In October 1988 P.J. McGoldrick, Ryanair’s then newly appointed chief executive, had marched across the tarmac at Dublin airport to greet an incoming flight. As the passengers disembarked, McGoldrick scooped Jane O’Keeffe, a twenty-one-year-old, into his arms and carried her towards the terminal building, while press photographers clicked away for the next morning’s newspapers.
O’Keeffe was the millionth passenger to use the new airline. Her reward, McGoldrick said, would be ‘free flights for life’ for her and a partner. ‘What would that cost the company?’ a journalist wondered. ‘We don’t nitpick over the gifts we give,’ McGoldrick replied rather grandly.
At the time money did not really matter in Ryanair. McGoldrick had just taken over from the profligate, if occasionally inspired, regime of Eugene O’Neill and had no idea about the true state of the airline’s finances. Simple things like organizing a contract with O’Keeffe that might specify the precise nature of her entitlement and how she could claim it were bothersome details with which the young Ryanair did not concern itself.
For the next ten years O’Keeffe made use of her free flights, nominating first her sister then her new husband as her travelling companion. In the absence of a contract O’Keeffe and the airline had come to a mutually acceptable compromise. If she gave a couple of weeks notice, Ryanair would put her on the flight of her choice. But then came a crunch in the summer of 1998. ‘It blew up one weekend,’ O’Leary says.
Our records say she called up on the Friday of a bank holiday weekend insisting on two flights to Prestwick and we had only two seats left, and we said, ‘No, you’re not getting it; you have to call in advance.’ She claimed she had called two weeks earlier and nobody had gotten back to her…We couldn’t prove it, she couldn’t prove it. The difficulty with [the case] was that we inherited it from back in the days when nobody [in Ryanair] had a sheet of paper. The only evidence that she had anything from us was some video clip from the nine o’clock news with P. J. McGoldrick saying she had free flights for life. There was no terms, no conditions, nothing.
O’Keeffe remembers it differently, ‘I did get a contract originally but then they had to make changes [and] they never issued a new one,’ she says. ‘It worked very well for many years. It was all very easy, very straightforward. I didn’t ask for anything in writing after that because it was all working fine.’
Her troubles started with that Easter flight to Prestwick.
I was due to go over to Scotland and they had told me two days or so before that I couldn’t travel. I kept ringing up trying to find out what was going on and one day I was put through to Michael O’Leary. He wasn’t expecting me. I was working in Today FM [Ireland’s independent national radio station] at the time, sitting in an open-plan office. We had such an argy-bargy on the phone; we were shouting, and when I hung up everybody in my office was looking at me, asking what was that all about? When somebody is shouting at you, it’s intimidating and I was trying to make myself heard. The only way I could do that was to raise my voice. Of course I got nowhere. He was saying, ‘Stop ringing me, stop ringing my employees.’
O’Keeffe travelled twice more with Ryanair after that, but the refusal to accommodate her Easter plans had rankled, and she believed that the airline, and O’Leary in particular, could not be trusted to honour McGoldrick’s 1988 promise. O’Keeffe’s solicitors exchanged letters with Ryanair, seeking a new agreement or compensation. ‘Whatever about the logistics of it, it wasn’t right, it wasn’t fair,’ says O’Keeffe. ‘I wanted to work out something that was workable but we had reached an impasse. There was no real option [but to issue proceedings] because nobody was budging.’ So in September 2000 she instructed lawyers to write to Ryanair, saying that the airline had broken the agreement and seeking compensation of up to £500,000.
‘We said fuck off,’ says O’Leary.
In December 2000 the newspapers were alerted to the story, and the feeding frenzy began. ‘It’s Ryan-unfair: Woman sues airline as free travel is cancelled,’ the Mirror proclaimed on 18 December. ‘Stingy Ryanair bosses have grounded a woman who was given free travel for life by the budget airline,’ the paper said.
