In his orange shirt, Andy Harrison, the chief executive of easyJet, could be
easily mistaken for a cabin steward in the bustling aircraft hangar that
serves as easyJet's Luton headquarters.
He eschews the perks of a chief executive. He has no office, preferring an
anonymous desk at the end of a row that would not look out of place in a
call-centre, and conducts our meeting in a functional meeting roomthat is
without windows, coffee or executive trappings. It is the office equivalent
of a no-frills flight.
Mr Harrison, who joined easyJet in Deecmber 2005, from RAC, the roadside
rescue company, is quietly spoken and shuns the limelight - the antithesis
of his arch business rival, Michael O'Leary, chief executive of Ryanair.
While Mr O'Leary is predicting a headline-grabbing “perfect storm” in the
aviation sector in the next year, which could cause a fall in profits,
easyJet is saying that its profits will rise by 20 per cent this year. The
prediction is all the more surprising because the airline's chief executive
is known for his understatement. He is precise in his choice of words and
marshals evidence, rather than emotion, to support his arguments.
Nevertheless, Mr Harrison is no less exercised than Mr O'Leary by the issues
that face the aviation sector. In the week in which the Civil Aviation
Authority (CAA) will reveal the caps that it intends to set on the charges
that BAA, the airport operator, can make at Heathrow and Gatwick and in
which the Chancellor will give his first Budget, Mr Harrison's focus is on
BAA's failings, the system of airport regulation in Britain and the
shortsightedness of so-called environmental taxes.
Two years ago, Gordon Brown doubled air passenger duty (APD), citing the
damage caused by the aviation sector to the environment. It was knee-jerk
legislation that did not discriminate between the younger, less-polluting
aircraft of easyJet and Ryanair and other airlines' older fleets.
Mr Harrison has no time for people who blame the low-cost airlines for the
perceived “explosive” growth of flying and its damage to the environment.
For “low-cost”, he substitutes highly efficient and claims that his company
and Ryanair may have helped to reduce the total aviation emissions in Europe
in the past ten years as they have filled their new, efficient aircraft at
the expense of older, polluting airlines, some of which have gone out of
business. His claim, he acknowledges, can only be that because it is
impossible to know what level of emissions every aircraft flying in Europe
is making.
“It makes me very angry when the Government uses global warming as an excuse
to raise money. Let's not just lob tax on aviation because the Government is
short of money, which is exactly what they did with APD,” he says, pointing
out that billionaires in their private jets are exempt from the duty, as are
cargo aircraft.
The Government, he concedes, has realised its blunder and is working on a new,
emissions-based tax to replace APD, yet airlines with older fleets are
lobbying hard to block this, too. EasyJet's solution to the problem is
dramatic: ground any aircraft manufactured before 1990 by 2012.
“The aircraft that we have now are 20 per cent more efficient that the planes
they have replaced,” he says. “If you force airlines to use modern aircraft,
it is possible to have sustainable growth in aviation.
“In Europe we already have minimum standards for cars and soon for light
bulbs, why not aircraft? A third of the aircraft in Europe are
old-generation aircraft and the problem with old aircraft is that as long as
you maintain them they will fly for 35 years. Efficient aviation can deliver
growth with relatively small environmental impact.”
He says that in Europe aviation is a mature market that has grown at a steady
4 per cent to 5 per cent a year, for the past 20 years. He has one last plea
to Alistair Darling this week: “Please don't do things that have short-term
political capital, things that are ill-informed - there are sensible ways
forward.”
His thoughts on airport regulation in the UK are no less succinct. Heathrow,
he says, is an embarrassment and nobody - not the CAA, which regulates
airports, nor the Government - is showing leadership.
The problems inherent in airport regulation are have been exposed since BAA
was bought in a highly geared and controversial £10.6 billion deal by a
consortium of investors, led by Ferrovial, the Spanish construction company,
in 2006.
Airlines are used to chucking bricks at BAA, whoever owns it, but until now
easyJet's chief executive has refrained from public criticism of the
company. However, easyJet is embroiled in its first public row with BAA at
Gatwick, where the airports operator will not relax the one-bag rule without
a 15 per cent increase in charges.
