Ireland’s economic blossoming in the 1990s turned a nation accustomed to hiding its meagre wealth into a nation of ostentatious spenders. Economic growth was, by European standards, staggering: in each year from 1994 to 2000 the Irish economy grew by almost 10 per cent net, a spurt that spawned a new generation of multimillionaires.
In 1997 Ireland’s fast-emerging wealth prompted the London Sunday Times to devote part of its annual Rich List survey to the Irish phenomenon. That year the paper could only find seventy-five Irish people worth individually more than £6 million; the collective worth of the seventy-five was just over £4 billion. O’Leary, whose salary and bonuses were unknown while Ryanair was a private company, made his first appearance in the list in 1998, joining the top ten Irish with an estimated worth of €140 million. That year the newspaper commented, ‘A noticeable feature of this year’s list is the high proportion of young self-made millionaires. A new breed of entrepreneurs has leapfrogged over older money. These were led by newcomers [like] Michael O’Leary.’
For some, recognition in the Sunday Times Rich List was an important symbol of arrival, but for O’Leary it was meaningless. His life was dominated by work at Ryanair, which was all-consuming during the working week, and his farm in Mullingar, which took up most of his remaining hours. O’Leary did not parade his wealth or indulge public passions. But his life had changed course over the previous year. He had become one of the most recognizable Irish voices and faces, and his fame, or infamy, was spreading to the UK and onto the continent. The Irish public was being introduced to something it had never experienced before: a chief executive with attitude.
O’Leary did not play by the normal rules of polite engagement. He was prepared to state his case robustly, to argue, harangue and provoke. Along with his stubbornness or intransigence, O’Leary had an extra quality that gave him a marked edge: he did not want to be a bosom friend of prime ministers, or an accepted member of the business elite or the most loved man of his generation. All he wanted was for his business to prosper.
His calculation was simple: if Ryanair was to keep growing, it had to become a household name. He was not prepared to spend (or as he would see it, waste) tens of millions of pounds on advertising campaigns if he could reach people more directly. He recognized that at least part of the success of Southwest came from the high profile of founder Herb Kelleher, the hard-drinking, chain-smoking Texan who gave the airline personality and whose flamboyant behaviour generated publicity. O’Leary could never be a Kelleher – he lacks his charisma – but he could nonetheless give Ryanair a definition of its own.
‘I think he felt that it was important to give the airline some personality,’ says Charlie Clifton, a long-standing executive at the company.
Not at the start, because it was important to do the knitting at the start. But later, when people were comparing Ryanair to Southwest, they would look at us and say, ‘Right, who’s gonna run it? Are you trying to say we’re really like Southwest but we’ve got a dull accountant running the company?’ It wouldn’t have washed. Michael knew he had to lead from the front, but I suspect he took that on reluctantly rather than egotistically. He’d been trying to keep out of the limelight for a long long time.
On one level his new-found fame made O’Leary uncomfortable and presented a threat to his low-key and unremarkable life. He wanted to be seen as an ordinary person, wanted to maintain the myth that he was just one of the boys. But he had also realized that recognition could be used to the advantage of his airline – people’s interest in him translated directly into newspaper coverage, which in turn translated into free publicity for Ryanair and lower marketing budgets. He would happily prostitute himself for the cause, because whatever benefited Ryanair, benefited him. ‘I don’t mind dressing up in something stupid or pulling gormless faces if it helps,’ says O’Leary. ‘Frankly I don’t give a rat’s arse about my personal dignity.’
O’Leary was conducting a series of noisy re-education seminars for Europe’s travelling public. The concept of cheap air travel was still relatively alien outside the British and Irish markets where Ryan-air had already made its mark. O’Leary had to change the way travellers thought about airlines, had to strip away preconceived notions about both cost and service, and he had to do it fast if he was to fill his soon-to-arrive fleet of Boeings with fare-paying passengers.
The primary message was price. In every fight he picked O’Leary would portray himself as the people’s champion fighting against fat, cosy, cosseted and expensive national airlines. The secondary message was simplicity: you pay for what you get, so do not expect traditional levels of service. In O’Leary’s new world order planes were buses; there would be no more romance about flying, no exclusivity and no luxury. Airlines were no more, and no less, than a means of getting from A to B simply and cheaply, and they were now available and affordable to everybody.
