Tuesday 27 September 2016

Like him or not, O'Leary is walking on air in the smiles-high club

Published 04/11/2015 | 02:30

Michael O’Leary was surprised to discover that actually being nice to passengers makes good business sense
Michael O’Leary was surprised to discover that actually being nice to passengers makes good business sense

Last Friday week, there was a small crash on the M50. Try getting to the airport from most places in Dublin if there is a crash on the M50: the chances of you making it on time are slim to non-existent.

  • Go To

We scrambled, arguing, angry and stressed into Terminal 1, a mere 35 minutes before the take-off of a Ryanair flight. Family half-term holidays must increase the chances of divorce dramatically.

Resigned to missing the flight, we trudged up to the desk. The woman at the desk told us the check-in was closed but after a bit of pleading, she spoke to her manager, a Scottish guy. He rang the gate, smiled and said: "Okay, just run."

Would this have happened in the Ryanair of old? No way.

But the new Ryanair is not just nicer; it's massively successful as a result too. As Michael O'Leary himself observed: "If I knew we'd make so much money by smiling at people, we'd have done it years ago."

Ryanair's latest results are phenomenal and they reveal how much the whole nature of air travel has changed and continues to change. They also underscore just how fantastic O'Leary is as CEO.

In a country that doesn't exactly embrace success, what O'Leary has done with Ryanair is extraordinary. Ireland has no right to have the biggest airline in Europe.

Read more: Winter Airfare Wars: Ryanair releases one million seats for sale at €15

Had you said 30 years ago that a country with no aeronautical manufacturing heritage, a tiny population, an incumbent national airline (in an industry dominated by the big national carriers), would create the biggest airline in Europe, change the entire way travel is perceived and do it in the face of massive governmental opposition, people would have thought you crazy. But O'Leary did it.

In the last six months, profits rose 37pc to €1,088m. The airline flew nearly 60 million people between March and September and, although O Leary cited three favourable factors - (1) bad summer weather in northern Europe encouraging people to fly south, (2) strong sterling and (3) lower oil prices - the growth of the airline is continuing apace.

When you look at the US market, you see that five large airlines dominate 90pc of the intra-US travel market. Might this happen in Europe? It must be possible.

Obviously the US is different as it doesn't have national carriers protected by national parliaments and notions of equating airlines with national football teams, but if consolidation comes, there must be a very good chance that Ryanair will lead that pack.

Right now, although it aims to fly over 100 million people this year, it is still only 13pc of the total European market and only 3pc of the huge German market. But if you look at the figures, Ryanair published the other day, it looks to expand in Germany to push up the annual numbers of passengers to 180 million - or 20pc of the European market - in the next few years. It has the fleet to do this and the airport places, which used to be the problem in the past, are now no problem. It's difficult to see what will stop O'Leary now.

In the past year, air travel to and from Ireland on both Ryanair and Aer Lingus has grown dramatically. For example, on the short-haul routes of Dublin to Milan, Rome, Barcelona and Madrid, traffic has increased by more than 150,000 passengers a year on each route.

This is a massive turnabout. And we see the same sort of numbers in UK airports too. For example, last year, 17 million passengers flew out of and into Stansted. This year, that figure is scheduled to be 25 million. This reflects huge pent-up demand in the London area and is also a reflection of just how the congestion at Heathrow is pushing people out to airports that in the past were considered secondary.

For companies like Ryanair and other low-cost carriers, Germany is the Holy Grail. It is a huge market but because German roads and railways are so good, the airlines have to be cheap and this is where Ryanair hopes to makes inroads.

The prize is huge because Germans are switching to flights within Germany - now that they are being offered the choice.

For example, last year a new route was opened between Cologne and Berlin. It flies six times a day - where the route did not exist before - and it is estimated that this year alone 600,000 will fly the route.

Operating a huge airline is a logistical feat, not unlike running a massive manufacturing operation. Companies the size of Ryanair fly 2,000 flights a day. With all the ground staff taken together, some 40,000 people work for or with Ryanair per day all over Europe.

The other day, at a regional airport in Croatia, I watched the whole operation with amazement. The people seem to know exactly what is demanded of them, they do it with extraordinary efficiency and most of us passengers by now understand the deal. You see the plane land, it turns around, the outbound passengers get off and then we get on and off we go. No fuss, no drama and although it's not luxury, it's grand and it works.

Most of the coverage of Michael O'Leary focuses on the PR stunts, the attitude and the "screw you, you paid only a fiver" stance. However, the real success of Ryanair is this operational efficiency and the fact that this is a massively complex operation that has to be consistently competent every day of the year. That takes a huge managerial and personal effort, which is often forgotten.

Next year, it is likely that Ryanair will make yet more profits because this year its cost of fuel was more than $80 a barrel, while in 2016 it will likely be closer to $60. This will give it a 20pc-odd fall in its fuel costs and given that Ryanair uses more that $2bn (€1.8bn) of fuel a year, the cost saving on this alone will be in the region of $400m.

All this cash on the balance sheet will put it in a better condition to emerge as the winner, once the airline industry consolidates and merges in the years ahead.

In a country that doesn't like its winners, or at least begrudges them, it's about time we learned, if not to love Mick, at least to acknowledge him. Imagine national adulation - that's one thing that would truly scare the bejaysus out of that fearless fighter!

Irish Independent

Read More