O’Leary was not bothered by the hostile coverage and refused to countenance a settlement with O’Keeffe. He knew the publicity would be bad, but he believed he had to make a stand, if only to show other would-be complainers and litigators that Ryanair never backed down. If you want to take on this company, he was saying, be prepared for a long and expensive fight. It is a strategy that newspapers use against libel claims: they may not fight every claim, but occasionally they pick one to go all the way, just to show that they are prepared to fight and that there is no easy money to be made from suing them. O’Keeffe says she was not after easy money:
They were trying to shaft me for no reason. Halfway through the case they tried to settle and they said, ‘We’ll give you back the free flights, you can have them back.’ After all I had put up with on the TVand the radio during the last few days [of the court case]…I decided, ‘They don’t like me, I don’t like them. I don’t really want to fly with them any more.’ Whatever trust there had been was gone. I’m not small-minded and petty, but when I walked up those court steps I didn’t feel good about them.
O’Leary’s belligerence was not shared by his colleagues. ‘It was one of those things where Michael really didn’t carry the rest of the company with him,’ says Tim Jeans. ‘Nobody could see the point of it. Why put us through all this grief and all this bad PR?’ Jeans might have been right, but O’Leary was not for turning.
The O’Keeffe case would fester in the background for many months as it wound its way to the courts, but it would not be the only generator of bad publicity for O’Leary. His hostility to O’Keeffe was mild compared to the contempt he reserved for Mary O’Rourke, Ireland’s minister for transport. She was his bê te noire – a woman for whom he had no respect yet who had power over key decisions that could make a real impact on his company’s growth and its earnings. The loathing was mutual.
Originally a primary schoolteacher, O’Rourke’s family connections – recently her brother had been a senior cabinet minister – ensured her a power base within the governing Fianna Fáil party. As transport minister O’Rourke was the majority shareholder in Aer Lingus and the sole shareholder in Aer Rianta. If O’Leary were to get a second terminal at Dublin airport he would either need O’Rourke’s support or he would have to undermine her to such a degree that she lost her job or simply buckled under the pressure.
At the start of the year she had again rejected O’Leary’s proposals for a new terminal, claiming that the European Union would not allow the government to give Ryanair special treatment. ‘I will be writing back asking her whether or not she wants to support our proposal to open ten new routes from Ireland to Europe and the UK, creating 500 new jobs and carrying two million passengers a year,’ he replied.
At the end of January 2001 O’Rourke was at her most vulnerable. Enda, her husband of forty years, died suddenly after suffering a brain haemorrhage. His funeral drew crowds of mourners, including Mary McAleese, the Irish president, Bertie Ahern, the taoiseach, and senior politicians from all the major political parties. O’Leary, to O’Rourke’s surprise, joined the mourners. It was a momentary ceasefire.
A few days later he launched a series of personal attacks on O’Rourke through full-page newspaper advertisements depicting her in a bathtub, with the headline, ‘Mary, Mary, quite contrary, how does your monopoly grow? It doesn’t’. O’Rourke was appalled. ‘He did it four days after Enda died, and he saw me; he was at the funeral and I was roaring crying,’ she says. ‘If you wrote a novel about a man who four days after this woman’s husband had died, that he set out to torture her, you’d think it was unbelievable, because you would say nobody could be that cold or that horrid, but he was. He didn’t care.’
O’Leary, as his various battles with rivals and the political establishment confirmed, liked to project himself as the underdog scrapping for a fair chance to take on the big guys. That sense of smallness, of being an entrepreneurial company in a world of state-owned or recently privatized behemoths, was critical to the company culture fostered by O’Leary, but as Ryanair grew quarter by quarter, racking up higher profits and passenger numbers, so the challenge to maintain that culture intensified.
In an interview with the Wall Street Journal, his second in less than a year, O’Leary explained how he coped with the changing shape of Ryanair.
We try to keep a lot of the bull out of the organization. We keep the management structure extremely flat. As we grow, we’re only adding aircraft, pilots, inflight people and engineers. We don’t need these layers of bureaucracy or layers of management.
So hopefully we’ll avoid the bull – by keeping our feet on the ground and not losing the run of ourselves. The downside of success that we really worry about is the danger that the more successful you are, the more likely you are to lose sight of the things that made you successful…Someone wrote a book in the States twenty years ago and said the three things you can always use to tell the time when a company turns from being a success to a failure are when they build a headquarters – the glass palace headquarters office – helicopter outside of it, and the chief executive writes a book. So I think as long as we stay away from all those things, we’re fine.
