Saturday 24 February 2018

O'Leary adds some frills to lure business passengers on board

He calls it evolution rather than a strategy shift, but the Ryanair chief's 'less stressed' tack is aimed at filling the leather seats on dozens of new aircraft, he tells Nick Webb

Michael O'Leary
Michael O'Leary
Nick Webb

Nick Webb

A BIT of cleavage is the first thing to greet you in the otherwise fairly grubby entrance hall of Ryanair HQ at Dublin Airport. It's a large poster of a skimpy bikini beauty advertising the controversial charity calendar. Ryanair is in your face the moment you come through the door. But for how much longer?

Pilots, people in suits and kids in jeans mill about. Behind the counter are pigeon holes for Ryanair boss Michael O'Leary, outgoing number two Michael Cawley and the Customer Service Department. That one is packed with post.

O'Leary bursts out through the doors and marches me up to his office. He rustles up some coffees and sits down at a conference table, arms folded behind his head. Bleeeurgh! Ryanair's office coffee tastes like the devil's mouthwash. But it's free and you don't get much free from Ryanair.

But Ryanair is changing direction. O'Leary is supposedly becoming warm and cuddly. He's supposed to be tweaking the system after being savaged by investors at the Ryanair AGM. There were a series of high-profile PR spankings about Ryanair's annoying costs. "I don't give a shite," O'Leary has said when asked about how Ryanair's success is viewed. But selling seats is different. This is business.

Customer service is now king and everyone from O'Leary downward is going to try and stop being horrible. Passengers are now called customers. "It's an evolution rather than a strategy change. We're going to go into some of the more business-type airports, we need to allocate seating for business passengers and we need to stop arguing."

But this is a calculated land grab rather than any notion to improve the lives of travellers for altruistic reasons.

"We own the 81 million price-sensitive people or the people who live around our airports in Europe. We now have to go after the 20 million or 30 million people, the people who'd say 'I'd rather pay an extra €20 or €30 more to fly with Aer Lingus'," he said. "With another 175 aircraft coming from next September, we need to move into this space."

The key part of this planning is to stop pissing people off unnecessarily. "These fees are actually paid by remarkably few people. Less than half of one per cent of passengers flying Ryanair have ever paid a gate bag fee, but you always hear about it. You hear about the boarding card reissue fee. It's paid by less than 0.1 of one per cent of passengers. We need to change. You've got to soften it and eliminate these points of conflict." So Ryanair is relaxing the rules on carry-on bags, queues will be less mental and even the trumpeting sound is under review. "It'll be less stressed."

There's a lot happening under the hood, stuff that will make buying and flying simpler. Ryanair is working on a monster technology overhaul, with a smoking hot new website, big data mining, apps and other cool new stuff. Ryanair is also developing a project with Google to create a flight booking and comparison behemoth. "It'll transform distribution," he predicts. "Selling tickets more effectively will get more bums on seats. Real leather seats too," as O'Leary reminds me.

Getting more bums on seats also means O'Leary and Ryanair must manage relations with governments.

"To be fair, Michael Noonan and the Government deserve praise because they've got it. Let's scrap the bloody travel tax. Already we've announced an extra one million passengers coming into Ireland... which is bigger than the Gathering.

"We are the Gathering for 2014," he says. "The big volume will come from the UK or Europe. It's not going to be transatlantic. If you want another 500,000 people it has to come from Europe. Not Obama coming to rediscover his roots in darkest Offaly."

As the polar vortex winds shake the building, O'Leary can see the Aer Lingus HQ across the car parks at the airport. It's nicer than the Ryanair office, which he describes as "a dingy fucking building".

REBUFFED

A dramatic dawn raid in 2006 saw Ryanair snap up 29 per cent of Aer Lingus just after its IPO. It's been rebuffed with three takeover attempts since then and its stake is so far under water that you'd need scuba gear to count the losses. The Ryanair stake is up for sale. "Nobody has come to offer us anything." The process is now locked down in bureaucratic trench war in the UK and Europe. "If our appeal is successful in Brussels or the UK we could go back again, but frankly, I'm not sure that we would."

The logic for buying Aer Lingus has never been entirely clear. Until now. Aer Lingus would have been Ryanair's "middle class" or business airline. "Aer Lingus would have been the brand for doing the major airports," he reveals. It would have served the main big city routes rather than landing in a field 50 miles out of Venice. Aer Lingus would have flown the key European cities and with all the new stuff ranging from allocated seating, business orientated schedules, mobile boarding cards and fast-track security, would have taken the battle to easyJet. The British low-cost carrier, with its decent website, happy passengers and cheapish prices is in O'Leary's rear-view mirror. He's planning to gun the engines and reverse over them.

