Carolyn McCall - CEO, easyJet HARDtalk

all. France 13`0. Injury time when against Ecuador for them, taking it

to`1. `` 3`1. `` 2`1. Lufthansa, British Airways or

Emirates. Is flying always going to be this affordable and accessible?

Carolyn McCall, welcome to HARDtalk. Thank you. I want to begin with the

move you made, dramatic move, from being the boss of the Guardian Media

Group to taking over easyJet. You didn't know anything, really, about

the aviation business before. You've been in the media for decades. How

difficult a transition was it? Actually, I knew a lot about being a

passenger. Actually, that is quite a lot about being in the industry. One

of the reasons I joined easyJet is I liked what they did. They have

completely changed the way people travel. I also liked their crew. So,

I came up with quite an understanding about easyJet from a

passenger viewpoint. There are loads of similarities about being a CEO in

one sector and transferring to another. It's a consumer facing

business, it's all about people internally, it's about getting

people aligned, the vision, clarity of where you're going, media

coverage and handling all of that. The brand, the positioning of the

brand, the marketing to consumers, there is a huge amount of

similarity, actually. It's 24/7. It's interesting that you draw those

similarities. It is a ruthlessly competitive business, though,

particularly at the low`cost end of aviation. Were you prepared for

that? Yes. Oh, very much. I think media is more competitive. And I

find it extraordinary, in the airline industry, when people start

talking about more capacity coming into the market in the summer, when

everybody makes money. I think, yes, well, that's just competition. When

you've worked in newspapers, which is where I started my career in

media, it's dog eat dog. It's competitive every single day. I had

the Times price cutting to 20p. 10p, in fact. I think media is a

ruthlessly competitive industry as well. I'm tempted to say, but you

wouldn't have had any particular competitor just like Michael

O'Leary, who is the boss of perhaps easyJet's most obvious, immediate

rival, Ryanair. He is so aggressive, so ferociously competitive. When you

took the job, he dismissed you as some old media luvvie. Less of the

old, ey? The implication was that you know nothing about how to run an

airline. Were you intimidated by that? Not really. I think you can

only do what you can do. So, I'm rarely intimidated by anything

anyone says. I also think, actually, it's a huge misconception that our

biggest rival is Ryanair. It's not. Our biggest rivals are the legacy

carriers across Europe. So it's British Airways, Lufthansa, Air

France, KLM. Those are our biggest competitors. That's who we compete

with. Do you say that because you are definitely trying to position

yourself as less of an in`your`face, no`frills, budget carrier than

Ryanair? Do you think Ryanair have, and maybe their results in recent

times have shown this, gone too far with that concept? I think,

actually, Ryanair and easyJet have always had quite different models,

actually. We have always flown, for a long time now, for the last eight

years, the network is primary airports. We fly into Charles de

Gaulle, Schiphol, Madrid, Barcelona, you name it. You name an airport in

Europe, a primary airport, and easyJet probably flies there.

Ryanair don't do that. They fly to different kinds of airport. They fly

into secondary airports. They have a very effective business model, doing

that. So, that's one thing. That is the network. People are always

surprised that easyJet's network is stronger than any other airline's

network in Europe. That's the first thing. I think the second thing is,

over the last four years, is we've over the last four years, is we've

really thought very hard about the customer, what the customer feels

like when they're travelling with us. I think easyJet already had...

Its crew was always very customer focused, but very little else was. I

think that's been a huge change, it's made a dramatic change on the

customer. You talk about change, and it was a turnaround job. When you

took over in 2010, easyJet wasn't actually performing terribly well.

Most notoriously, your punctuality record was pretty horrible. Ghastly.

Half the time, your planes weren't taking off on time. I just wonder

whether you feel there's still more to do to improve the reputation of a

brand like easyJet. I'm thinking, for example, the last Christmas,

when you had terrible problems at your biggest UK hub, Gatwick. The

North Terminal, I think, was knocked out by flooding and power problems.

The customer feedback was that easyJet didn't care enough about its

customers, it left them abandoned in the terminal, and, in the end, it

was unprofessional. That was so disappointing. Actually, the problem

and the cause of the problem, was completely outside our control. I

had my team at the airport. My team, actually, were the first people that

found out what was going on at Gatwick. They were there from five

in the morning, trying to sort out what ended up being a really, really

bad day for Gatwick and for easyJet. But I think the most important thing

is that we have really learned from that, as has Gatwick. That will

never happen again. There wasn't a contingency plan of the airport, and

certainly not signed off by the airlines. We had thousands of

passengers on Christmas Eve, because it was Christmas Eve. Thousands. And

you never get to that position, you should never have that many

passengers not able to take off. As a boss, I wonder what your personal

reaction was? Was it, "Oh, my God, I must go down there myself. This is

so potentially damaging to the brand that I have to handle this myself."