Over the years O’Leary had become increasingly unhappy about Aer Rianta’s charges at Dublin, which he claimed were the highest Ryanair paid in Europe – a claim repeatedly denied by the airport’s managers. As a destination, Dublin worked for Ryanair – 40 per cent of the airline’s turnover was from flights in and out of the city – but as an airport, it did not. His solution was simple: build a new terminal at Dublin, attached to the same runway but with different management and lower charges. Competition, which had breathed life and lower prices into the airline industry, should logically be extended to airports. If airports had more than one terminal operated by rival companies then the terminals would compete on price and service for the airlines’ business, rather than charging take-it-or-leave-it monopoly rates.
He was not alone. Ulick and Desmond McEvaddy, two Irish entrepreneurs, through their company Huntstown Air Park, had already approached the government with a view to building a new terminal on land they owned near the existing airport but had met entrenched opposition from Aer Rianta, who had tied the McEvaddys’ proposals up in lengthy legal wranglings. Growing impatient with the delays, O’Leary decided that while what the McEvaddys were proposing was compatible with Ryanair’s needs, the plans were moving too slowly. The best solution, he thought, was for Ryanair to build its own terminal. And so in mid–May he submitted the first plans for Terminal Ryanair to Ireland’s department of transport.
Before submitting the plans, O’Leary had tried to rally support at a Dublin Chamber of Commerce meeting in mid–April, telling the assembled crowd of businesspeople that Ryanair was prepared to spend £20 million on the new terminal as a way to break ‘the totally unfair and appalling monopoly of Aer Rianta’. The move would also make good financial sense for Ryanair, O’Leary said, because the airline was paying Aer Rianta £10 million a year to use Dublin airport, so the airline would recoup its investment in just two years. Ryanair’s terminal would be built on Aer Rianta land which adjoined the airport and would have enough gates to allow Ryanair to operate more flights, O’Leary said. And, eager to capitalize on his public image as the champion of the consumer, he added that the new terminal would mean cheaper fares for those flying from Dublin airport.
Convincing the business community of the merits of his proposals was a relatively easy challenge, but O’Leary was to have a much tougher time winning over Mary O’Rourke, the minister for transport, who would ultimately decide the fate of the plan. O’Rourke hailed from Athlone, in the same electoral area as O’Leary’s Mullingar home. The pair had met occasionally at local events in Westmeath before O’Rourke came to transport, but didn’t know each other ‘in any meaningful way’, O’Rourke says. Once she took over the transport ministry their contact became much more frequent, and O’Leary soon became a thorn in the minister’s side. ‘I wasn’t long in the office when he made contact with me,’ she says.
There was often twenty letters a day. All that is quite silly, I mean if you want to write one punchy letter that’s grand, but twenty letters a day, that’s silly.
I have never met anyone like him in my life. It is not persistence – I’ve met persistent people – he is obsessive, about himself and his business. He’s not interested in a good business relationship, or a social relationship, he is interested in none of those things, it’s just me me me me. I just think he is a horrid, horrid little man.
The hostility was mutual. ‘She’s an idiot,’ he says. ‘I’m very supportive of people who come from the [Irish] midlands but I’m not supportive of an idiot no matter where they come from. Most politicians are idiots, but if you look on the scale of idiocy she’d be right up there at the top.’
O’Rourke was prepared to meet O’Leary to discuss his proposals, but the omens were hardly inspiring. A privately owned terminal would be a direct competitor to the state’s own operator, and required O’Rourke and her cabinet colleagues to take a decision that would inevitably spark serious confrontation with the trade unions that controlled the existing airport, and would provoke political opposition both within and outside the government parties. Either way, there would be no fast decision. The wheels of Ireland’s public service churn slowly, and a decision on something as momentous as a second terminal for the country’s largest airport would not be swift.
O’Leary had commercial logic on his side – a second terminal would give Dublin airport room to grow – but his battle with the unions at the start of the year, and in particular his refusal to engage with Bertie Ahern when he wanted to appear to be solving the crisis, had set O’Leary on a course to conflict with the Irish government. Ahern’s hostility was made evident in a barely concealed swipe at O’Leary in May, when he hit out at managers ‘who don’t seem to believe in social partnership but who have done very well out of a strong economy’ and attacked ‘people who weren’t around ten years ago’who had been’jumped up a bit’by economic growth and’who are now telling us how we achieved what we collectively achieved’.