“They think this is a good way of getting more money through the regulatory
framework,” Mr Harrison says. “Gatwick is the only airport I know of that
has proposed such huge increases. "What the purchase of BAA has done is
to highlight how poor the regulation is. That sort of buyer, with loads of
debt, is exactly the sort who will exploit every weakness in the regulation.
“If you were to sit British Airways, Virgin Atlantic, ourselves and Ryanair in
a room, the one thing we would all agree on is that the regulation is
broken. "But where is the leadership coming from to fix it? The CAA is
in the middle, but they are in their trenches. The level of confidence in
the CAA is not high and they are not showing leadership - and neither is the
Government.
“There has been a huge leakage of value from the UK airport system, which has
gone to the BAA shareholders.”
Last week, Colin Matthews, the former chief executive of Severn Trent, was
appointed chief executive of the airports operator, from April. Despite the
new man's knowledge of the aviation sector and of regulation, Mr Harrison
argues: “A change in leadership grabs the headlines, but the same problems
are there.”
This week, easyJet is braced for further increases in the charges that it pays
at Gatwick, when the CAA rules on the price caps at the two main London
airports. “We fear there will be another substantial increase at Gatwick.
The passengers are being asked to pay for Ferrovial's financial problems.”
Ferrovial had intended to refinance BAA last year, but it has had to postpone
any refinancing because of the global credit crunch. Its finances are now
very stretched, not helped by a heavy capital investment programme and huge
interest charges. BAA is considering selling off an airport - perhaps
Gatwick or Southampton - to ease its liquidity position, but, with flawed
regulation, a sale is just “a recipe for another problem”, Mr Harrison says.
“BAA has made a whole series of submissions saying it needs to make more
money. It is now talking up the risk of running airports, but it is
confusing the risk of running an airport, which is a low-risk business -
airport are utilities - with its financial structure, which is high risk.” A
break-up of the group, the preferred option of the other airlines, is no
solution, either. “I'm not sure it is a good idea to break it up without
addressing the regulatory framework, because it will just be some
mini-monopoly, owned by some other private equity outfit, which paid an even
higher price than Ferrovial paid, probably with as much debt and it would be
the same problem.”
There are other challenges to navigate this summer, with record oil prices in
a weakening consumer economy. Indeed, easyJet has never faced a consumer
recession before and it is not clear whether it will suffer from people
cutting out short breaks and extra holidays, or whether it will benefit from
cost-conscious travellers trading down.
At present, Mr Harrison is bullish. Passenger numbers were up in February and
load-factor, a measure of how full the carrier's aircraft are, continues in
the mid-80s.
EasyJet, which makes most of its profits in the summer, has hedged half of its
aviation fuel needs for that time. This gives it a headstart on Ryanair and
explains the starkly different guidance that each airline has given.
For Mr Harrison, a cool head and rational view of the evidence suggests that
whatever turbulence he encounters this year, easyJet will prosper in the
long-term. “People are very nervy and very short-term-focused. If you look
at the fundamentals, we will win share of a growing, relatively stable
market. It's tough, but we expect to continue to deliver.”
C.V.
Born May 2, 1957
Education Hitchin Grammar School; Pembroke College, Cambridge
Career became chief executive of easyJet in December 2005
1996 became chief executive of Lex Service, overseeing the integration
of Lex’s vehicle distribution business and RAC
1993 ran international fabrics and home furnishings business of the
demerged Courtaulds Textiles
1986 joined Courtaulds as a business development manager, later became
finance director of Courtaulds Textiles
Other interests non-executive director of Emap; holds a pilot’s
licence; skiing
Q & A:
If you could change one thing in the financial and commercial environment,
what would it be?
Reduce the price of oil to a sustainable medium-term level and remove the
speculative investors in oil.
Who is or was your mentor?
There have been several, all people who have helped me enormously in my
career. Sir Christopher Hogg, Martin Taylor , Sir Trevor Chinn ; Richard
Lapthorne.
What is the most important event of your working life?
There have been a series of milestones, no single one overwhelming
Does money motivate you?
Money is more of a scorecard and you can't be successful unless you make
money, but it is not the primary motivator.
Which business person do you most admire?
There isn't a single person because I try to look at successful companies and
take whatever learning I can get from them.
How do you relax?
Flying small private planes. I got my pilot's licence four years ago, before I
joined easyJet.
