Tuesday 27 September 2016

Flying the friendly skies

Michael O'Leary promised us a new Ryanair with a smiley face - what he has delivered are spectacular profits and greatly changed public perceptions

Joe O'Shea

Published 07/06/2015 | 02:30

Chilling out: Ryanair CEO Michael O'Leary. Photo: Mark Condren
Chilling out: Ryanair CEO Michael O'Leary. Photo: Mark Condren
Ryanair signalled a dramatic overhaul in its corporate culture last year

Michael O'Leary and Ryanair have chosen the flight-path to Damascus. And the radical change in course charted by the messianic airline boss appears to be paying off.

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The famously abrasive Ryanair CEO signalled a dramatic overhaul of corporate culture last year, saying he no longer wanted the airline to be perceived as "unnecessarily pissing people off".

This from the airline boss who once declared: "You're not getting a refund so f**k off. We don't want to hear your sob stories. What part of 'no refund' don't you understand?"

There was a relaxation of Ryanair's notoriously tight rules and punishing charges, passengers would be allocated seats (ending the scramble at boarding gates) and be allowed a second carry-on bag.

The infamously user-unfriendly website has been overhauled, new apps offer smartphone boarding passes and real-time, mobile information. The airline now has an in-house website and app development department - Ryanair Labs - at its Dublin corporate HQ.

Ryanair's frontline staff have also been given more discretion and flexibility when it came to punishing penalties on bag-size and other minor infringements.

O'Leary himself - who had less than 12 months earlier responded to criticism by branding passengers stupid for making "f**k-ups" - took personal blame for his airline's "macho culture" and promised to do better. To replace the snarl with a smile.

And now the results are in. Ryanair has just posted an astonishing 66pc leap in profits to €867m in the first full year since O'Leary's promise that his staff and passengers would be happier.

The low-cost airline's critical "load factor" - or measurement of bums on seats - has increased from 83pc to 88pc. Ryanair is on course to ensure that nine in 10 seats on all flights in 2015-16 are sold, a hugely impressive statistic for the industry.

On the face of it, Michael O'Leary has confounded his critics - and concerned shareholders - once again.

The man who revelled in calling then Taoiseach Bertie Ahern a "gobshite", who asked his staff to pose in bikinis for calendars and launched annual reports while dressed as a leprechaun (and saying, "All flights are fuelled with Leprechaun wee and my bullshit!"), is changing his own image and the perception of his airline.

When shareholders complained at the AGM last year that they had family members who refused to fly Ryanair and had suffered verbal attacks at dinner parties for their involvement with the carrier, O'Leary was ready with his new warm and fuzzy persona (or at least as warm and fuzzy as O'Leary gets).

However, while the latest profits are very impressive, industry analysts say the motivation and results are not just down to Ryanair's overhaul of customer service and experience.

Dr Anil Padhra, senior lecturer in aviation studies at Richmond University, London, believes that Ryanair had little choice but to change their image given the competition from EasyJet and British Airways (under the direction of Dubliner Willie Walsh).

Dr Padhra says the Ryanair revolution has long since changed the face of the global airline industry, with low-cost competitors like EasyJet and older "legacy" airlines such as British Airways and Aer Lingus now competing with the same business models.

"Ryanair can still keep their operating costs very low. They pay pilots less than other airlines do, don't have to worry about trade union disruption and have found that since the economic crash of 2008, people haven't stopped flying, they will just fly with the very lowest cost option," he says.

"But now Ryanair is finding that EasyJet in particular have cut operational costs to where they can compete on ticket price, but have improved their customer service quite a bit.

"The two airlines deny it - but Ryanair's biggest rival is EasyJet.

"So Ryanair have had to make changes, to allow allocated seating, a second carry-on bag, to reposition themselves as offering a quality customer experience with a better website, mobile apps, everything that their competitors can offer."

Dr Padhra points out that a big part of Ryanair's business is making "ancillary revenue" selling car hire, hotels and extra-baggage.

"The trend across Europe has seen ancillary revenue fall in recent years as customers become smarter. So what Ryanair want to do is get more passengers, more routes, to expand across Europe and improve customer service, so that passengers will come back to them again and again".

Industry analysts like Dr Padhra say O'Leary's airline is also chasing a very specific target - of winning back the "never again" customers who swore off the low-cost carrier after bad experiences in the past.

"You may have flown with Ryanair 10 years ago, had a bad experience and swore off them for good. But if they can change that perception, so that people no longer think of them as the nasty airline to be avoided, they can win back a lot of potential customers.

"Loyalty to airlines is really a thing of the past. Passengers, especially leisure passengers who are not time sensitive in the way business travellers can be, will go with the lowest cost option. But they also want to feel that they are not taking a risk, that they have a good chance of experiencing satisfactory customer service".

Ryanair has also benefited from some very smart decisions - for instance, only flying one type of plane, which cuts maintenance costs, reduces complexity and requires pilots to be trained on only one type of aircraft.

Some clever - if somewhat risky - forward strategy on buying fuel has also seen their airline cash in on the recent, historic drop in oil prices.

In the viciously complex and competitive global industry, Ryanair has consistently posted profits for shareholders and maintained the upper hand over competitors who have - largely - been forced to follow their lead.

But it is in the strange, mercurial genius of Michael O'Leary that many shareholders might find cause for concern. "Michael O'Leary is the Steve Jobs of Ryanair and the wider airline industry," says Dr Anil Padhra.

"If he were to leave Ryanair tomorrow, you would see their share price tumble. But he is 54 years old now, and I don't think he has any intention of quitting his airline, it has virtually been his life.

"He may step back from the CEO position, take a presidential role and perhaps work as a consultant with airlines who are not direct competitors, in places like Australia and in Asia".

Michael O'Leary does now have a life outside of the airline business. He has proved himself to be a winner as a racehorse owner and shows signs of mellowing (again, in as much as you can imagine a chilled-out Michael O'Leary).

Some might even miss the old O'Leary, the man who could stand up in front of Europe's media and declare: "Germans will crawl bollock-naked over broken glass to get low fares."

The Ryanair CEO may become restless. Last year, he waded in on the Irish Water controversy and slammed the Government for "wasting a glorious crisis" by failing to radically reform the way business (and government) is done in Ireland.

A leap into politics may sound wildly far-fetched. But you could argue that it would be in keeping with the character of the man.

And if you thought Michael O'Leary, airline boss was scary - try Michael O'Leary, Taoiseach.

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