You can't really... I mean, I run an airline and Gatwick was part of that

airline, 20% of what we do. We have a team of people at Gatwick. We had

a whole team of people at Gatwick. It wasn't so much hands on deck, it

was actually not having the contingency plan for a power

shortage as well as flooding, as well as one terminal not working.

Actually, as an airline, we run all our systems, all our controls, our

operational control centre is run from Luton. Everywhere, whether you

are in Milan, whether you are in Moscow, it is all run from our

operational control centre in Luton. So that's where we needed to be. So

we had crisis meetings all day on Christmas Eve. The thing is, I felt

awful about that because it did disrupt a lot of passengers.

Actually, we spoke to a lot of them, we have e`mailed all of our

passengers. We've done as much as we can. I think it also clouded a lot

of the good that we've done. If you just think about how many good

e`mails we now get, saying, "Thank you for allocated seating, "it's

just the best thing you've ever done." You know, business travellers

saying, I only fly easyJet because you're better than a flag carrier.

Honestly, it's clouded some of that. As an airline, what you have to do,

is really pick yourself up and move on. Interesting that you focused,

even in the course of this interview, so far, on your

determination to challenge what you call the legacy carriers. By that I

guess you mean the British Airways, KLMs, Lufthansas. The big airlines

that we have been used to for so long. You said that you believe the

potential of your company is limitless. Does that mean you think

you can knock these companies, the traditional legacy carriers, out?

No, look, I think what the legacy carriers do really well is their

long haul networks. That's what they focus on. That is where they make

their money. Could you do long haul? I don't think we would do long haul.

We have no intention to do long haul because we think it's a different

kind of business. I think what we're really good at is short haul. We're

very efficient, we're very quick, we work very well with the airports to

do things that are in the right needs for our passengers. We get

them in and out of airports as quickly as possible. Why would you

take a high risk strategy to try and do long haul, when your actual

proficiency, your area of real competence, is short haul, European

travel, by and large? We do fly to Moscow, we fly to Egypt. We do

extend that. But the bulk of what we do is short haul. There's no

mistaking the scope of your ambition, because you very recently

signed a mega deal with Airbus for 135 airliners over nine years, with

the potential, possibly, for 100 more than that. Your former owner,

boss, founder of the company, who is still, with his family, the biggest

shareholder, Stelios Haji`Ioannou, he calls it a vanity exercise. He

thinks it's a fundamental strategic mistake. That must be problematic

for you? Well, look, we have been very cautious and very, very

considered about our growth. We have returns that exceed not just any

other airline, but actually, in the transport sector, easyJet returns to

its shareholders more money. But he is the biggest shareholder. He calls

it a vanity exercise and says, "Look, this is a more than ?20

billion deal." Well, you don't know how many billions it is. You don't

know how much it is. Well, it might be even more. The price of these

planes might go up exponentially. No, it can't go up for us because

we've secured a deal. That's a ten year deal. That's based on... I

mean, is very, very rigorous. We crawled all over it. We've got a

fantastic deal. Remember, also, a lot of these aircraft are to give us

the flexibility to grow. But we don't have to. We have the

flexibility to actually reduce our fleet if we want to. This is to

replace aircraft. A loss of our new orders are to replace our older

319s. It is important to know that the average age of our fleet is only

four and a half years. There are some planes in our fleet that are

eight nine, ten years old and need replacing. So, it's not as simple as

saying that 135 planes are coming in and it's only for growth.