The lines had been drawn: O’Leary could expect no political support for a plan that would deliver extra jobs and extra tourism to Ireland, largely because that plan was opposed by the trade union movement, whose grip on Dublin airport would be loosened by a privately owned second terminal. For the moment it was a confined battle, one that pitched O’Leary as the people’s champion against a government that refused to deliver better and cheaper services for consumers, and while it undoubtedly alienated O’Leary from the political establishment, it gave him and his company precisely the profile and media coverage that he had hoped for.
In the summer of 1998 Ryanair bolstered its route network further by launching three new routes into Italy – Stansted to Venice, Pisa and Rimini – and two new French routes – Stansted to Lyons–St Etienne and Carcassonne/Toulouse. The routes followed Ryanair’s now established approach of selecting remote airports and hammering out favourable deals on landing charges, promotional and marketing incentives and grants. Each time the offer was the same: We can deliver passengers, what can you do for us to make it worth our while?
The small airports were chosen for a number of straightforward business reasons: they were underused or barely used at all, meaning Ryanair had no competition on the route and also guaranteeing swift turnaround times for their aircraft; they were typically distant from the main cities they were expected to serve, creating opportunities for Ryanair to earn more money from its passengers through deals with car-hire companies, hotels and bus operators, as well as drawing passengers from a greater hinterland. Starved of passengers and planes, they were desperate to please them and were prepared to charge little or nothing for their services and to subsidize Ryanair’s arrival.
For Venice the airline flew to Treviso airport, some nineteen miles from the city centre – a short walk in Ryanair terms – and little more than a shed attached to a runway. The airport at the destination Ryanair dubbed Carcassonne/Toulouse is on the outskirts of Carcassonne but more than fifty miles from the region’s major city, Toulouse. Similarly, a flight to Lyon-St Etienne leaves passengers quite close to St Etienne but some forty miles away from Lyon. Pisa’s airport is close to the city centre – but the main city in Tuscany is Florence, some fifty miles away. Meanwhile, Rimini airport is quite close to Rimini, but quite far from anything else of interest.
For Ryanair each route was but another notch on an ever-expanding belt, but for the five chosen cities the launches were far more significant. ‘It’s equivalent to somewhere like Longford [a small town in the Irish midlands], that doesn’t have an airport, and suddenly has three million people coming in every year,’ says Ethel Power, who helped organize the route launches that summer.
On the launch day for the three Italian routes Ryanair arranged a trip for the press, who would be accompanied by O’Leary and Power on a visit to the airports. Power remembers the reception Ryanair received that day in Italy as the best day of her three years at the airline. Coming in to land at Rimini, ‘We saw the runway and we saw a big guard of honour of all the fire engines down along it,’ Power says. ‘And then as we came in close to land we saw thousands and thousands of people on the apron – breaking security really, they shouldn’t be on the apron – waiting for Ryanair to arrive. They were waiting for God; Michael O’Leary was God coming to these places. I still remember the cheers that went up. Seventeen different television stations had come to see who this man was.’
O’Leary was not overcome by the occasion. The crowds may have wanted to see him, but he had a blunter message that he wanted transmitted on the news programmes. ‘The first thing we did when the door of the plane opened was to carry out a massive sign that said simply, “Londra, 999,000 lira” [about £40]. We held that up before Michael came out of the plane because that’s the shot we wanted on every television camera. We didn’t want pictures of Michael, we wanted pictures of 999,000 lira. That’s what hit them. They were used to paying millions of lira to fly to London,’ Power says.
On the ground, the Italians had gone out of their way to welcome the new airline. ‘Every single tourism organization had rolled out and they were giving a big party. We do the press conference, then an hour later we’re back on the plane, on to Pisa, touch down, repeat the sign, greet thousands of people, and then on to Treviso.’
For O’Leary it was another day’s work, but a hard one. He preferred the office to the road, found the meeting, greeting and posing exhausting. He played to the crowds and to the press to get the news coverage and to transmit the message, but it was tough. The Italian job, though, had pleased him. ‘At the end of the day he said, “Well done,”’ Power says. ‘But “Well done” from Michael O’Leary means you did a fantastic, amazing, amazing job.’
