How McCall has proven her critics wrong

WE need more investors like Sir Stelios Haji-Ioannou, founder and majority shareholder of easyJet. If institutions were as combative as the pugnacious Cypriot, there would be no need for the current debate over executive pay. In recent years, Sir Stelios has taken easyJet’s directors and executives to task over everything from the size of the airline’s cash-pile to the number of planes in its fleet. Most recently, he has turned his ire on remuneration, arguing that a “phoney and self serving” way of calculating return on capital employed has allowed them to feather their nests. But while it is comforting to know that someone who understands the business so well is watching things closely, it doesn’t make him automatically right.

Like others, we had reservations about chief executive Carolyn McCall when she took the flight controls in July 2010. Guardian Media Group, the publisher of The Guardian, was hardly in fine fettle upon her departure (although it would have probably taken a miracle worker to have turned that business around). Despite our early reservations, her tenure has been remarkably successful. EasyJet is taking market share and growing its margins as rivals retrench in an increasingly tough market. Its decision to focus on business passengers with flexible ticketing and guaranteed seating is also paying off.

Yesterday’s results, which prompted analysts to upgrade their forecasts across the board, prove the point. Revenues were up 17 per cent, its pre-tax loss (prompted by a surge in fuel costs) was smaller than expected and its load factor – a key measure of how full its planes were – stood at 87.6 per cent, one of the highest in the industry. Although it will book a loss in the first half, sales during the all-important holiday season should see it post a meaty profit for the full-year. Investec has pencilled in pre-tax profits of £234m.

It would be wrong to dismiss Sir Stelios’ constant interventions as “noises off”, not least because they keep management on their toes. But from where we’re standing, easyJet is doing just fine.