Understood. We will only grow where we can make money and where we can

get returns. We are very returns focused. From a shareholder point of

view, I think if you were to talk to easyGroup, they would say they are

content with the returns they had. Now, they may want more... But we

can't get away from the fact, when we talk shareholders, Stelios and

his family hold about 36% of all the shares. Yes. If we're talking

shareholders, there is one big daddy amongst them, and that's him. This

is what he said. Of the Airbus deal, "I will hold the directors to

account by all legal means. If it turns out this Airbus deal destroys

shareholder value, I will go to the law." So, as you can see, we've

created a lot of shareholder value. When my CFO and I joined the

company, on the same day, four years ago, our share price was about

?4.20. Our share price, currently, is now well over ?15. So, we've done

everything we can to do the right thing for the airline. We have a

growth strategy which is based on profitable growth and returns. The

majority of our shareholders, actually, backed the fleet deal. The

executive, on their own, cannot take a decision, that was a class one

transaction. It went to a vote and it was voted through. So I think,

actually, fundamentally, what we've demonstrated, I think, is that if we

follow our strategy, which is very clear, it is about retaining our

cost advantage and, actually, this fleet deal gives us a very

compelling cost advantage against any low`cost competition coming

through. Account for lots of decisions, including the purchase of

airliners, but also for renumeration ` yours and the board's. Your

renumeration last year was pretty extraordinary. If you take in all

the long`term options, the pension contributions, the salary salary

itself, the benefits, it amounts to well over ?6 million. That hasn't

been received yet, so you have to be in the company for quite a long time

to get your long`term investment plan. Sure, but that's what it's

going to amount to over time time, 2013, one heck of a year for you,

over ?6 million and now Stelios clearly thought it was excessive and

there is a whole sort of economist school of thought now which suggests

that as CEO pay gets more and more out of kilter with what is paid to

the ordinary members of staff in a business like yours, there is

something unhealthy and dangerous about it. Do you see the potential

danger? I think the first thing is I don't set my renumeration and I

think the second thing to say is we have a renumeration committee. I

came into the company, there was a structure already, they reviewed the

entire structure of renumeration at easyJet about three years ago. The

chair of renumeration committee consulted all our shareholders. So

the entire scheme is based on performance. Only on performance. If

we don't perform, we don't get our long`term incentive plan, we don't

get any bonuses and it is actually highly geared to that. So

actually... If you don't mind me asking, what is

the average pay of easyJet cabin crew, when you add up all of the

extra little bonuses they will get on the performance of the company.

The take home yearly average pay of an easyJet cabin crew? Cabin crew,

it depends on which country you're in. Well, say the UK, in pounds.

?40,000. Something like that. An average captain's salary salary is

over ?100,000. Cabin crew, there is a lot of them. My mathematics tells

me that therefore you're earning more than 150 times more than the

average of your own cabin crew. Now, Thomas Piketty and others have

and the rise of a super`salaried and the rise of a super`salaried

elite and he and others say that's not good. It's not good for our

economy, or the staff of your company and it's not good for the

moral well being of nation. I just want your personal reaction. My

personal reaction is that I am... The most of what you have talked

about is performance`related. The vast majority of my pay is if I do

well for the airline and if I do well for the airline, then the

shareholders benefit, the people at easyJet benefit and I of course

benefit. But it is still 150 times less than yours. And I don't set

that. I know. You're the leader, you're the executive chief of your

company and I want you to just tell me whether in broad terms you think

that is a healthy place to be. Well, all I can say is that easyJet is in

a healthy place. I know that the people at easyJet feel more secure

than they have done for a long time. They feel the environment that we

work in, which is very open, and is very honest and is very ` has got

good moral. So people are very aligned behind our cause, which is

to make it easy for all our passengers, to make it affordable

for all our passengers. People really believe in that. So actually

the health of easyJet is better than it has been ever actually. It is one

of the strongest companies in this sector. A final thought on this,

again Thomas Piketty, his book and it is very much in the news, his

conclusion about this rise in inequality and the super`elite and

the ordinary worker, his conclusion is the super`elite, the highest

earners, need to pay substantially more tax. Again, it's not often we

have CEOs in the studio. I just want your personal view. Do you believe

it would be right for you to pay substantially more tax? I've never

complained about the tax I have paid. But that is not my question. I

know. Never complained about that. The rate for the absolute highest

earners should be higher. So when you say the absolute, when you call

me the super`elite, I don't recognise that. Over ?6 million a

year? I have to earn that much... I know you've explained it is a

long`term... Over a long period of time of course it's a lot of money.

Of course you're in the super`elite. Of course it's a lot of money, but

you talk about it as if it is some sort of football game. All I'm

trying to say is I can only do, I do the right things for my company

regardless of the long`term plan. Do you think it is right for people

like you to pay more tax? I've not really thought about it in those

terms. I have always thought that people who are earning a lot of

money should pay high taxes. I've always thought that. The tax rate

for me is not something currently that I wake up thinking about. I

think about easyJet. OK. Let's talk about easyJet and regulation nd tax.

