£500m prize that BA let go for a song

TWO years ago it would have been unthinkable. A budget airline with 25 planes that is worth as much as £500 million? Impossible! Indeed, less than 12 months ago, Michael O'Leary, who as head of Ryanair has little motive to rubbish the idea of flying people on the cheap, famously described Go as 'a dog, a chronic lossmaker'.

Well, as dogs go, this particular one has proved to be pretty valuable. If, as is being suggested, Easyjet pays as much as £500 million for Go, then no-frills airlines will have come of age. They will have proved that budget doesn't mean cheap.

One party in the Go saga can claim spectacular success - 3i group, which backed Barbara Cassani's buyout from BA only last June.

Then, the price was a mere £100 million. The assumption was that 3i would hold on to the operation for three or four years. Only then would it float.

To show so spectacular a gain within a year is an extraordinary achievement, even by the standards of the venture capital industry, which sets such ambitious targets for return on capital.

Thus 3i can feel pleased with itself, even if a curious confluence of events means that the first woman to chair a FTSE 100 company (Baroness Hogg at 3i) is selling the company headed by one of Britain's most prominent women business leaders (Barbara Cassani at Go).

But British Airways is left looking foolish. And for the first time since he joined the airline as chief executive, Rod Eddington cannot claim that it was all the fault of the chap who used to be in charge.

Go was the creation of Bob Ayling. It was part of his declared strategy of putting economy-minded passengers on an economy airline while making as much as possible from the folk whose flights were paid for by their companies and who would stay with BA proper. It was Eddington's decision to sell Go for £100 million.

BA is putting a brave face on the affair. Go cost only £25 million to set up, it claims. It sold Go for four times as much - rather more if you include the extra £10 million it will receive for the airline changing hands again so quickly.

BA affects a complete lack of concern that Go is now being valued at so much more than it received.

This is a frail argument. It is like someone selling a house and boasting that they have made a 10% profit while seeing their neighbours-hang on for a further couple of years and make 50%. The person who sold early sold unwisely and missed out on a large profit. BA may try to appear cheery, but in fact it looks foolish.

There is a further possible ramification if Easyjet gets its way.

Go has said that it will buy 75 planes over the coming two years. As late as Friday morning it appeared that the airline was likely to favour Airbus for the order.

If the Easyjet deal goes through, Airbus should worry. Easyjet uses Boeings in its existing fleet. If it buys more planes, as it suggests it will, then Airbus can bid farewell to the idea that it will supply them.

THERE are noises to suggest that there may be more repercussions after the Financial Services Authority's damning report on how Iceland conducted itself towards the end of 2000, when it was being run by our favourite Yorkshireman, Malcolm Walker.

Iceland, readers will recall, failed to tell the stock market that its sales were plunging. While investors remained oblivious to the fact that the firm was in trouble, Walker calmly offloaded £13.5 million-worth of his shares.

Some institutional investors are now raising the question of whether Walker is actually a terribly valuable member of any quoted company board.

In particular, they have turned their attention to DFS, the furniture retailer headed by Lord Kirkham, where Walker sits as a non-executive. In the careful words of one of DFS's big shareholders, 'it is always possible that someone can make an exceptional contribution. But in the case of Mr Walker, the opportunity for making an exceptional contribution would seem to be severely constrained'.

Indeed. And it may be that Walker is not the only DFS non-exec whose value is questioned. Walker has been on the board since 1993. So has the entirely blameless Kevin Howe. Institutions seem to be in the mood for change. Having had two nonexecs sitting on the board for fully nine years feels a little too cosy.

DFS insiders say none of the institutions it has been chatting to has raised the non-execs issue. No one has suggested that it is time that Walker, or indeed Howe, moved on.

Why Walker chooses to stay at DFS is anyone's guess. He scarcely needs the money. And he had some lovely garden furniture delivered to his new London flat last weekend, so he and wife Rhianydd can relax on the patio. Why doesn't he give up on quoted companies, sit back and enjoy the sun?