Outlook: Mayhew loses his successor. Will the firm be next?

Flying high; Purple pages

Barring a miracle, Cazenove is not going to float on the stock market next spring as originally planned and now David Verey, the ex-Lazards man brought in to become its next chairman, has abruptly quit. Conspiracy theorists will see a connection between the two events but David Mayhew, the Cazenove chairman, says it is all down to our old friend personal chemistry.

Cazenove puts a lot of store by relationships – it is the unique selling point which has enabled this small, independent and impeccably discrete British investment bank to outgun its big, brash American rivals on a regular basis. Take almost any City deal that matters and more often than not Cazenove can be found on one side of the table or the other, usually in the shape of Mr Mayhew.

When it came to Mr Verey, however, Mr Mayhew misjudged his man. As he said yesterday, until you live together, you don't really know each other. In the case of Mr Verey it took only eight months of cohabitation for Mr Mayhew to realise that what he assumed to be an "eligible successor" was in fact nothing of the sort. The cultural fit the two men identified when Mr Verey jumped ship at Lazards turned out to be a cultural gulf. Mr Verey thought he would be joining a "fun group of people". But as Mr Mayhew describes it, Mr Verey was unhappy from day one and "not gaining in happiness".

This is not really a satisfactory explanation. But it is the best anyone is going to get out of Cazenove, an organisation which prefers not to confirm the time of day let alone confess to the world that there has been a terrible bust-up at the top.

What can be said is that Mr Verey joined Cazenove on the rebound from Lazards which he left, equally abruptly, after a shake-up which ended the independence of its London arm and put a New York-based American chief executive in charge.

New relationships formed on the rebound rarely stand the test of time and so it has proved for Mr Verey and Cazenove. And yet the plum job of chairing what remains one of the City's most influential institutions is not something to be passed up lightly. Particularly when the severance package is three months money and a package of shares which do not look like they will be tradable for a long time to come.

Cazenove and Mr Mayhew are now left with a lot of questions marks dangling over their heads. Will they go outside for another successor or will the baton pass seamlessly to the internal candidate, John Paynter, a Cazenove veteran with more than 20 years' experience in the business?

Will the Cazenove board stick with its plans for flotation at some ill-defined time in the future or will the firm throw in its lot with a US bulge bracket bank?

Change at the top can be destabilising below. Cazenove must hope that by acting quickly and decisively it has nipped the problem in the bud. But, just as the markets are going through turbulent times, so the future for this great blue-blooded institution looks uncertain one more. Time, perhaps, to circle the wagons in Tokenhouse Yard.

Flying high

It's a fast-moving world, the airline business. No sooner has easyJet overtaken Ryanair as Europe's biggest low-fares airline than Ryanair's chief executive Michael O'Leary declares easyJet is nothing of the sort. Strictly speaking, he says, easyJet is a low-cost airline, not a low-fare one. How could it be otherwise when the price of the average flight on Ryanair is half that of easyJet?

If Mr O'Leary is correct, then what we are witnessing is a further splintering of the airline market. First we had high-cost, high-fare, full-service airlines such as British Airways, Lufthansa and Air France. Then we had the advent of low-fare competitors such as Ryanair. Now we have an airline in the shape of easyJet which sits somewhere in the middle. It may be low-cost but it is not genuinely low-fare. It does what British Midland used to do successfully before the no-frills carriers really got into their stride, which is to fly to the same Continental airports as BA but at a more competitive price.

Easyjet may still believe in "stampede boarding" – leaving passengers to fight for the best seats – and it may still be a single-class airline. But it prefers not to compete on price with Ryanair. It is turning itself into a business fare airline, leaving Mr O'Leary to fight for the interests of the everyday passenger who lacks an expense account.

This may, of course, be another piece of Irish blarney from Mr O'Leary – much like Ryanair's insistence that it always offers the lowest fare on any given route.

But if he is right, then there should be ample room in the market for Ryanair, BA and easyJet, each of them catering to a different market. Fly Ryanair and you will arrive in a secondary airport but the fare will reflect that. Fly easyJet and you will arrive on the stand next door to BA but the in-flight service will not have compared.

The danger with this theory is that the industry begins to converge, not splinter. BMI British Midland has already launched bmibaby and is slowly transmogrifying into a low-cost airline itself. BA still lumbers a long way behind, even with the cost reductions it has managed to implement since 11 September. But it has discovered how popular each-way tickets bought on the web can be with passengers. If it could get the marketing right it has the route network and frequencies to make serious inroads into the new market the no-frills carriers have carved for themselves.

Ryanair produced another gravity-defying set of results yesterday. But it is capable of being brought to land with a bump.

Purple pages

BT's return to the directories business is not exactly the magic bullet which will rescue its share price. But at least Ben Verwaayen, the new chief executive, is playing to the company's remaining strengths.

After the debt-fuelled excesses of the Bonfield/Vallance years, came the reckoning. Nowthe mobile business is gone, along with BT's vaunting international ambitions, the company has rediscovered something valuable buried underneath. A UK telephone business with 21 million residential customers and a tight grip on the market even after all these years of deregulation.

It might seem odd to re-enter the directories market a year after selling Yellow Pages. But that was a forced sale and since then BT has crept back in, scooping up Scoot for a mere £8m. Mr Verwaayen is not about to re-invent Yellow Pages – the new directories will probably consist of a purple section inside the existing phone book. Allied to this BT will be offering everything from share prices to weather reports and cinema listings when its directory enquiries monopoly is thrown open to competition this December.

It is not exactly the kind of stuff to set the pulse racing. But not is it likely to induce heart attacks among investors.

m.harrison@independent.co.uk