Just before 9 a.m. on 11 September 2001 American Airlines Flight 11 was flown into the North Tower of New York’s World Trade Center. Fifteen minutes later United Airlines Flight 175 crashed into the South Tower, and thirty minutes after that American Airlines Flight 77 hit the Pentagon in Arlington, Virginia.
In less than an hour the world changed. Almost 3,000 people died in the attacks, which had been planned and executed by members of al-Qaeda. The consequences were immediate and far-reaching: death and devastation in New York, Washington and in the fields of Pennsylvania, where United Flight 93 had crashed after its hijackers had been overwhelmed by passengers, followed by the launching of US-led invasions of Afghanistan and, eventually, Iraq.
The attacks sent the airline industry into a tailspin. Who would want to fly in their aftermath? And what levels of security would have to be introduced to prevent a repeat of the easy hijackings that had made the attacks possible? ‘The US airline industry is in an unprecedented financial crisis,’ said Continental’s chairman and chief executive Gordon Bethune. ‘This patient is dying very quickly. We all are going to be bankrupt before the end of the year. There is not an airline that I know of that has the excess cash to handle this.’
Before 9/11 that crisis had already been well on its way. The major American airlines had consistently failed to bring their costs into line with their revenues and were racking up losses at a remarkable rate. Yet, thanks to the generosity of America’s bankruptcy protection laws, their financial incontinence did not force the collapses or mergers that would have rationalized the industry and allowed healthier and leaner carriers to emerge in their place. Smaller airlines went to the wall, and some larger ones; but the majority struggled on, fighting with their employees, staving off their creditors and trading at a loss.
For them 9/11 was also an opportunity, because it allowed them to blame external factors for their own deficiencies, gave them an excuse to announce large-scale redundancies already in the pipeline, and encouraged them to put out the begging bowl for government assistance. Within days of the attacks American Airlines and United Airlines both announced they were shedding 20,000 jobs, while Continental and Delta said they would cut 12,000 jobs each. Industry analysts estimated that the attacks would cost America’s airlines a further $3 billion in losses and that 100,000 jobs would be lost.
European airlines were also preparing for the worst. British Airways’ share price tumbled by almost 40 per cent in the four days after the attacks and the company responded by announcing 5,200 job cuts on top of the 1,800 voluntary redundancies revealed just weeks before. Alitalia, Italy’s long-suffering flag carrier, announced plans to cut 2,700 jobs and grounded thirteen jets in response to what it termed ‘by far the worst crisis commercial airlines have faced since the end of the Second World War’. And in Ireland Aer Lingus suspended a quarter of its flight schedule and said it would shed 600 temporary workers.
Back in Ryanair headquarters, however, the reaction to 9/11 was somewhat different. O’Leary’s immediate response was classic: he launched a seat sale, offering one million seats at the then low price of GB£9.99 each and using the iconic image of General Kitchener calling men to war with the tag line ‘Your country needs you.’
O’Leary had no sympathy for the flag carriers’ woes and was sceptical about their motives in calling for help. ‘There is little doubt that tragic events in the US are being used by a number of European flag carriers as an excuse upon which to blame their long-standing cost problems and an opportunity to look for subsidies and handouts,’ he said. ‘We intend to fly our way out of this crisis by giving passengers even more reasons to travel at even lower prices. I think a lot of airlines are making hay out of what happened and trying to create their own crisis. This is our chance to send out a clear message to the big, fat flag carriers who are looking for state subsidies.’
It was a response that prompted accusations that O’Leary was trying to use the atrocities to grind his rivals into the ground. He was, but he was also doing what he did best: using any opportunity to sell seats, calculating that people’s fear of flying would be tempered by low prices. ‘You might be scared of flying at £200 return, but you’ll be a lot less scared at £20 return,’ he said. And he was right. While the high-fare airlines saw sharp falls in bookings, the Ryanair seat sale was an instant success.
