Go: An Airline Adventure [Englisch] [Gebundene Ausgabe]

This is the story of Go - a low cost airline started in May 1998 as a 100% owned subsidiary of British Airlines. It nicely captures the challenges of a start-up in a corporate environment, the dumb decisions of corporates and investors.

Barbara Cassani was an American woman with a degree in international relations and a few years of consulting experience when she joined British Airways at the age of 27, ostensibly because she loved travelling.

BA had recently been privatised and Barbara became an "internal consultant" for ten years, changing jobs every 18 months or so - each one a newly created role.

After badgering top management for a more challenging role she was invited by the CEO to work on a business plan for a low cost carrier - so that BA could take on the emerging challengers Ryanair and easyJet both several years into low cost growth.

This book tells the story of how the business plan was developed with venture capital concepts in mind. The business had to stand alone and be profitable after 3 years. The founders were incentivised with shareholdings and the business was structured to be "trade sale ready" or "demerger ready".
To avoid being sabotaged internally Barbara and the small team that she gathered together hired offices outside of BA and were very secretive. The plan was develop and successfully pitched to the BA Board who agreed to an investment of GBP 25 Million. They later also guaranteed some plane finance.
(Put this investment into the context of USD $ 100 Million for one 747).

Official Board approval was given in November 2007 and from a standing start the first flight was in May 1998.

Barbara tells the start-up story, forming the team, dealing with all of the compliance issues, project management challenges, negotiations to secure planes, airports and facilities. The important little details - like staff uniforms, coffee and route selection !

The initial marketing planning and branding challenges met - the team then faced a legal challenge from easyJet, alleging anti-competitive behaviour by BA.

At launch they had 90 employees and the plan called for hiring 30 additional employees each month until Christmas 1998 when they hit 300 people.

Building the right culture, picking the right people.

For the next few years the challenges included sourcing planes, financing planes, selecting routes, driving down costs, sales tactics, breakdowns.

About 22 months after launch the ground shifted. BA's CEO Bob Ayling - who had been the sponsor of Go was sacked. A few months later Australian Rod Eddington became his replacement.
He arrived with a firm view that "traditional" airlines should not own low cost airlines.
Without even doing a walk-around or having a good look at the emerging operational data Eddington commenced a sales process.

Barbara went from being the favoured child of one CEO and a pariah to the next.

So a two year ownership game commenced - this is a big distraction when still in the critical growth stages of a company.

BA effectively ran an auction with 3i - a British private capital firm the winner at a price of GBP 100 Million.

This deal was concluded in June 2001 and included a big stake for employee ownership.

The plan was for an IPO after 3 years.

After the initial drama Sep 11, 2001 opened up an opportunity to acquire new planes cheaply - and the business was performing well.

Forward valuation targets at IPO were in the order of GBP 1 Billion !

Then lightning struck twice. Despite the great prospects 3i was in trouble and needed to pull a rabbit out of a hat. Go was 3i's biggest investment yet the CEO never visited the company nor experienced the business as a customer !

3i sold the company to easyJet for GBP 374 Million after only 12 months. Barbara resigned.

This is a very good read with great insight into business building, shareholder value creation, corporate ownership, private equity deal-making and the low cost airline sector.

As a postscript - in December 2009 The Economist analysed the current challenges facing BA.
One strategic option canvassed - start a low cost airline. Duh !