Sunday 28 December 2014

I will fill all flights to US with €99 fares -- Michael O'Leary

Ryanair chief Michael O'Leary reveals to Eoghan Corry his quest to slash the cost base of Aer Lingus and cut prices if he gets the go-ahead from Europe to take over his rival

Published 04/10/2012 | 05:00

Michael O'Leary doesn't do interviews. He does performances. Like a great stage actor, he listens attentively to each question, waits for his cue and off he goes with Shakespearian aplomb, only with more swear words.





He has heard all the gripes before and has a mantra to reply to all of them. He interjects frequently that Ryanair have the cheapest fares and the best punctuality, in case he might drift off message.



Hidden charges? "There aren't any; they are all up front."



Outsize luggage and that cage at the airport gate? Rules are rules -- "if it does not fit in the sizer, you are outsize. You agreed, that is the policy, comply with the policy."



It even happened to Michael himself at Gatwick and he is CEO of the airline.



Surely he sympathises with people travelling with children saddled by baggage charges? "Of course, that's called Mrs O'Leary. "



His endless rows with airports, doing deals, opening routes then pulling out and closing them again? His job is to negotiate the lowest fees so he can offer the lowest fares.



Those fuel emergencies in Spain? He was set up by the Spanish. "System-wide we had less than 100 safety incidents and all of these were routine. It is unusual to have ostensibly a European government leaking patently flawed stories to the Spanish newspapers."



Shannon? Sell it. "I said to Michael Noonan he should sell Shannon. He asked me how would they do that? I said by calling Sherry FitzGerald."



He never expresses any regrets for his actions or his outbursts. The woman who paid £230 (€285) for her boarding passes is not specifically an idiot, but people who come to the airport expecting Ryanair to waive the boarding pass fee are.



Between his broadsides against the Dublin Airport Authority , the useless Department of Transport, the interfering Commission, the ill-informed media and the expletive-deleted unions, he occasionally offers a short glimpse of what is driving that amazing, hyperactive, avaricious mind of his. The walk back through the famously functional Ryanair office as he graciously accompanies his guest back out is a good place, probably the best place, for one of those asides.



This is where Padraig O Ceidigh was humiliated. This is where I asked him about Southwest, the airline that served as the model of his success.



"I fly Southwest often, and each time I do so it strikes me how unlike Ryanair it is. It gives out free food for instance. Comparing Southwest with Ryanair is like comparing a juicy orange with a rather frugal apple.



"Southwest has gotten middle-aged and fat and happy," he says, with a hint of sadness, a hint of mischief.



"They are now much more concerned with being loved. They have lost their mojo. Their obsession is being one of the top 10 places to work every year in 'Forbes' magazine, which is normally reserved for IT companies with 1,000pc margins. Spirit is the new Southwest."



The message is as clear as it is unstated. Nobody is going to accuse Michael O'Leary or Ryanair of wanting to be loved, anytime soon.



Being unloved comes at a price. He now faces a multi-million euro battle to persuade the EU Commission to let him take over Aer Lingus.



If the Commission says yes and gives him the go-ahead on January 14, it will be his fourth attempt to do so.



He has a mantra here too -- that the Commission has already allowed mergers between six major airlines in Europe. The only merger the EU has ever turned down is between two Irish carriers.



His dilemma is nobody supports this bid, consumer groups,, the media, the Irish Government and, most of all, the powers in Brussels which are unused to being lampooned by an upstart as O'Leary has frequently done over the past decade.



A previous takeover bid was lost in 2007 on a single issue: competition on routes from Ireland's three airports. He has a plan, perhaps several plans, to counter that argument this time round.



He says it goes well beyond what was leaked to newspapers ("leaked by the people we were talking to"), that rival airlines would be invited to take up 50pc of the services being offered by Ryanair and Aer Lingus combined.



O'Leary is at his best talking directly to his customers. He loathes and avoids the jargon of the investor document or powerpoint presentation. He talks about fares rather than market share, load factors, or yields.



So here's the takeover news:



• Ryanair will continue to have an average fare of €45.



• Aer Lingus fares will come down from an average of €85 to €65.



• In winter Aer Lingus will offer transatlantic fares of €99.



"We will take bundles out of Aer Lingus' cost base. Instead of having €200 fares across the Atlantic we will have €99 fares in the winter. How many flights do you think you can fill going to the States for €99? Every single one of them."