A million cheap flights was, however, a small stroke of opportunism compared with O’Leary’s major coup. In the months before 9/11 O’Leary had been engineering a Dutch auction between Boeing, the aircraft manufacturer which supplied all Ryanair’s current fleet, and Airbus, its European rival. O’Leary’s expansion plans required scores of planes over the next five years and he was focused on securing the cheapest possible price. His tactics were crude but effective. During July he had cancelled options that Ryanair held on nineteen new Boeing 737s and then stated publicly that he would be trawling the second-hand market to find fifty planes to meet his growth targets. In August, just before the 11 September attacks, Ryanair had placed full-page advertisements in trade publications for fifty second-hand Boeings and within a month had 600 to choose from, all priced at under $15 million each. At the same time he informed Airbus that he was open to offers. He said he would not deviate from his policy of operating a uniform fleet, but if Airbus wanted to convert Ryanair from an all-Boeing to an all-Airbus carrier, now was the time to make its proposals.
He was not bluffing. The list price of a new Boeing was $60 million, with an Airbus A320 marginally cheaper at $58 million, both far more than he was prepared to pay. But the attraction of new aircraft was that ongoing maintenance charges and running costs would be significantly lower than with second-hand planes.
For both manufacturers the stakes were remarkably high. Each had studied Ryanair’s growth, subjecting its business model and projections to exhaustive testing. They knew that the airline would be a major customer in the years to come and also that O’Leary would not deviate from his conviction that Ryanair should operate only one type of aircraft. Winning O’Leary meant not just hundreds of millions of dollars in orders from the Irish airline, it meant that the winner could claim to be the provider of choice to Europe’s most dynamic airline.
For Airbus, the pressure to win was intense. Boeing already had Southwest, America’s most successful low-cost airline, as its largest customer. Airbus had no significant presence in Europe’s low-cost market – its home patch – and it needed to shoulder its way in.
Technically, O’Leary believes, there is little to choose between the planes. His criterion was price. ‘In the autumn of 2001 Ryanair started to involve us very seriously in the evaluation of sourcing additional aircraft,’ says Chris Buckley, a vice president with Airbus. ‘I would say that the main reason for doing that was to put tremendous pressure on Boeing so they could get the deal they wanted from Boeing for additional aircraft.’
It would have been a tumultuous battle even without the intervention of 11 September, but the terrorist strikes gave the negotiations added bite. The manufacturers’ plight was fast becoming desperate as carriers cancelled aircraft orders and dumped their options. Boeing was in crisis. Its order book had halved almost overnight and it was about to embark on a massive redundancy programme that would see 50,000 workers lose their jobs in Seattle. Airbus, too, was being pushed to the brink, although the company’s chief commercial officer, John Leahy, insisted there would be no job cuts.
O’Leary could smell blood. ‘As soon as either one of them came up with a price, O’Leary would fax their offer through to the other and say, “That’s what I’m being offered, better it,” says one former executive. The manufacturers knew that they were being played, but could not afford to back away. The second-hand market was bloated with planes, their customers were in retreat and there were no new ones on the horizon. O’Leary was the only buyer in a buyers’ market.
In O’Leary’s book state aid was a mechanism to keep inefficient airlines in business. It distorted the market and was, he argued, illegal under European competition laws. When Sabena secured a €125 million ‘bridging loan’ from the Belgian government after 9/11, he complained to the European Commission. And he was preparing another tirade against ‘lazy incompetent national airlines’ when the waters were muddied by news that Ryanair itself was a beneficiary of a form of state aid.
The 9/11 attacks had prompted insurance companies to withdraw their war risks cover from airlines, and governments stepped in to provide the insurance indemnity without which airlines could not fly. As Ireland’s largest airline, Ryanair was the greatest beneficiary of the Irish government’s decision to provide the indemnity.
O’Leary insisted that Ryanair had offered to pay the government for its cover, and vigorously denied that the temporary provision of insurance cover in such exceptional circumstances could conceivably be termed state aid. ‘It is not state aid, because it is not costing the state a penny,’ he said. ‘We would be happy to pay in any case.’ Such subtleties, however, did not find favour in the Irish media. The Irish Times report was typical: ‘Ryanair wins under state aid cover plan’, and it followed up its news coverage with an opinion piece that argued that Ryanair and O’Leary were hypocritical about state aid.
