Ryanair in danger of losing its mojo as O'Leary's star loses lustre
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NO Irish company generates more headlines than Ryanair thanks to Michael O'Leary's genius for self-promotion.
Mr O'Leary's prodigious talent to annoy, tease and inspire his staff, the travelling public and the media have turned Ryanair from a puny and loss-making airline into what is arguably the most successful Irish company since Arthur Guinness began brewing his porter 250 years ago.
Investors who bought shares at many points in the past have plenty of reasons to be grateful to Ryanair, but can the airline's success continue or is Ryanair losing its touch? There are certainly many reasons to believe that Ryanair is not the airline that it once was.
Mr O'Leary has failed to negotiate the sort of deal with Boeing which followed the September 11 attacks and it is no longer obvious where the airline's long-term expansion will come from.
To be sure, Ryanair has acknowledged that the growth rates of the past cannot continue indefinitely but this does not change the fact that most shareholders wish it were otherwise.
The airline's large cash pile could well make a wonderful once-off dividend but such a payment would also be a tacit acknowledgement that one of the country's greatest growth stocks has run out of steam. Even without a dividend, there are disturbing straws in the wind suggesting that the airline has lost its 'mojo'.
Mr O'Leary's embarrassing and seemingly illegal decision not to compensate people who could not fly following the volcanic eruption in Iceland last month and his climbdown only hours later was one.
The very public ticking off by Judge Peter Kelly for twisting the truth in his increasingly irrational battle with the Government was another. It is very difficult to the use to shareholders of the very public spats between the airline and with the European Commission which rules on the aid for so many of the airports used by Ryanair.
This week, the Paris-based newspaper 'Le Figaro' reported that French prosecutors are investigating an alleged attempt by Ryanair to evade social contributions. Ryanair denies these charges. There was a time when such an accusation was outlandish and could have been dismissed out of hand but that time is over; Ryanair is no longer just the coarse but honest jester who spoke the truth.
There is probably no other company on the stock exchange where the reputation of the chief executive matters more. This may seem far from Sharescope's usual remit but in a climate where the cult of the (Irish) chief executive is somewhat tarnished and question marks hang over the reliability of large sections of corporate Ireland, the value of companies is determined by intangibles such as reputation as well as the analysts' metrics which have let us all down so badly in recent times.
- Thomas Molloy
Irish Independent
