Flight risk

[Re: The economics of the airline industry are sheer hell, yesterday]

I’m surprised David Crow has chosen to lump me in with Vijay Malya (the Indian entrepreneur behind Kingfisher Airlines) in his otherwise well observed critique of the modern airline industry. As the largest shareholder in easyJet I have, since 2008, been vocal in warning the airline industry of the risk of acquiring unnecessary and costly aircraft from its monopoly suppliers – Boeing and Airbus. In the previous decade, when the oil price was about half to one fifth of where it is today, it was possible to lower prices and attract new passengers. But with oil at $120 per barrel, average ticket prices have to cover these higher costs thereby reducing passenger volumes on nearly every route. This must impact the bottom line. As your correspondent correctly points out, recent history is littered with great airline failures. Many, if not all can be directly attributed to the buying of too many new aircraft only to find there are no profitable routes left to serve. That is why I have repeatedly asked easyJet’s chairman Mike Rake to publish the company’s profitability by aircraft. This he has consistently refused to do. Other airline shareholders would be well advised to do the same. They would then find they were better served – as managements would spend less with Boeing/Airbus and take more care to maximise shareholder value.

Sir Stelios Haji-Ioannou, chairman of easyGroup

[Re: After many years in a bull market, is it still a good time to stake your wealth on gold?, Tuesday]

I think these are two very different arguments, answering entirely different questions. Trevor Greetham says that, as an investment, gold is not particularly attractive at the moment. Tom Clougherty is identifying the long-term problems with fiat money. Both of these views are correct, it seems to me. I think a mainstream discussion about fiat money against commodity-backed money is long overdue. As Clougherty says, fiat money is the whole reason we had the credit bubble in the first place.

Nick Heath


Beenz there before

[Re: Is Facebook’s purchase of Instagr.am worth the money?, yesterday]

As a former dot com bubblist, I can assure you that, as far as social networks and games go, we are fully inflated and detached from economic reality. Other than ludicrous prices, there are two indicators to watch: one, companies with names designed around a web address. Mine was called Beenz. It would be comfortable alongside Zeebox, Flickr, and Instagr.am. Two, these so-called growth companies become benchmarks for actual businesses. This is the point where the shoeshine boy gives stock tips. Now I am running a real business, with revenues, customers and an actual listing, I am occasionally asked by fund managers why we aren’t growing at Facebook rates. My reply, that we are a real business whose customers are actually customers, never satisfies. This bubble will burst, like the last one. All it takes is one failed IPO, or a hot startup fails to raise its fifth round at a 500x valuation on the one from the month before. My money is on Twitter going first.

Charles Cohen, chief executive of Probability


No tax surrender

[Re: Maximising tax revenues is good for politicians – but not the rest of us, yesterday]

Jamie Whyte is absolutely right that the government shouldn’t be some kind of predatory leviathan, with no objective but maximising its own revenue. But it is bizarre that he thinks that is what the TaxPayers’ Alliance wants. The government should try to limit itself to the size that will maximise our overall welfare, without compromising the economic growth that is the foundation of our future welfare, or our economic liberty to spend our own money on our own priorities. There have been academic studies looking at both the welfare-maximising and the growth-maximising level of spending. Obviously there are limits to that kind of study, and the results should be taken with a pinch of salt. But they suggest spending should be much lower than the 40 per cent or so of national income the state is expected to be spending by the next election.

At the moment though, the government is spending far more than that, far more than it can hope to raise in tax. In an attempt to close the gap, it is hiking some taxes to extremely high rates that seriously distort behaviour. Just as more hedge funds will disappear if the difference between the amount they can keep after tax in Switzerland and in Britain rises, more smokers will buy dodgy cigarettes if they can save more money relative to buying over the counter from an honest trader. That will undermine how useful these taxes are in achieving the politicians’ objective of reducing the size of the deficit. Pointing that out isn’t some kind of ideological surrender. Tax evasion isn’t a victory for the free market. The likely result can easily be the rest of us paying more. One of the benefits of lower, simpler taxes is that it will encourage everyone to pay their fair share, and end the poisonous suspicion that everyone else isn’t, which erodes the rule of law. I’d hope a fellow of the Cobden Centre, which claims to believe in “honest money,” would appreciate the case for an honest tax system.

Matthew Sinclair, director of the TaxPayers’ Alliance



Unfortunately localist planning reforms are a Nimbys’ charter and unlikely to increase housing supply.

Building on the countryside is not the only option to our housing problem. There’s lots of redundant commercial property that could change to residential.

Glad to see that the London rioter has been brought to justice. 11 years in prison for destroying a listed building in Croydon.

Regarding the Gordon Thompson sentence: there must be many victims of different crimes feeling very hard done by.