‘Let’s get one thing clear,’ the article began. ‘Michael O’Leary is not opposed to state aid to Aer Lingus. He is opposed to anything that gets in the way of profit at Ryanair, be it state aid to the national carrier or ice in his customers’ drinks.’ Ryanair, it argued, had no objection to state aid when the Walloon regional government gave it subsidies of about €12 million per year to operate from Charleroi airport. And the airline’s ideological objections to state aid were muted when it accepted the government’s insurance indemnity.
O’Leary was not prepared to let the paper’s views go unchallenged, and three days later his own article appeared on its opinion pages. ‘We are indeed opposed to [state aid],’ he wrote. ‘Not…because it would get in the way of profit at Ryanair (it wouldn’t), but because it will threaten some of the jobs of 1,700 – mainly Irish – people employed at this company. How would [the Irish Times] feel if the Irish Independent or the Irish Examiner were to receive Government subsidies to compete with the Irish Times ?’ He then addressed the issue of state aid from the Walloon government.
The low-cost arrangement we have entered into with Brussels South Charleroi Airport is not State aid. It is a low-cost arrangement (which in turn is passed on in the form of low fares) which is available to every airline – including Aer Lingus – that wishes to fly there. This is not, as asserted, State aid.
State aid does not result in efficient airlines or lower fares – it props up inefficient airlines and high fares. I object to State aid for our principal competitor, when it is quite clear that this aid will be used to assist it to compete against Ryanair.
His argument was passionate but failed to deal with the newspaper’s most pointed accusation – that O’Leary and Ryanair were hypocritical in their approach to state aid. O’Leary did not explain how state aid for Aer Lingus threatened Ryanair jobs but not profits. Without doubt, Ryanair’s profits would have suffered if Aer Lingus, or any state-owned airline, was given unlimited resources by its government to compete with it. His objective was to ensure that as little state assistance as possible found its way onto state airlines’ balance sheets, because the weaker they were, the better equipped Ryanair was to compete with them aggressively. There were, too, semantic distinctions that O’Leary took seriously: he saw his deal with the Walloon government not as a subsidy or state aid, but as a commercial deal that would benefit both sides. Ryanair would get the opportunity to build a new market at low cost and with financial help, but the long-term winner would be the Walloon region. It was not a subsidy to prop up an ailing airline or to distort competition, but an investment by the Walloon government in a profitable future.
O’Leary also said that he was calling a truce with Mary O’Rourke, the transport minister. ‘We have requested a meeting to explain in detail how – by working together – Ryanair and the government can deliver two million new passengers and 500 new jobs for Irish airports and Irish tourism over the next two years. I hope she will respond magnanimously in the national interest.’
The day after his article appeared, O’Leary and O’Rourke attended a political fund-raising event hosted by Charlie McCreevy, Ireland’s finance minister and a friend of O’Leary. ‘Reports say they [O’Leary and O’Rourke] were not observed in friendly conversation, or indeed any conversation at all,’ the Irish Times noted. By early November, however, reconciliation was back on the agenda when O’Leary said he had decided to stop ‘slagging off’ government ministers. His comments came during a conference call with stock market analysts, as he was discussing the prospects of Ryanair’s terminal and the location of Ryanair’s next base.
‘Our view remains unchanged that Aer Rianta is a high-cost, inefficient monopoly, but perhaps the Irish government’s view is changing,’ he said, according to a transcript of the conference call.
There is a new atmosphere and it’s time to stop slagging off the government and certain Cabinet ministers and work more cooperatively with them. If not, we could see 15,000 to 20,000 tourism jobs lost. The government is giving some consideration to our plans to break the Aer Rianta monopoly and our plans for a second terminal. But I’m guessing that the government will not be able to move quickly enough to meet our deadlines.
O’Leary, in any case, was not prepared to wait. He was hunting for a new continental base to complement Charleroi, and in late 2001 he chose Hahn, the former NATO airfield in southern Germany he preferred to call Frankfurt Hahn.
The two sides signed a twenty-year deal which would create 200 jobs and provide at least thirty flights daily to more than ten destinations from February 2002. Ryanair promised these flights would deliver 1.5 million passengers in the first year. For the airline it meant a guaranteed low-cost base for twenty years in Europe’s largest market. For the airport, the deal with Ryanair guaranteed its future.