But as it comes to the corporation tax. You have air passenger duty to

pay in the United Kingdom. Airline bosses, Willie Walsh and others,

have called it punitive and deeply damaging. Is it in your view

damaging your company's ability to grow? Of course it is. It not a tax

on airlines, it's a tax on passengers, airlines just collect

the tax and give it to the Treasury. So it is a tax on passengers. And

the more you tax passengers on air travel, you suppress demand. Even

with the most optimistic projections about more efficient engines in

airliners, the overall aviation contribution to manmade greenhouse

gas emissions over the next 30 years is going to be double if not triple.

Is that good reason therefore to use the tax system to curb the growth in

aviation. Not just thinking about easyJet, but all around the world?

Well we have said with ETS which actually was the EU was hugely

pushing, the EU wanted that to happen. The reason that didn't

happen, because of America and China I think it was so, actually it

didn't happen at all. So you know we have never objected to having an

offset carbon scheme for airlines, which was the emissions trading

scheme. We have always said that will incentivise airlines to do more

of the right thing. But you couldn't do APD and ETF. APD, the the airline

passenger tax, is unique to Britain actually and is taxing passengers

for flying. Just one very quick final point on that. The Scottish

leadership of the SNP going into this independence referendum in

Scotland have said if they win and Scotland goes independent, they will

put by 50%, if not long`term remove this air passenger duty. Does that

mean that you're a supporter of Scottish independence? No, I'm not

going to make any political statement about whether I support or

don't support Scottish independence, but I think they would do the right

Scottish people. Because actually if Scottish people. Because actually if

you are flying to and from Scotland you are flying to and from Scotland

from England, regularly, you pay tax twice and actually exceed the price

of your air fare. So it is punitive and we are an island and you know no

matter what you say, air travel is very, very beneficial to trade and

it's an important economic and social benefit and there is demand

for it and so you know actually airlines have got to be responsible

and we have to be responsible, which is why we do what we do, lightweight

seats lightweight trolleys, lightweight carpets, everything to

do with reducing how much fuel we consume. Almost out of time, but one

other key question for you before we close. It may be one you resent, I

don't know, you get it a lot, because you're one of only four CEOs

who happen to be female in the FTSE 100 companies at the moment. It does

mean, and I don't know whether you resent it or not, that gender comes

up in interviews with you, simply because it's unusual at the moment

There is a lot of talk about quotas. There is a lot of talk about quotas.

The European Parliament are suggesting that four out of every

ten non`executive directors of companies in the EU must be filled

by women by 2020. Do you believe quotas are the right way to increase

the numbers of women at the top of business? I don't resent the

question at all, I think it is a natural question to ask. The reason

I don't think quotas would work in this country is because I think the

thing that I worry most about is that there are not enough executive

women in work in any kind of really of scale. So there is 6.9% of

executive women in the FTSE 100. Why do you think that is? I think there

are lots of reasons. I think that a lot of women when they have kids

really rethink their lives. I think they sometimes think it is too hard.

Companies are often inflexible and quite rigid organisations that don't

really think about how they retain women who are between their mid 30s

or their early 30s. That is quite a big issue. It is a culture of

companies that has to change. So at easyJet, you have done what to

ensure your mid`30 middle management women stay? We have done a lot. I

think people know that we're very serious about keeping women in work.

I think'vest we have got, we started doing a lot of development and we do

leadership development. We don't just do it for woman. But we do do a

lot more leadership development than we have ever done. We've set up a

women's network, where they now run it themselves, but we actually gave

it the oxygen to start, which really helps. But I guess the point is a

lot of companies don't and if we talk quotas and we talk regulation

to enforce the promotion of women. I think the problem with quotas is

there won't be enough women. We have to focus on what they're call the

pipeline of women. Which at the moment is leaking all over the

place. We need to make sure that there are enough women in those

middle management jobs that stay and get promoted on to executive

committees and management committees so that they are in a good position

to get the next jobs. The really senior leadership jobs. Because if

we don't have that kind of scale, you're going to be trying to fill

and just go, that person is not good enough for it. And in the end there

would be a backlash. I mean that is just a very personal view of quotas

at this moment in time in Britain. Do you think the culture is changing

without that sort of quota system? Are you optimistic? I think that the

pace is quite slow actually on executive women. But I think the

more women there are on PLC boards, I think Mervyn Davis has done a very

good job on that, getting that up to nearly 25% now of women on boards. I

think all of that helps influence the behaviour of companies. We have

to end there, Carolyn McCall, thank you very much for being on HARDtalk.

Pleasure. Thank you very much indeed.

It looks quiet across the UK over the next few days. High`pressure

dominates. That does not mean it will be wall`to`wall