O’Leary was true to his word. Despite the airline’s success, Ryanair inhabited a drab headquarters building at Dublin airport, using the same furniture acquired by Eugene O’Neill back in 1987, with the exception of the grandiose chief executive’s desk, which had been ditched. There was no corporate helicopter and no corporate jet, and no prospect of O’Leary penning a guide to corporate success. ‘Business books,’ he says, ‘are bullshit and are usually written by wankers.’
His management structure had helped ensure that the same senior managers who had helped float the airline two years earlier were still on board, while growth came through adding bases and adding routes. Alongside the release of third-quarter results – which revealed a 39 per cent increase in passengers and a 23 per cent increase in pre-tax profits – O’Leary announced yet another share sale, this time to raise £113 million, which he said would be used to part-fund the purchase of thirteen more Boeings and launch six more European routes. He was also able to announce Ryanair.com’s first full-year figures, and said that the website had sold 3.3 million seats online.
Growth also required a strengthened board of directors. O’Leary was the only executive to sit on the board, not out of hubris but largely because directors were required to reveal their levels of pay to shareholders. O’Leary had a relatively modest pay package, content in the knowledge that adding value to his shareholding was the real route to wealth. His management colleagues, however, required substantial remuneration. By staying off the board, the scale of those packages and the rate of their pay increases were shielded from public scrutiny.
Just before the results Ryanair recruited to its board Kyran McLaughlin, a stockbroker with Davy, Ireland’s most successful broking firm; Michael Horgan, a former Aer Lingus executive; and Paolo Pietrogrande, a senior Italian businessman. McLaughlin, hugely respected in the Dublin financial market, was the most controversial appointment. The previous year he had been required to resign as joint managing director of Davy after it emerged he had invested almost €320,000 in a Liechtenstein-based trust which was being investigated by the Irish Revenue Commissioners. Ryanair, though, ‘couldn’t care less’ about his Davy resignation, according to their then spokeswoman. ‘The issues surrounding his resignation have no bearing whatsoever on the matter,’ she added. ‘To secure someone of Kyran McLaughlin’s skill and expertise is a tremendous coup for Ryanair.’
The announcement of the sale knocked the Ryanair share price back a few pence to £7.45, a fall blamed on O’Leary’s decision to sell another chunk of his shares. O’Leary told the market that his sale should not be seen as an attempt ‘to get the hell out of here quick’.
‘I’m in the tragic position of selling 10 per cent of my holding a year and still having 90 per cent of my wealth tied up in this airline,’ he said, referring to the steady rise in the airline’s share price each year. ‘I’m selling shares for good, boring portfolio-management reasons.’ Later, O’Leary would say that his frequent share sales were in part prompted by the experiences of the dot-com paper millionaires – the entrepreneurs who had been worth millions because investors had chased up the value of their companies, only to wake up penniless one morning because the market had collapsed. ‘I’m not going to be like those dot-com gobshites,’ he said.
Banking his cash was an essential part of the O’Leary approach. He had enough money tied up in Ryanair, and he instinctively made sure that no matter what happened to the company, he would still be a wealthy man. Making more, much more, from his Ryanair holdings remained his first priority, but he would continue to cash in his shares if the stock continued to rise.
Farmers like cash, and O’Leary was no different from his forebears. February’s sale meant the chief executive had taken almost €115 million out of the company in the previous three years, and had spent just a fraction of it on the fripperies of life. The rest was his nest egg, his rainy-day money, his marker.
‘Ryanair shareholders can’t say they haven’t been warned,’ the Irish Independent said. ‘When a chief executive sells €46m of stock within a fortnight, it’s not a vote of confidence. No compelling technical explanation was offered. The sales go beyond all normal requirements of cash need or diversification. Michael O’Leary is not retiring. Even a Dublin house is not that expensive…Believers put their money where their mouth is.’ O’Leary was unruffled: he remained a large shareholder, he remained committed to driving the company forward, and he had the unequivocal support of his board and his shareholders. Newspapers could write what they like, but O’Leary pointed only to results.
With the money for the new planes banked, O’Leary was ready to take his next step forward. On the day of the results he had said that Ryanair was close to finalizing details of its first continental European base. He had narrowed down the search to three airports: Stockholm’s Skavsta, Frankfurt’s Hahn and Brussels’ Charleroi. On 28 February 2001 Charleroi, owned by the regional Walloon government, was unveiled as the victor. For the airport the prize was considerable – Ryanair’s first-year target was seven routes, up to thirty flights a day and one million passengers – and the victory was the culmination of months of tough negotiation.