‘A deal is a deal,’ says Hahn’s Helfer.
And of course it includes some provisions for inflation, and there are provisions in the deal concerning what happens if they grow to a certain level of base aircraft and so on, but basically it is a deal. It doesn’t make sense for an airport to handle Ryanair as a customer, give it a low-cost deal, and then increase your charges by 100 per cent two years later, because then their business model wouldn’t work. We have a passenger charge of €4.35 and that is it.
Helfer says Hahn offered Ryanair a cheap deal because it was the only airline flying there. ‘That’s the problem of conventional airports,’ says Helfer. ‘They have, let’s say, one daily flight from Lufthansa going to Frankfurt or one daily flight from Aer Lingus going to Dublin and they have to be very careful not to deteriorate their price base with the traditional customers when they start doing business with Ryanair. We did not have this problem.’
O’Leary was happy with the outcome, and happy to use it as a stick with which to beat Aer Rianta. ‘What makes Frankfurt Hahn different is that everything they said they would do from day one they have delivered on,’ he said. ‘This new German base means that four more aircraft, 200 new jobs and over one million tourists have again been lost to Ireland by the high-cost Aer Rianta monopoly.’
His relationship with Dublin airport deteriorated further at the end of November, when the two disagreed about the creation of a special low-cost facility within the airport, prompting Aer Rianta to state that a low-cost deal for Dublin did not necessarily have to involve Dublin airport. ‘It is worth noting that Shannon airport is only marginally further from Dublin than many of the European airports Ryanair flies to [that claim to be city airports],’ a spokesman said, referring to airports like Malmö, Hahn and Beauvais. It was a valid, if mischievous, point. It also highlighted the differences between an established airport like Dublin and a transformed military base like Hahn. Dublin had an international market, a host of carriers as customers and far less flexibility to manoeuvre. Hahn, starting virtually from scratch, could offer dramatically cheap deals because it was desperate to build a business.
O’Leary is a supreme pragmatist who never worries that his actions might contradict a previously stated policy. He will do whatever he thinks is best at the time and execute a perfect U-turn moments later if conditions change.
In his long-running battles with Aer Rianta, O’Leary used a familiar refrain. The airport company’s refusal to reduce its charges and the Irish government’s inability to deliver a second competing terminal in Dublin was, he said, depriving Ireland of both new airline routes and consequent tourism growth. When he announced the new bases in Charleroi and Hahn he reiterated that Ireland had once again lost out on the opportunity to have more routes because of the intransigence of Aer Rianta and the government. He would not, he said, launch another route from Dublin until there was a change in policy, and other countries would benefit instead from Ryanair’s growth. He had also denounced both Glasgow and Edinburgh airports as far too expensive and had opted instead to base Ryanair’s Scottish operations in Prestwick.
Barbara Cassani, unfortunately for her and her fledgling airline, believed O’Leary’s rhetoric and decided that Go would launch a route from Dublin to Edinburgh. Her decision was announced in July, with the service due to start operating at the end of September.
O’Leary’s response was immediate and brutal: Ryanair would crush Go, no matter what it cost. In part, his determination to see off Go was simple machismo. Ryanair wanted to retain its dominance of the low-fare market between Ireland and the UK and would brook no competitive threat. His response was as consciously predatory as Aer Lingus’s earlier attempts to knock Ryanair out of the skies, and showed that O’Leary only liked competition when it was on his terms.
‘Go foolishly decided to come into Dublin,’ recalls Tim Jeans.
‘David Magliano, the Go marketing director at the time, apparently told Barbara Cassani not to worry. Go could do Edinburgh and Glasgow because Ryanair wouldn’t follow. We had often said quite publicly that we would never darken Edinburgh’s doors because [its landing and passenger charges] were far too expensive and it wasn’t our kind of airport.’