Ryanair’s presence in the Italian market was a clear shot across the bows of Alitalia, which was already teetering on the edge of collapse and insatiable in its demands for capital from the Italian government. Of the major flag carriers, it was one of the most vulnerable to attack from the low-fare airlines, and one of the least capable of making a competitive response. By choosing small regional airports O’Leary avoided direct competition on comparable routes, but the challenge was serious.
In mid-June, after almost a year of hints and speculation, Ryanair announced plans to list its shares on the London Stock Exchange, to complement the listings in Dublin and New York. About £50 million in new shares was to be offered to the market, and the airline’s main investors were to sell another £50 million worth of their shares, so £100 million in total would be available to London investors. All three major shareholders were sellers – David Bond-erman and the Ryan family were both to sell the equivalent of 2.4 per cent of the company, while O’Leary was to sell 1.2 per cent of the company, about 8 per cent of his £130 million stake.
There was some confusion about the motivation for the share sale, which came just a year after Ryanair’s original £300 million flotation. In his first interview with the Irish press, Bonderman told Irish Times journalist Cliff Taylor that this was an ‘ideal time’ for Ryanair to issue new stock. ‘This will enable us to expand the shareholder base here in Europe as we expand our route network in Scandinavia, France and Italy,’ he said. Michael Cawley told journalists that the funds from the sale would be used to finance new aircraft purchases. But earlier that month O’Leary had told UK trade magazine Commuter/Regional Airline News that money wasn’t the primary motivation for the London flotation. ‘We want to raise awareness, broaden our shareholder base and give our existing UK shareholders a means of holding shares in the company,’ he said. ‘We are still perceived as Irish, but 75 per cent of our traffic does not originate in Ireland, and 40 per cent does not even touch Ireland.’
In truth it was a combination of all those factors, and the timing was also advantageous. Rival easyJet was starting its third year, and while the airline had yet to publicly report profits, confidence was high and it had just acquired 40 per cent of Swiss charter airline TEA Basel AG, which went on to be renamed easyJet Switzerland. Several new players were also entering the fray, most notably Go, the much-anticipated low-cost operation of British Airways, which began flying on 22 May 1998. BA’s commitment was a sign that low-cost carriers were here to stay and not some passing craze.
Go’s initial three routes – Stansted to Rome, Milan and Copenhagen – were picked because they were not served by either easyJet or Ryanair. Go’s chief executive, Barbara Cassani, was keen to position her airline away from low-cost carriers such as Ryanair. ‘Low price will not mean low service,’ she told journalists in April. ‘We have excellent staff and we are hoping to encourage people who have not previously travelled far in Europe to fly with us.’
Ryanair professed to be unconcerned by Go’s appearance. ‘Go was never going to be a threat to Ryanair,’ says Power. ‘At that point in time BA was the biggest fat cat around – BA were never going to show Ryanair how to run a low-cost airline. Did we have sleepless nights about Go? No.’
Ryanair’s London offering came to market on 10 July, when twenty-one million ordinary shares were placed at £5 per share. The placement was a resounding success, with demand for the shares more than five times oversubscribed. The Ryan family grossed GB£34 million, as did Bonderman, after each decided to offer an additional 1.15 million shares to the market to satisfy the heightened investor demand. O’Leary stuck with his 1.8 million share sale, and grossed GB£10 million, which he claims he duly deposited in his local post office.
He had plans for the money. Between 1995 and 1998 O’Leary had carefully restored his home. Now he wanted luxury. He asked Westmeath County Council for permission to renovate the existing courtyard buildings and to add a swimming pool, terrace and leisure centre. The development would more than double the size of the house, turning what had been a comfortable family home into a luxurious retreat. He also sought permission to build a dressing room and bathroom adjoining the master bedroom – an expensive storage solution for his undemanding collection of jeans and check shirts.
Controversy was never far away, no matter how successful the international expansion. The baggage handlers’ dispute, which had been on ceasefire since the end of February, had not been resolved. In July the Labour Court findings on the dispute that had shut Dublin airport loomed over Ryanair, and O’Leary knew that he would come in for heavy criticism. He decided on a pre-emptive strike against the bad publicity by issuing share options to all 1,000 employees to a total value of £20 million. It was the first time that an Irish public company had granted shares to all its employees directly, rather than through an ESOP scheme, in which the shares are held in trust.