‘At the end of the year 2000 we were put on a short list of several European airports located near big cities,’ recalls Pierre Fenemont, Charleroi’s PR manager. ‘The negotiations started in November 2000 and ended at the end of January 2001. It was a long and strong and hard negotiation but it was a friendly negotiation.’
The key issues were financial: how much would Charleroi charge, how much would it contribute to Ryanair’s marketing costs and what would it pay towards the cost of establishing the base? O’Leary knew that his business had already transformed an airport that had been atrophying. Charleroi was about to become a significant and profitable European airport, and the surrounding area would benefit from Ryanair’s decision. Logically, therefore, the owners of the airport should pay Ryanair for the privilege of its business.
The deal, which would soon be referred to the European Commission by jealous rivals, was the template for Ryanair’s future European expansion. The Walloon regional government agreed that landing charges at Charleroi would be fixed at €1 per passenger, about half the standard rate. It also agreed to pay €4 per passenger towards Ryanair’s marketing and promotional costs for fifteen years for up to twenty-six flights a day; a further €160,000 for up to twelve new routes – a flat fee paid regardless of the cost of establishing the routes; €768,000 towards pilot training; and €250,000 towards hotel costs for Ryanair staff. On top of that, Charleroi would charge Ryanair just €1 per passenger for its ground handling services, compared to the normal rates of between €8 and €13 per passenger.
It was a remarkably sweet deal for O’Leary, and was concluded as a bilateral private contract between the airline and the airport. The details were not published and the incentives not made available to other airlines. O’Leary has always maintained that any other airline could have negotiated a similar deal with Charleroi, and that the discounts on ground handling and landing charges were a red herring because the published tariffs were strictly notional. Charleroi’s published rates applied to an airport that had no business; the rates he negotiated applied to an airport that would handle a million passengers a year, all delivered by Ryanair.
Charleroi and the Walloon government believed the incentives were a worthwhile investment; their money and flexibility on charges would deliver an airline, a base and passengers. The airport’s growth would stimulate the local economy, create employment and increase tourism. The airport’s business plan, which was used to justify the deal, expected revenues to surge, not from Ryanair but from other carriers drawn to the airport.
But the plan was optimistic and economical with the truth. It ignored the potential risks attached to the deal, understated the scale of its incentives for new routes and was overly bullish about the earnings that might accrue from other, hypothetical, airlines. In short, the Charleroi business plan was a political document. It was designed to put flesh on a political decision to back Ryanair and its development of the airport – a decision that would require millions in taxpayers’ money but which the Walloon government decided was money well spent if it delivered a bustling airport to a region that had been depressed ever since the demise of its coal mines.
Three years later the European Commission would have to decide how much of the incentives would have been paid if Charleroi had been thinking like a private company rather than an instrument of government. For the moment Ryanair had a deal that boosted its profits and reduced its costs, a deal not made available to any other airline.
‘A lot of work and energy went into the Charleroi base,’ says Tim Jeans.
The great thing was that Ryanair would parachute people in from various departments – they would take a pilot and someone who works in the accounts department and say, ‘Right, you’re going out to Charleroi.’ I effectively moved my sales team out of Stansted and across to Brussels and we lodged in hotels in Brussels for several weeks and prepared the ground in terms of PR, holding press conferences, alerting the media, launching competitions and just getting the name out there.
O’Leary’s tactics for promoting the Ryanair brand were tried and tested. Sabena, Belgium’s struggling flag carrier, would be his whipping boy; as long as it rose to his bait, he would be able to promote Ryanair cheaply and dramatically. Christophe Mueller, Sabena’s president and chief executive officer, should have been prepared for the onslaught, but he proved easy prey for O’Leary.
Ryanair’s opening campaign was low key by its standards: newspaper advertisements carried the relatively uncontroversial message, ‘Welcome Ryanair and its really low prices. Good-bye Sabena and its really expensive flights.’ The second round of advertisements was more typically confrontational. They featured a picture of the famous Brussels statue of a small boy urinating and said, ‘Pissed off with Sabena’s high fares? Low fares have arrived in Belgium.’
