose in an industry I really enjoy – and I love travel – with a business model that I find inherently interesting and good, which is the discounting one. It’s a good thing creating a product that lowers prices so customers can buy more. There’s nothing untoward or under-handed or tricking them into paying a higher price. So when I was working on the book and was getting a lot of offers to run this company and run that company or be the chairman of blah blah blah blah, eugcch. No thanks. The last thing I wanted to do was get involved with a big company that needed to be blown up from inside out. I like building and being part of things that I deem to be good.

What persuaded you to take the Olympics job?

I did a bit of due diligence and looked into where it would be and started to understand the whole Olympic area and met with the government and the mayor. The mayor was very persuasive, calling me up and saying that I was the person he wanted. He was delightful and I think he wanted me because I’m a maverick. He doesn’t know me and he still doesn’t know me – he knows me a bit better. I’m known for getting things done and for speaking my mind and for doing what I say I’ll do. It would have been easier for all of us if I had an English accent and impeccable sporting credentials, but packages don’t necessarily come in those shapes. What I’ve made sure if that I’ve built a team, just like I did at Go, of people who are complementary to each other and to me.

You said you’re now more hard-headed. Is there anything else you’ve become since the Go experience?

I would never create a company that was majority owned by venture capitalists. I wouldn’t put my energy into that. Never again. I wouldn’t mind if they owned 10-15% of it, but they come on my terms, not their terms.

Something that came through in the book was that you were always willing to walk away.

During the management buy-out I had quite rigid requirements and I met them. I thought they were fair, and there’s this whole notion in the venture capital world, which they call re-trading. You think you’ve got your deal agreed between management and the venture capital crew. And what I didn’t like about it, and it’s not particularly 3i, but all venture capital companies, was that they enjoyed screwing management basically. You can tell there’s a locker room chat about who they ‘got’ and I really hated that so I was very prickly, because I didn’t want that to be me and I made it very clear with them, ‘what we agree is what we agree. If you try to re-trade on me I’ll walk. GO ahead and find a new CEO, but it’s not going to be me’. And I hung tough and they were surprised. Usually management are desperate to do the deal. But I’ve always believed in any of the negotiations I’ve conducted, whether it’s leasing aircraft or whatever, that if you’re not willing to walk you’re on a hiding to nothing.

To buy Barbara Cassani’s new book ‘GO: An Airline Adventure’ click here

The last thing I wanted to do was get involved with a big company that needed to be blown up from inside out.

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