The details of the share grant were to be finalized on 12 June, when Ryanair was to publish its full-year results. Michael Cawley said the scheme would be salary-related, with employees on higher salaries gaining more shares. O’Leary was keen to add that the share option scheme was in addition to basic pay increases of between 3.25 per cent and 5 per cent, which were significantly ahead of the increases agreed in Partnership 2000, the national wage agreement struck between the government, employers’ representatives and trade unions. ‘We are determined to continue to try to create substantial wealth for our outstanding people, by encouraging them to become long-term shareholders in Ryanair,’ O’Leary said.
It was a smart tactic. O’Leary wanted to demonstrate that his people could do better without a trade union, and he wanted to show that everyone in the company could benefit from its success. It also fitted neatly with Tony Ryan’s early philosophy that every employee should be a stakeholder in the business. Events, though, conspired to dilute its impact. While O’Leary sought positive coverage ahead of the Labour Court report, news that Ryanair had received £23 million in rebates from Aer Rianta since 1994 delivered the opposite.
The scale of the rebates was revealed in an answer to a parliamentary question from Tony Killeen, a Fianna Fáil representative from County Clare. Ryanair’s rebate was not too far ahead of the £21 million received by Aer Lingus, but given Ryanair’s persistent complaints about Aer Rianta’s charges the revelation was damaging for the airline’s credibility.
Aer Rianta, which was now on a war footing with Ryanair because of its proposals for a competing terminal at Dublin airport and its incessant criticism of the organization’s charges and management competence, was willing to stoke the controversy. A spokesman said Aer Rianta had originally been reluctant to disclose details of the scheme for commercial reasons, but that it ‘suits us in some ways to have the figures out in the open…It annoyed the hell out of us to have Michael O’Leary going on about our high charges when Ryanair was getting rebates on that scale.’
A week after the revelation about the rebate, the Labour Court report was released. It showered criticism on both Ryanair and SIPTU, saying both parties must bear responsibility for the ‘chaos and eventual closure of Dublin Airport‘. It said their ‘intransigence’ led to a situation which had brought hardship and inconvenience to 20,000 passengers. Ryanair was criticized for its failure to make a meaningful effort to resolve the dispute, and the report cited the company’s refusal to participate in a Labour Court inquiry and its rejection of government invitations to cooperate with an independent inquiry into the dispute before the airport’s closure. Ryanair had gambled that the protest would be short-lived and would collapse if there was no outside intervention, the report concluded. It also urged Ryanair to review its personnel policy to allow at least limited union recognition, and said the company should ‘re-examine and clarify its policy and attitudes’ towards the Labour Court and Labour Relations Commission.
The unions, though, came in for even harsher criticism, with the report noting that SIPTU, the main union at the airport, had ‘inexplicably’ failed to use its vast knowledge and experience of industrial relations and collective bargaining in the crisis. It said the union had allowed a major disruption to occur over an industrial dispute that involved a relatively small number of Ryanair workers and it criticized the union for ‘creating confusion and uncertainty, deliberately or otherwise, among its members on the reasons and purpose of the strike‘. It had also failed ‘to consult or communicate effectively with its members in Ryanair‘. Damningly, the report found that ‘by its statements, [SIPTU] left itself open to allegations that it had a wider agenda’ and that far from being spontaneous, the walk-out at the airport had been ‘instigated and encouraged by SIPTU activists in airport-based companies. Such action cannot be condoned.’
Aer Rianta also felt the lash. The report found a ‘negative attitude’ to Aer Rianta’s performance on the part of other airport users. ‘In the opinion of airport users Aer Rianta did not have effective arrangements in place to maintain a safe and secure environment for passengers, airport operators and their staff during the weekend of the dispute,’ the report noted. ‘Most airport-based companies were especially critical of airport police, who are employees of Aer Rianta and members of SIPTU’, for joining the strikers.
O’Leary was uncharacteristically quiet the week the report came out and delegated responsibility for public relations to Cawley. He chose Dublin newspaper the Sunday Business Post for his one interview and stuck rigidly to the company’s mantra. Ryanair, he said, had no problem with recognizing a union if the majority of staff wanted it, which they did not – a stance that sat uneasily with the fact that the majority of Ryanair’s baggage handlers had, indeed, wanted union representation. O’Leary, however, did not see his workforce as autonomous units; union recognition would require majority approval from all the staff, not majorities from separate groups of workers. He also defended Ryanair’s decision not to engage with the Labour Court earlier on in the dispute. Cawley, meanwhile, admitted that the airline had failed to manage the media as effectively as it could have. ‘The biggest flaw in our campaign was on the PR side,’ he said. ‘We didn’t manage it well – in fact we made a complete mess of it. We never anticipated thirty-nine people could get so much exposure and oxygen.’