Mueller was furious and sent a fax to O’Leary claiming that the advertisements were defamatory. The game had begun, even if Mueller was not yet aware what he had started. O’Leary faxed back his rebuttal. The advertisements, he said, were ‘valid criticisms of Sabena’s outrageously high airfares’. If Mueller had expected the faxes to remain a private matter between two chief executives, he had failed to do his homework on O’Leary. With his fish hooked, O’Leary could start to play. The faxes were speedily translated and sent out to the Belgian press.
Sabena would not let up, however, and Mueller eventually took his complaint to court, where he won a truly Pyrrhic victory. In October, eight months after the Charleroi base had been announced and eight months after the advertisements had first run, Ryanair was ordered to discontinue the campaign or face a fine, and was also instructed to apologize to Sabena. O’Leary complied with the court order, but gave it his own twist. ‘We’re sooooo sorry Sabena!’ his advertisement said, and listed seven one-way fare comparisons with Sabena. ‘Ryanair is really, really sorry and promises to include this information in our future advertising.’
Once again the easily pricked vanity of a national airline had guaranteed Ryanair months of controversial coverage. By the end of the court case Ryanair had become a well-known brand in a country where it now had a base, and its message of low fares was clearly understood.
The airline industry is used to endemic crises: war, terrorism and the vagaries of the oil market all create painful losses from time to time. In February 2001 a different crisis took hold, with the confirmation that in Britain there had been an outbreak of foot and mouth disease.
Highly contagious, foot and mouth afflicts cattle, sheep, pigs, goats, deer and prompts a panic reaction from governments. Once confirmed in Britain, Ireland went on red alert to prevent the spread of the disease across the Irish Sea. The Irish government banned the importation of live animals and animal products. Disinfectant mats were placed at all points of entry and across farm gates, schools, offices and shops, and the movement of animals was restricted. People were asked to cut down on unnecessary travel and public events cancelled.
The seriousness of the situation was evident from the decision to call off the annual St Patrick’s Day festivities in Dublin, while Joe Walsh, the minister for agriculture, banned hunting and fishing and shut down national parks. Dublin Zoo shut on 1 March, and then Walsh called on racing fans not to travel to England for the Cheltenham racing festival. In Britain measures were less draconian, but the nightly television news carried gruesome images of herds of cattle being destroyed and their carcasses burnt in massive pyres.
Sporting events, too, started to fall victim to the foot and mouth outbreak. Ireland’s rugby internationals against Scotland, Wales and England were postponed so that thousands of fans would not travel. The match against Wales, scheduled to take place in Cardiff, was called off just a week before the game was due to take place. In a show of patriotism Aer Lingus immediately offered to refund the tickets of travelling fans or at least to change the dates so that they could make the rescheduled game. Ryanair, however, refused to make any concessions. ‘It may turn out to be something of a PR disaster for us,’ said Ryanair spokesman Enda O’Toole. ‘But these are all scheduled services we have to run anyway. We had a flight into Cardiff on Friday morning with 130 booked and only sixteen travelled. We have to protect ourselves against that.’
The stock market feared that Ryanair, which relied on the Ireland–UK routes to generate more than 40 per cent of its revenues, would suffer. O’Leary disagreed. ‘We will continue to deliver shareholder value despite foot and mouth – it isn’t impacting Ryanair,’ he told an investor conference. He said that 6 per cent of passengers weren’t turning up for Ireland to UK flights, but because the airline refused to give refunds, the no-shows had no impact on revenues. O’Leary was more concerned about the effect of foot and mouth on his own herd of Aberdeen Angus cattle. A prize bull he had bought in Canada was stranded on the other side of the Atlantic until travel restrictions were lifted, and an outbreak of the disease in Ireland would have forced him to kill his entire herd.
There was, though, a moment of light relief at the height of the crisis. On 21 March, O’Leary’s fortieth birthday, his fellow directors organized a surprise. In the middle of a Ryanair board meeting the door was thrown open and in marched Mary O’Rourke, O’Leary’s political nemesis. His shock quickly turned to laughter when he realized it was actually Minister Rourky from RTE’s satirical programme Bull Island, who bears more than a passing resemblance to O’Rourke despite being played by a male actor.