Cassani’s decision to launch a Dublin–Edinburgh service was not illogical. At the time the route was served by Aer Lingus, which operated two Fokker 50s and ran four flights a day. It was an expensive route – a typical return fare was more than £200 – and it seemed ripe for competition. Instead of a battle with Aer Lingus, however, Cassani got a price war with Ryanair, or as Jeans says, ‘a competitive response of biblical proportions’. The number of planes ploughing the route ballooned from two Fokkers to thirteen Boeing 737s daily, with a capacity of 1,500 passengers each way, as Aer Lingus, Go and Ryanair battled for supremacy.
‘We certainly weren’t making money,’ says Jeans. ‘But this was very much part of the cost of defending our territory. The costs of the exercise were never calculated and it was only a question of when would Go pull out.’
Ryanair’s fares undercut Go, tumbling to £5 each way. Eightyfour days after launching the route, Go admitted defeat and withdrew. ‘We got a thrashing,’ Cassani wrote some years later in her book about Go.
Going head-to-head cost us millions and we withdrew wounded. We learned another crucial lesson about discounting. You can’t take on someone with lower costs because they dig deeper than you to lower their prices and still make money, while you’re bleeding.
We seriously misjudged how seriously and how angrily they would take the incursion into Dublin. It was just a really tough lesson in business.
For Ryanair the battle had been a resounding success and had created a firm precedent – mess with us and we will crush you. Prey had turned predator, and would use its power to drive away competition by cutting fares to the bone. O’Leary’s response, though, was only possible because of his obsessive attention to costs. Ryanair had become the lowest-cost operator in Europe, and so could charge less than any competitor on any route without losing money. Even where it dropped its fares to loss-making levels, it could still recoup revenue from its ancillary deals. Critically, its low costs allowed it to sustain a price war longer than any rival could bear.
‘It sent a warning shot to everybody,’ says Clifton.
If you step on our toes we can sustain lower costs and lower fares better than anybody else. It’s particularly true when you’ve got a guy like Michael on top. Airline executives have to decide if they’ll compete with Ryanair or not. They look at the cash balance and they look at the guy running it. And [after Go’s experience] it wasn’t a very good idea to go into your board and say, ‘I’ve decided to take these guys on, because they’d have to fly for free for ten years to beat us off,’ because a number of people sitting around the board table would say, ‘Well, maybe they just will.’
For O’Leary, route dominance mattered. It gave him extra power with the airports served by his airline, and it gave customers in search of a cheap ticket no option but to choose Ryanair. It was not, however, predation in the old style. Where Aer Lingus wanted to crush Ryanair so that it could restore high-priced travel, O’Leary’s philosophy was fundamentally different. He wanted volume, and the way to drive passenger numbers ever higher was to reduce ticket prices. He wanted dominance on a route not so that he could push up prices, but so he could have far greater control over the airports and their charges. The result would be higher profits, but they would come from squeezing his suppliers for extra savings and from boosting passenger numbers, not from raising ticket prices.
While O’Leary and his colleagues basked in their swift victory over the pretender, Aer Rianta complained to Ireland’s Competition Authority that Ryanair had ‘launched services on the same routes with the sole purpose of putting its competitor off the routes’.
Aer Rianta chairman Noel Hanlon had already written to the government to complain. ‘Ryanair publicly stated that they would not allow another low-cost airline to operate on these routes, and proceeded to offer fares at £5 return with the sole purpose of putting its competitor off the route. To do so, Ryanair pulled capacity from three other routes which had an overall effect, from Ryanair’s point of view, of not increasing capacity but of undermining its competitor.’
O’Leary was unfazed. ‘The thought of our airport monopoly making a complaint to the Competition Authority fills me with joy and wonder,’ he said.
For Cassani, the battle with Ryanair was a defining defeat. The barbarians had trampled all over the nice people and Go’s credibility had taken a battering from which the company would struggle to recover. O’Leary just banked the victory and moved on. It had been important to win, but he had had no doubts that he would. Securing a deal for new aircraft was far more important, and demanded his full attention. By the end of the year Airbus had won, or at least it thought it had. It had offered to sell Ryanair its planes for just under $30 million each – effectively half price – and Boeing had come up short.