O'Leary has also been looking at plans to take a baseball bat to the long-haul airline travel sector. But these schemes are getting dusty because he can't buy any long-haul jets. The "eyeball popping" orders from Gulf airlines have pretty much taken up every single long-haul jet to be manufactured over the next few years. "There's no sign over the next four or five years. But the business plan is already there. Maybe 15 European cities to 12 or 14 American cities and because it's broadly based, none of the big carriers could dump all over you. There's a real business there."

Becoming CEO of Ryanair in 1994, the 52-year-old father-of-four began the greatest fixer upper of an Irish company ever seen, as he built Ryanair into the biggest airline in Europe. Copying and improving the concept created by Herb Kelleher's Southwest Airlines, O'Leary repositioned Ryanair as the ultimate low-cost airline. No newspaper, no breakfast, 20-minute turnarounds at crappy airports and all for €20 to Stansted. It was a masterclass of deconstructing a business model and putting it back together better. As a capitalist achievement, it's bang up there with inventing a pint of Guinness.

Looking at the future, O'Leary sees further seismic changes coming for the transport sector. "It's all going to move digital and mobile. The opportunities for ancillary revenues through mobile are enormous. In five years, everyone on Ryanair will be paying on their mobile. You'll pay for your drinks or snacks with your mobile. You'll upgrade to priority on your mobile and we'll be doing much more individual marketing."

He's only 52 but O'Leary isn't going to sell cheap seats forever. The hair is a bit greyer. He's a bit more whippety. Taking on all comers with an 'in yer face' approach isn't part of the strategy any more. Now it's going to be a bit less rock and roll. Steady, steady growth. Where's the fun in that? "I still have this rolling fucking plan of stepping down in two to three years. I've been leaving in three years every year since 1988. I'll step down when it gets dull and boring."

Introducing allocated seating, Twitter feeds, customer engagement over the landing trumpet sound and all-leather seating, can't really be all that much of a rush for the maverick tycoon. "No. It's never been more exciting. We've a big aircraft order coming over the next five years. Lots of other airlines across Europe are going to get significantly smaller. There are very exciting internet, digital plans and there's a lot to be done over the next year or two." Hardly Barbarians at the Gate but it's racy enough to get his arms waving wildly. "We can't still be the wild boys. It needs to be more sophisticated. It needs to change."

Part of that change will be in O'Leary's own public role. His six-gun is going to be holstered. "An awful lot of the sales and marketing stuff was about me doing my wild man of Borneo stuff, shooting my gob off. It gets a lot of publicity. It's very effective in new markets. They love me in Italy and Spain. But it runs out of road in Ireland and the UK. If you stick around long enough here they'll take you out."

Success has brought its rewards. O'Leary has an absolute fortune. He gets paid about €1m per year but also has 51m shares in Ryanair worth €325m. He's also sold about €65m in recent years. Then there's the dividends: €500m paid to shareholders last year. But O'Leary pays his tax here. His personal tax bill of €14m in 2003 was bigger than Ryanair's own corporate tax bill. The Mullingar-based accountant has always insisted his cash is locked away in the post office. Of course it's not. He owns an office block in the City of London and property in Birmingham and Altrincham.

While the weekends may be about training underage rugby, there are also the fancy moo cows on the country pile and farm at Gigginstown in Westmeath. And the horses. O'Leary is pretty much the biggest owner of National Hunt horses in Ireland. He was champion owner in 2013.

RUBBISH

As in his day job, O'Leary doesn't muck around. Underperforming horses are carted out at the end of each year. "Eighteen were sold. I clear out the rubbish every year. I've no interest in having shit horses." People move out too. Champion jockey Davy Russell was unceremoniously dumped at Christmas. It was pretty ruthless stuff.

While the horses may be a distraction, O'Leary has lasered in on a European recovery to help drive growth. "Europe will be in recovery over the next two to three years, slowly, as there hasn't been any real reforms. We had a phenomenal opportunity over the last five years to deliver critical reforms.

"Look at the private sector. It's been transformed. Competitiveness has rocketed -- but across the public sector there has still been no reform. The HSE is still a mess. The civil service hasn't been reformed. There's no productivity and nothing has been done," he says.

"I think Ireland will bounce back very strongly over the next two to three years. Competitiveness has been transformed and there's been substantial inward investment... not least by us!

"We're the biggest multinational investor in Ireland. Nobody is investing as much in Ireland as we are... yet they are building fucking statues to Google!" It's going to take a brave man to pull O'Leary away from the microphone. Or at least a very big one.

Irish Independent

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