O’Leary spends a lot of time talking to the media, but interviews rarely offer a new insight into the man or his company, and he recycles the same stories and the same explanations, often word for word. His objective remains the same: to promote the brand and the mantra of low fares, preferably via free publicity. Occasionally, however, he will float a new idea and see what happens. In May 2001 he decided to use an interview with Fiona McHugh of the Sunday Times to test some radical thoughts.
In 2001 Ryanair passengers were choosing to spend an average of £4 each on ancillary services. O’Leary noted that an extra pound per passenger on those services would raise revenues by more than £9 million. ‘If we can increase the average spend per passenger by enough, then we could afford to cut fares to zero,’ he said. ‘Ultimately, we are trying to get to a situation where we can give away tickets, not on Monday mornings or peak times, but on midweek seats. All the other airlines are asking how they can get up fares, we are asking how we can get rid of them.’
To get this extra pound per passenger, O’Leary proposed to introduce a host of paid inflight services, ranging from satellite television to Internet services to gambling. ‘I’m working on a [cinema] multiplex model,’ said O’Leary. ‘They make most of their money from the sale of popcorn, drinks and sweets, not cinema tickets.’
O’Leary was thinking aloud, floating the concept of free flights and guaranteeing headlines for his airline. It was not wishful thinking. He believed that if the package on offer to each passenger was compelling enough, he could turn a profit simply by having people on his planes, even if they paid nothing to get there. By no means would all seats be free and Ryanair would still squeeze every last cent out of last-minute travellers, but as the airline expanded and opened new routes, the prospect of filling planes on a wet Wednesday afternoon from Stansted to Malmö or Charleroi appeared a daunting task. Free, or virtually free, flights would draw the numbers; the challenge was to make so much money from passengers while they were a captive market that the giveaway became a profit centre.
Encouraged by the deal with Charleroi, by May 2001 O’Leary was talking to thirty airports that wanted a Ryanair service, fourteen of them in Italy. He was happy to let them compete for his attention and was candid about his intentions. ‘We don’t view any airport as a long-term arrangement per se; the biggest incentive for us to use an airport is a package of low charges. All of our existing arrangements are interchangeable so if, for example, Belfast was to come up with a better package [than Derry] then we would certainly consider it.’
Ryanair wanted low charges, quick turnaround times and money for its promotions and new routes, and it was also saying it would turn its back on any airport that tried to ratchet up charges once it had got their business. To make sure his new suitors were aware of his single-mindedness, O’Leary was able to provide an example. In mid-June he announced that he was terminating the service between Rimini and Stansted, a route launched in 1998. Ryanair claimed that Rimini’s new management and board had tried to break the terms of its deal with Ryanair. It was commercial director Michael Cawley, and not O’Leary, who presented Ryanair’s case to the public.
Here we have the spectre of a misguided airport management and board seeking to break its contract with Ryanair. Ryanair has built up Rimini airport from the provincial backwater that it was prior to 1998 and has transformed tourism in Emilia-Romagna with tens of thousands of new visitors to the region from the UK, not just during the peak summer periods but throughout the whole year.
The airport management and board now feel that they can renege on the terms of the agreement which Ryanair signed originally in 1998 with the airport and expect Ryanair to continue to fly there under some new financial arrangements. What they do not understand is that with ten existing airports and in excess of ten further airports seeking our business Ryanair has more demands for its flights than it can supply for the foreseeable future.
The Rimini flights were immediately moved to Ancona airport, an hour’s drive away.
Rimini was not the first Italian airport to feel the ire of Ryanair. In November 2000 Ryanair had terminated its flights between Stansted and the southern Italian airport of Lamezia, just four months after the airline had begun flying there. Ryanair claimed it was ‘impossible to maintain a satisfactory arrangement with the board of Lamezia’, complaining that the airport had sought to renege on the terms of Ryanair’s deal just months after it was signed.
The disagreements with Rimini and Lamezia were no worse than the problems Ryanair had had over the years with Stansted and Manchester, and they were certainly no worse than the various wranglings with Dublin airport. But while Stansted, Manchester and Dublin were vital parts of the Ryanair network, Rimini and Lamezia were expendable. The number of people living within an airport’s catchment area mattered but not hugely. London was the draw, and London was the market, not Ancona, Rimini or Lamezia. And the message to hopeful airports was emphatically clear: stay cheap, stay amenable or Ryanair will leave.