Chris Buckley suggested O’Leary and his team come out to Toulouse to finalize the deal. ‘And that is exactly what we accomplished. That day in Toulouse, Michael and our president at the time, Noel Forgeard, shook hands on a deal for a hundred A321s.’
As far as Airbus was concerned the deal was done, but O’Leary had other ideas. Airbus’s offer was attractive, but it gave him the ammunition for one last shot at Boeing. ‘As far as I know, Michael called Boeing on the day, and said he had been in Toulouse, had a deal with Airbus,’ says Buckley. ‘Boeing came back on the following day, knocked some more money off, and Ryanair called us up, and said they were going to stick with Boeing after all.’
Boeing, like Airbus, was up against the wall. Production at the 737 plant in Renton, Washington had been cut in half, morale was at rock bottom and tens of thousands of employees had already lost their jobs. It was not a situation Boeing was used to. It was the dominant player in world aviation, having snapped up old rival McDonnell Douglas – maker of the infamous DC10 – in the 1980s. Airbus, a European consortium driven together by political desire rather than economic compulsion, was the new kid on the block, and its aggressive sales techniques made Boeing look patrician, old-fashioned and complacent.
But this time, Boeing knew it could not afford to lose. Alan Mulally, Boeing’s chief executive, decided to do the deal with Ryanair whatever the price. Boeing had one extra shot in its locker that Airbus could not match.
The 737–800 series, with its slightly elongated body, could carry 189 seats in Ryanair’s tight configuration – sixty more than the older 737s and thirty more than the Airbus A320. This would put enormous pressure on O’Leary to fill the new capacity, but his calculation was that those extra places reduced the average cost of each seat on the plane. They also gave added firepower against his competitors, allowing him to ramp up seat availability and flood the market on chosen routes with low fares and the capacity to match. It was a risk, but a calculated one. ‘We were getting the extra seats almost for nothing,’ he says. ‘The challenge was to fill them.’
For Airbus, the memories of the deal that never was are still painful.
‘This was an unprecedented event for Airbus, because after having two chief executives shake hands, it’s normally left for everybody else to quickly do the paperwork and make sure everything else happens,’ says Buckley. ‘When the Ryanair delegation left Toulouse we were elated, we actually thought we had a deal. But then our reaction was one of massive disappointment that we had not won as we thought we had. And [there was] massive disappointment that the handshake we had thought we had was not even a handshake at all.’
Unusually for O’Leary, he showed Airbus some compassion in their loss. ‘We had a letter from Michael a few days later,’ says Buckley. ‘It was thanking us for all our efforts, apologizing but business is business, and the Boeing offer was much better. At least[we had] something in writing from Ryanair, but that only goes 5 per cent of the way to mitigating our disappointment about not winning.’
The result was a spectacular coup for Boeing, but it was even more spectacular for O’Leary. ‘We raped the fuckers,’ he crowed shortly after securing a deal that delivered him a hundred brand new Boeing 737–800 jets, and an option for fifty more, for less than half price – just over $28 million a plane. Boeing, however, did not care. Asked how he felt about the ‘rape’, Toby Bright, then Boeing’s vice president in charge of sales, replied with a straight face, ‘We enjoyed the experience.’
The deal had stabilized Boeing’s Renton plant and, just as importantly, had given the company a solid platform in Europe. For Boeing’s employees, oblivious to the high-wire negotiations that had delivered the deal, news of the Ryanair order caused jubilation when it was announced at the end of January 2002. ‘It was a fantastic feeling,’ says one Renton veteran.
For months there had been a sense of unimaginable doom. It’s difficult for people outside Boeing to understand, perhaps, but when we watched those planes hit the towers on September 11 we were watching planes that we had built being turned into weapons. It was a sense of violation. And then came the cancelled orders and the trauma of the layoffs.
The spirit here in Renton is great, but nothing could withstand those sort of setbacks. We badly needed a lift, and Michael O’Leary gave us that lift. He came to us when we were at our lowest, and he said, I believe in you and I believe in your product and I want to do business with you. More than that, though, he promised us he would take our fight with Airbus to his heart. It was like something out of Braveheart rather than something you’d expect from an airline boss.