In September 1998 Ryanair suffered a setback in another of its long-running battles. This one dated back to December 1994, when the airline had taken a case to the European Court of First Instance, challenging parts of the Irish state’s £175 million aid package for Aer Lingus, which had been sanctioned by the European Commission the previous year.
Under the terms of the agreement, payments of £50 million in both 1994 and 1995 were contingent on Aer Lingus achieving cost reductions of £50 million. Aer Lingus fell short of this target by £7.6 million, but the commission accepted that Aer Lingus could have the £100 million because ‘substantial progress’ had been made. Ryanair disagreed, claiming that since the conditions had not been met the aid should not have been paid. Ryanair also argued that the commission’s decision to overlook the fact that Aer Lingus flights from Dublin to UK provincial cities were run at a loss meant that the aid was in breach of EEC rules.
For O’Leary it was just another front in his battle with Aer Lingus. In 1993 he and Conor Hayes, then Ryanair’s chief executive, had opposed Aer Lingus’s plans to set up their own low-cost airline, Aer Lingus Express, claiming that the proposed carrier would represent illegally subsidized competition and could ‘ultimately lead to the demise of Ryanair, albeit at enormous cost to Aer Lingus‘. The plan was eventually shelved by Aer Lingus. In 1995 Ryanair complained about Aer Lingus’s plan to introduce new planes on their Dublin–London routes, asserting that the number of seats on the planes would break the terms of the 1993 state aid agreement. His legal challenges were guerrilla tactics, designed to distract Aer Lingus from the serious business of competition, and launched because he knew that the bureaucratic mindset at the state-owned airline would devote money and management time to refuting the allegations – far more time than he would spend on making them. His actions were not frivolous – he always had a point to make, however narrow – but they were vexatious.
In September 1998 the European Court of Justice eventually ruled that while Aer Lingus had been in breach of the conditions set out, the commission was entitled to exercise a degree of ‘discretion’ on the matter. Regarding the loss-making routes to the UK, the court said that while the government was obliged to ensure that such routes were not subsidized, that did not mean that a group like Aer Lingus could never operate a route at a loss. Aer Lingus could keep its money and its routes, but O’Leary still claimed vindication because the commission had upheld his argument that taxpayers’ money should not be used to subsidize loss-making routes. The court, though, ruled that Ryanair should pay all the costs of the action.
For Ryanair the setback was minimal. It had made record profits of £39.8 million for the year ending 31 March 1998, on a turnover of £182.6 million. The airline had also just announced pre-tax profits of £9.2 million for March–June 1998, up almost 20 per cent on pre-tax profits for the same quarter of 1997. Aer Lingus, in contrast, was still struggling, with its operating profits wiped out by the losses it had incurred selling a subsidiary and its heavily unionized workforce denying it the flexibility to adapt to the escalating challenges posed by Ryanair and other low-fare operators. Once again the state airline was lurching towards crisis, while O’Leary drove Ryanair to a new level.
Yet another series of battles arose from the EU’s plan to end the sale of duty-free goods between member states, which was set to come into force in 1998. Stansted airport feared an immediate fall in its retail revenues and decided to repair its finances by hiking landing charges by 15 per cent. O’Leary was having none of it. On 23 September he announced that Ryanair would halt its expansion from Stansted if BAA, Stansted’s owner, forged ahead with the proposed increase in charges. ‘If BAA goes ahead with this, we will not start any more new services through Stansted,’ he said. ‘We will go to an airport that is more growth orientated.’
At the time eleven of Ryanair’s twenty-four routes were from Stansted, and the airport had been the focus of much of its European growth, with recent route launches to new Italian and French destinations. But O’Leary said future growth could easily be from another British airport such as Luton or Birmingham, or from an airport on the continent. The threat to Stansted was deadly serious, says Tim Jeans. ‘At the time, and to this day, there was capacity at Luton,’ he says. ‘We wouldn’t have pulled out of Stansted but we could certainly have driven future expansion from Luton.’
