While other airlines have floundered post-Covid, Ryanair has enjoyed a spectacular revival. And the flamboyant boss shows no sign of stepping down
‘Never let a good crisis go to waste”, was the most famous phrase attributed to political activist Saul Alinsky. Michael O’Leary, activist of the airways, has just been through his third crisis.
And, true to form, he has not let this one go to waste either. Amid the deluge that has engulfed aviation during Covid and its aftermath, O’Leary and his burgeoning airline are the ones that appear to have made it on to the roof.
Cumulative aviation losses worldwide will be around €200bn. Ryanair lost €1,015m in the first year of the crisis and €355m in the second.
This week, the airline reported its first post-crisis quarterly profit, a modest €110m for a three-month period to June. The profit for the summer months will certainly be greater, although O’Leary is reluctant to even make an estimate before the airline dips back into loss-mode for the winter.
The figure might sound large, but it is a pittance in aviation terms, enough to buy the front half of a Boeing 737 (as far as row 16, if you like). Ryanair has just purchased 73 Boeing 737 max aircraft, so at this level of profitability there are another 72 and a half to go.
But it is black in the industry’s sea of red, and our favourite love-hate figure stands proudly behind it. Michael O’Leary has regained his throne as king of the skies.
When queried about his generous salary (€975,000 in wages and bonuses, according to the latest figures) O’Leary once gave me a comparison with the manager of the English Premier League club he supports. Pep Guardiola of Manchester City reportedly makes more in a fortnight than O’Leary does in a year. And, unlike his rich-list peers, O’Leary has resisted the temptation to seek tax exile status.
How long more will the Guardiola of Gorteen stay in charge? He first told me he would be leaving the post “within two years” back in 2002.
Since then, a generation of executives have passed through, while O’Leary has stayed put. Every few years he refloats the notion that he might retire and, no doubt, enjoys the frenzied speculation that results.
Even the jockey on the horse that adorns the wall over his desk in Ryanair’s Swords headquarters appears to have fallen from O’Leary’s favour since the photograph was mounted.
For the Ryanair chief executive, letting go of the dressing room is going to be as difficult as any of the sports managers he likes to invite comparisons with.
Unlike airlines run by pilots or the type of flight enthusiasts that O’Leary calls “aerosexuals”, he is an accountant at heart.
And he remains so. His idea of happiness is piloting his spreadsheets, keeping his 571 aircraft dancing through 3,000 flights a day. He has a work ethic like Boxer the horse in George Orwell’s Animal Farm.
Out of sight, O’Leary’s accountancy has shifted the way we think about air fares.
Ryanair’s results briefings this week pointed out that the average fare was 6pc down on the same period in 2019 to €34. But the average fare in 2019 was also down 6pc, so what is going on?
The answer is ancillary revenue.
You cannot consider travelling by Ryanair nowadays without checked bags if you do not buy priority boarding, if only to get your 10kg bag on board. Declining average fares are good for web searches. Ryanair has shown the average fare can continue to go down as the corresponding average overall take from the passenger goes up, currently €56 and rising.
O’Leary’s shrewd Covid strategy was to keep aircraft certified and pilots licensed. It paid off in recent weeks, as rival airlines cancelled flights and lost bags, causing huge damage to their reputation.
Across Europe, Ryanair is the airline that has come closest to filling its schedule. While Easyjet cancelled 14pc of its schedule, KLM 11pc, BA and Lufthansa 10pc each and Air France 7pc, Ryanair stayed airborne and has enjoyed a reputation for greater reliability during the holiday season.
Strikes by air traffic control in France and cabin crew in Belgium (but not elsewhere) have affected the summer schedule. Heavily publicised strikes by cabin crew across five southern countries stopped a few flights, none of them destined for Ireland.
Aviation trade union politics are not for the weak-hearted. Ryanair has proved particularly imperfect at mastering them. It commenced the first round of negotiations after deciding to recognise trade unions, typically unpredictably and suddenly, in 2017.
The move was designed to quell potential unrest in southern Europe and unlock the heavily unionised and labour-regulated markets such as France, Germany and the Scandinavian countries. In retrospect, and quietly, Ryanair admits that some of the union deals it signed in 2018-9 were a bit hasty and not always with the right people. Five years later, the airline is working through a new, post-Covid round of agreements, with the largest pilots’ union and largest cabin crew union in the countries it has bases.
In the new post-pandemic negotiating season, there have been quite a few surprises. Not least was the breakthrough deal signed with the Comisiones Obreras in Spain in May (considered the most difficult of the aviation unions; a common query after a labour agreement is celebrated in Madrid is “but what will the Obreras think of this?”)
It was, somewhat predictably, followed by strike threats by two of the Obreras’ rival unions led by the formidable Lidia Arasanz and Monique Duthiers. The pattern of agreements and strike threats in Spain was paralleled in Italy, France and Portugal.
In almost all of these cases, the announcement of the strikes was a bigger event than the strikes themselves. It helped that the larger unions had signed the deals, while smaller unions were the ones complaining.
Ryanair used the two previous recessions to leverage better prices when it went shopping in Seattle for Boeing aircraft. It then collected the bounty in passenger numbers.
In the three years after 9/11, Ryanair passenger numbers trebled, from 5.3 million passengers a year to 15.8 million, overtaking Aer Lingus for the first time.
During the four years of the global economic contraction 2009-12, Ryanair grew from fourth largest to second largest airline in Europe as passenger numbers moved from 57.5 million to 76.5 million, overtaking BA/Iberia and then Air France/KLM.
When Covid struck in March 2020 it was king of Europe, ahead of the combined Lufthansa group of 11 airlines in four countries, with passenger numbers of 152.4 million.
The latest crisis has extended that lead. Monthly passenger numbers for April, May and June this year were the highest in the airline’s history, ahead of the record achieved in 2019. More significantly the margin of increase is itself increasing, 6.5pc in April, then 9.2pc in May and 12pc in June.
Those monthly passenger numbers now show Ryanair as the second most popular airline in the world, behind Southwest of the USA (where O’Leary, as a young executive, first learned his guiding principle of sweating the assets).
Ryanair is now ahead of the three American and two, admittedly Covid-restricted, Chinese airlines which usually vie with the airline among the top seven finishers.
The last crisis of 2009 made Ryanair number two in Europe. Covid has made the airline number two in the world (albeit temporarily).
Who knows what the next crisis will bring? We can be sure that Michael O’Leary, king of skies, cannot wait.