On 25 June 2001 Ryanair delivered yet another set of solid full-year results: pre-tax profits rose by more than 37 per cent, to €123.4 million, and turnover was up by 32 per cent to almost €487 million. It had been an eventful year for Ryanair, O’Leary said when announcing the figures. Ten new aircraft were purchased; ten new European routes were launched; and a five-year agreement was signed with pilots, cabin crew and ground operations staff. O’Leary said there was ‘no cap on us growing at 25 per cent a year for the foreseeable future’. He stressed, though, that the airline’s growth was being judiciously managed.
Trading conditions over the past twelve months have been difficult, characterized by significantly higher oil prices, fears of an economic downturn, significant retrenchment in the technology sector and the outbreak of foot and mouth disease in the UK in the last quarter. Most of our European competitors have issued profit warnings or reported losses. Despite these negative market conditions, Ryanair has continued to deliver disciplined growth in fleet, new routes, traffic, revenues and profitability. During the last six winter months of the year, when all of the other low-fare airlines in Europe have been recording losses, Ryanair’s traffic increased by 35 per cent and profitability by 37 per cent. What makes Ryanair different from other low-fare airlines is that although our average air fares are some 30 per cent lower, our profits rise as our traffic grows, and we continue to be profitable in all four quarters.
As usual, O’Leary was not content with just talking up his airline’s performance.
I could not let these results pass without highlighting the lost opportunities to the Irish economy and tourism due to the disastrous effects of the present Irish government’s policy of increasing costs at Dublin airport, and protecting this high-cost airport monopoly which has resulted in higher fares and the ending of Dublin airport’s fifteen-year record of annual double-digit traffic growth. This policy is catastrophic for a small island nation like Ireland, whose tourism industry is central to the growth of our economy…It is time for the Irish government to change this disastrous policy before any further damage is inflicted upon Irish tourism.
It was a predictable rant, and it fell on deaf ears. The Irish Times and Irish Independent failed to mention O’Leary’s tirade against government policy in their coverage of the results the next morning. O’Leary’s passion was becoming a private one.
In November 1999 the appointment of Bill Prasifka to the new position of independent aviation regulator for Ireland had promised to change the dynamics of Ryanair’s tumultuous relationship with Aer Rianta. Ryanair had supported the concept of an independent regulator and Prasifka seemed like a natural ally for the company. A newcomer to aviation – something O’Leary always valued – Prasifka had served as director of Ireland’s Competition Authority, and his appointment indicated that competition issues would now become central to Irish aviation policy. Prasifka’s brief would include the thorny matter of airport charges. From now on if Dublin airport or Shannon or Cork wanted to raise their charges they had to get approval from the regulator, and he would lay down maximum charges.
Prasifka’s first year and a half was spent fact-gathering and familiarizing himself with the industry, and his office was only formally established in February 2001.
Despite the regulator’s power over Aer Rianta, the airport authority did little to endear itself to Prasifka, who was forced to seek a court order in March 2001 to force the company to release information to him. Aer Rianta caved in and gave the files to the regulator just before the case reached court, and at the end of June Prasifka gave his much-awaited draft determination on airport charges for 2000–05. He gave all three airports the right to increase their charges, but what he allowed for did not come close to the doubling Aer Rianta had wanted. Under the draft Cork was allowed to raise prices by a maximum of 94 per cent, to €9.08 per passenger, Shannon by 37 per cent, to €7.68 per passenger, and Dublin by just 9 per cent, to €6.30.
The rates were maximums only, and Prasifka said the airports were free to negotiate lower rates with individual airlines if they wanted to. He also set Dublin airport a target of efficiency gains of 15 per cent over the five years after finding that the airport was 30 per cent less efficient than peer airports of a similar size, and chopped €21 million from its proposed capital expenditure budget.
On that point, O’Leary applauded Prasifka’s efforts but his pleasure did not extend to the new charges. ‘The regulator’s draft report fails miserably to facilitate the development and operation of cost-effective airports which meet the requirements of users, and unless his final report meets this statutory obligation, then we will be calling on him to resign his position and allow someone who is willing to challenge the Aer Rianta monopoly – and promote the needs of airport users – to take over.’