The office in which the interview takes place makes its own statement. Unexpectedly, Ryanair lives in a square no-frills, three-storey building just south of the second terminal in Dublin where O'Leary is always complaining about the cost of the rent he pays to DAA.



In the morning, the small front office is like a terminal in itself, with hundreds of cabin crew passing through. A banner over the sales area reminds the team of the sales targets (during the interview O'Leary denies that there is any sales target on ancillary revenue, but then says he wants it to be 20pc of overall revenue).



O'Leary comes down personally to greet his guest and walk them up the stairs, magnanimous and welcoming and courteous, behaving more like the manager of an agricultural supplies firm in the country than CEO of an airline that has risen from a 15-seat Bandeirante turboprop in Waterford in July 1985 to become the second largest airline in Europe by passenger numbers after the Lufthansa group, one-and-a-half times the combined size of BA and Iberia, seventh largest company in Ireland and 14th largest airline in the world.



He offers a coffee from a cardboard cup. Free coffee from Ryanair, it doesn't get better than this.



You can safely bet no other top-10 airline CEO sits in an office with a high visibility coat hanging on the hanger in the corner.



There is a stack of boxes on the floor (carpet in the corporate blue, walls pale yellow), three short shelves in the corner containing an out-of-date Atlas ("that's where we plan where we are flying next," he told me on a previous occasion).



He runs his expanding 80 million passenger empire from a plain black desk with a few scattered papers, a nine-inch screen and small keyboard discreetly away to his left and a jacket over the back of the chair. A TV sits on a wall mount to his right.



The banner over the desk states simply: "Ryanair, the low-cost airline." On his desk he keeps one of the loyalty cards from the 1980s, to remind him never to do that again.



There is an unpretentious second table surrounded by seven chairs for meetings. This is where the interview takes place.



He talks in that familiar, enthusiastic style, varying the pace of the conversation, stopping in mid flow to take supplementary questions without complaining.



He uses expletives, but with more care than in the past, employing them to emphasise a point, in that peculiarly Irish way. If there is a 'f**k' in mid-sentence, it is to indicate a particular annoyance or to generate humour.



O'Leary's conversation is a zig-zag flight-path of contradictions, as befits a man who treated the attempt to get his hands on Hangar 6 in Dublin airport as if it was Napoleon's march on Moscow, and treated the game-changing bargain 100 Boeing 737-800s deal of 2002 like it was a junior camogie match in Mullingar.



However, the impending attempt to take over Aer Lingus is an expensive venture, eating up funds and management time -- a contradiction for someone who preaches the mantra of staying focussed on cheap fares and on-time arrivals.



He doesn't want to bring Ryanair into major airports like Charles de Gaulle or Frankurt-Main. Nor does he want to get his hands on cheap long-haul aircraft.



"We have no desire to take Aer Lingus and paint yellow harps on them. We need a two-airline brand strategy."



Instead he will grow Aer Lingus from 10 million to 15 million passengers a year by taking Aer Lingus into new bases across Europe, working as Aer Lingus, not Ryanair.



"For example, we have a very large base in Charleroi in Brussels. At the moment Zaventem is wide open for a real aggressive competitor. You have only got SN Brussels which is badly run by Lufthansa.



"Aer Lingus could go into Zaventem, which has five or 10 aircraft, and become the main airline in Brussels."



That is the opposite of what he did with Buzz in 2004. Why should we believe him? "Buzz was a flake. It was too small. It had 13pc of the slots, God help us, at Stansted at the time. It had 12 aircraft.



"We bought Buzz, got rid of the fleet, took the pilots and some of the cabin crew, some of them still fly for Ryanair. On those routes which Buzz operated, we now have 24 aircraft."



What about his record of beating up competitors? "The EU said that when easyJet came to Cork, Knock and Shannon, Ryanair cut all the fares, and when easyJet left, raised all their fares. Completely untrue. It is just that easyJet were never able to match our fares. Our fares since easyJet left are lower in Cork, Shannon and Knock."



The real insight is, as always, in that parting aside. "An airline is a high-volume, low-margin business," he says quietly, on the stairs, "that is what we do.



"We are not here for bean bags and pool tables. We have to work hard. It is the only way to get this thing done. That is how commoditised travel services work, bus companies, train services, airlines.



"As long as you give your customers a big price advantage, they will go with you."



And then he is gone, unloved and happy.

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