A week later O’Leary showed no such restraint when he threatened a total withdrawal from Dublin airport – Ryanair’s biggest base, with five planes and fourteen routes – if charges there were not reduced. He made the threat after Ryanair’s AGM, describing Dublin as the most expensive of the twenty-five airports used by the airline. As with Stansted, the row was created by Dublin’s reaction to the impending cessation of duty-free sales. Where the UK airport wanted to raise landing charges, Dublin wanted to end its rebate scheme, which rewarded airlines for reaching pre-agreed growth targets by reducing landing charges.
‘Our total payments [to Dublin airport] amounted to about £8 million this year,’ O’Leary said. ‘If those rebates go, those will rise to about £15 million every year.’ He said that Ryanair was looking at a number of solutions to the problem at Dublin airport, including building its own terminal, and that the airline was ‘indifferent’ to whether a deal was done at Dublin or not, pointing out that the future was in European growth, which could just as easily be managed from the UK.
‘If it [a deal at Dublin airport] is not done by Christmas, we will be gone,’ O’Leary said. ‘The government has to make up its mind what it wants to do.’ It was a wild threat – Ryanair would expand elsewhere, but it would not pull out of a large and profitable market because its growth potential was being curtailed.
Aer Rianta was publicly unconcerned about O’Leary’s threat – which was made less potent by Richard Branson, head of Virgin Express, who said he would be happy to fill any gap left by Ryanair at Dublin. ‘If Ryanair pulls out over landing charges we’ll take over,’ Branson toldjournalists. ‘I’ve no wish to undermine Ryanair or put them in a negative position, but if they really did pull out we’ll step in. It’s a very competitive market today.’ In the event, Ryanair did not withdraw a single route from the airport, but Dublin did not get a new route from Ryanair for another three years.
O’Leary meanwhile stepped up the pressure on Stansted by announcing a ten-year deal with Prestwick in early October. O’Leary could now argue that he had a second viable base from which to drive growth in flights from the UK to continental Europe. But when Go announced that it was planning a major expansion from Stansted in early September, Ryanair’s attitude towards the airport changed. Go claimed to be hiring up to 200 staffand said it was in talks with several new European destinations. Far from suspending growth from Stansted, all of the seven new routes launched by Ryanair the following year were either to or from the airport, and the dispute about landing charges was fudged.
For O’Leary, part of the beauty of low-cost travel was that it generated huge volumes of travelling passengers. While they were on his planes they represented a captive audience, sitting in their seats for an hour or more with nothing to do and with plenty of money to spend. The psychology of the early travellers – one that has receded as low fares become the norm across Europe – was that the money they had saved by flying Ryanair could be spent on other things: hotels, hired cars, restaurants, gifts. O’Leary wanted to get his hands on as much of that spare cash as he could, maximizing his revenues from every passenger.
In the 1996 fiscal year ancillary revenue had contributed 17.2 per cent of total revenue, but by 1997 it had fallen back to 11.8 per cent, partly as a result of Ryanair’s abandonment of cargo and charter flights. However, in October 1998 Ryanair embarked on a new stream of ancillary revenue – a tie-in with car rental company Hertz.
Hertz approached Ryanair about the possibility of a deal, and Michael Cawley and Tim Jeans were dispatched to see what could be done. ‘Other airlines were already doing it, so our deal was not particularly special, other than the fact that our commission rates were probably higher. And we felt that because we were still the young mavericks, it was nice to have the imprimatur of somebody like Hertz,’ says Jeans.
The initial deal between Ryanair and Hertz involved Hertz offering preferential fly-drive rates to Ryanair passengers and paying the airline a percentage of the sale price. ‘The great thing was that the secondary airports created a vast market for car hire,’ says Jeans. ‘Because how were people going to get from Carcassonne to wherever? It became part of the Ryanair folklore that if you were hiring a car you had to sit at the front of the flight and leave your wife and children struggling with the baggage so you could be first in the queue at the car hire desk, otherwise if you were at the back of the queue you’d be waiting well in excess of an hour.’
Ryanair’s other ancillary ventures – Ryanair Telecom, Ryanair credit cards and even Ryanair mortgages – would come and go, but the deal with Hertz has gone on to become a staple of Ryanair’s revenue. By the 2005 financial year car hire accounted for 15 per cent of all ancillary revenue and 5 per cent of total revenue. At the time the deal was not seen as monumental. ‘There wasn’t any particular bunting put up in the office,’ says Jeans. ‘It was just another deal.’