At a meeting called to discuss the report, O’Leary went even further with his criticisms of Dublin airport. ‘Dublin is ridiculously expensive,’ he ranted. ‘Dissatisfaction with Aer Rianta by the users is widespread.’ O’Leary was particularly outraged by Aer Rianta’s proposed extension at Dublin airport, which involved spending more than €200 million on a new pier to accommodate flights to Heathrow and some continental European airports. ‘What you want is low-cost facilities, not gold-plated mausoleums. Where in the legislation does it say Aer Rianta can subsidize the fat cats waddling down to Pier C to board their British Midland morning business flight to Heathrow?’ he asked. O’Leary wanted cheap facilities that could handle the needs of a low-cost airline. He did not want elaborate piers for aircraft; passengers could walk to their plane and board by the stairs. He wanted what his critics described as a ‘shed’ – a building where passengers could assemble for check-in and boarding, but nothing more.
Much to O’Leary’s disappointment, the arrival of a regulator had failed to resolve his increasingly bitter dispute with Aer Rianta and its chairman Noel Hanlon. With Mary O’Rourke also a confirmed enemy, O’Leary’s ambitions for Dublin were stymied. He was stuck with an airport management and a transport minister with whom he could not do business, and now he had a regulator who thought it was acceptable for airports to increase charges rather than reduce costs. Prasifka may have trimmed Aer Rianta’s spending but he had not changed the airport’s direction: instead of low-cost facilities, it would press ahead with elaborate and expensive expansion that delivered only marginal increases in capacity.
By the summer of 2001 Ryanair had grown to become one of Europe’s largest airlines. It was carrying upwards of nine million passengers a year, taking in hundreds of millions of euros in fares, making profits which were the envy of the aviation world, and expanding its route network at a fast clip. The one thing the airline lacked, though, was glamour. EasyJet projected a friendlier, hipper image; Go was all touchy-feely and consumer-friendly; Ryanair was just cheap.
And then came the sprinkling of celebrity magic. In August 2001 Tony Blair, Britain’s then charismatic prime minister, announced that he and his family would be taking a Ryanair flight to Carcassonne for their summer holiday. Blair had been expected to choose easyJet, prompting an advertising campaign boasting that ‘even Tony Blair got a bargain this summer’, but in an embarrassing U-turn for the British airline Blair switched to Ryanair – ‘probably because it is convenient’, according to a Downing Street spokesman. It was a stroke of luck and a massive publicity coup for O’Leary. Ryanair was undoubtedly cheap, but if it was good enough for Blair and his children then it was good enough for most.
Ryanair’s reaction to the news was remarkably restrained – ‘Downing Street aides have confirmed Tony Blair will be flying with us, but we cannot discuss any details,’ a spokesman said – but it still used the opportunity to get across its message. ‘If he wants a cup of tea or a sandwich he will have to pay for it; this is a very egalitarian airline,’ the spokesman told the London Times.
Some high-profile travellers, however, refused to use O’Leary’s airline. Des Geraghty, president of SIPTU, reacted furiously when O’Leary said he was a Ryanair regular. O’Leary claimed on radio that it was ‘breathtaking’ that Geraghty had ‘flown six times with Ryanair in the past six months’ yet continued to criticize the airline so vehemently. Geraghty said he would seek an immediate retraction of O’Leary’s ‘misrepresentative claim’, or failing that an apology in the courts. He insisted he had never travelled on a Ryanair flight ‘before, during or since’ the baggage handlers’ strike in 1998.
Characteristically O’Leary refused to apologize. If Geraghty hadn’t flown Ryanair, why were the hard-earned dues of union members ‘being frittered away on higher fares for SIPTU bigwigs’? Or did Geraghty get a ‘special deal’ on Aer Lingus and ‘travel with the other fat cats in business class’?
‘I don’t travel with fat cats, skinny cats or any other cats,’ Geraghty replied. ‘Actually, I usually take my car and the ferry when I go on holiday. I would normally travel economy class and I travel with Aer Lingus because that’s where our members work.’
O’Leary could not have cared less. His airline was growing, his profits rising and his routes expanding. Disease and high oil prices had not knocked Ryanair off course; Blair had given the airline his blessing; and while O’Leary was bogged down in a long war over Dublin airport and its development, this was not distracting him from the main prize. European domination was the goal, and O’Leary was on his way. What could go wrong?