When O’Leary arrived in Renton to address the Boeing staff in February 2002 he was given a rousing ovation by a crowd of almost 2,000 employees, who cheered as he regaled them with tales of lazy state-owned airlines and hammed up Boeing’s victory over Airbus. ‘We love Boeing,’ he told the crowd. ‘Fuck the French.’
On 25 January 2002 Ryanair went public with its new Boeing deal. Ten days later, after announcing yet another set of recordbreaking quarterly results which showed that profits had risen by 35 per cent to just under €30 million for the third quarter, the company seized the opportunity to place another thirty million shares on the market to raise €162 million, with a secondary offer raising an additional €25 million when demand for the new shares once again exceeded supply. For a change, O’Leary did not participate by selling any of his own stake in the company.
Ryanair had another cause for celebration in February – a partial victory in its long-running battle with Aer Rianta, when the airport operator agreed to provide a designated area in Dublin for low-cost carriers.
The agreement came on the back of a report by international aviation expert Professor Rigas Doganis which had recommended the initiative. The new facility would be operational for the 2003 season, Aer Rianta promised, and would give low-cost carriers a quicker, no-frills service. The key to the proposal was speed and convenience; lower charges were not on the agenda. Doganis’s report ruled out Ryanair’s plans for an independent low-cost terminal, but a partial victory was better than no victory at all.
‘This will be a physical area which low-cost flights on any airline, including Aer Lingus, will be able to access and exit quicker than in other parts of the airport,’ Mary O’Rourke explained.
O’Leary had no time for the normal business of Irish politics. Instead of courting political leaders, he lambasted them publicly and loudly. Mary O’Rourke had felt the full force of O’Leary’s contempt, and Bertie Ahern, Ireland’s popular taoiseach, was regularly lampooned by O’Leary as a dithering idiot in hock to the trade union barons. O’Leary, however, did have some political friends. His most important ally was P. J. Mara, a former government press secretary who had branched out into the world of public relations and political lobbying. Mara had retained powerful links with Ahern’s Fianna Fáil party, acting as its director of elections, and he was also a close confidant of Ahern. His relationship with O’Leary – both friend and paid adviser – put him in a peculiarly awkward position with Ahern, but Mara is a man who can serve two masters with poise and charm.
O’Leary was also on friendly terms with Mary Harney, leader of the Progressive Democrats, a right of centre party which had been instrumental in delivering the country’s low-tax regime, and Charlie McCreevy, the finance minister who had implemented the low-tax policy and was an avowed supporter of entrepreneurs and the free market. O’Leary’s friendships, therefore, were with like-minded politicians; he did not go out of his way to seek access or favours from those he disdained.
Traditionally businessmen sought political favours by lavishing cash on political parties and on individual politicians. Ireland’s planning system was systemically corrupt, with zoning decisions bought by land developers who bribed both local and national politicians. O’Leary’s attitude to politics stemmed from a perhaps idiosyncratic view of what motivated politicians. In a radio interview in 1999 he said, ‘I have never yet come across a politician who will make a political decision in your favour or against your favour unless it was in their interest, or in what they consider to be the national interest. They just don’t make decisions based on the fact that you sponsored something, or that they stayed in some holiday home of yours.’
It came as a surprise then when it was revealed in early February that, through Ryanair, O’Leary had made a substantial donation to Harney’s Progressive Democrats. Details first emerged in a parliamentary debate, and within a matter of days the scale of the contribution became public knowledge.
Ryanair had donated £50,000, the maximum allowable under Irish law. O’Leary refused to comment at the time, but he now says Ryanair has made donations to Ireland’s two largest political parties – Fianna Fáil and Fine Gael – as well as to the Progressive Democrats. ‘If the party is going down the right road we should try and support it,’ he says. ‘The only two I wouldn’t give a contribution to would be Sinn Féin and Labour. Sinn Féin are a bunch of mindless morons and they have the economic policies of a two-year-old. Labour have my sympathies, but that’d be about the height of it.’
If O’Leary appeared to be softening in Ireland, he showed no sign of changing his tactics in Ryanair’s new markets. The airline planned to launch fourteen new routes from Hahn on 14 February – a move that prompted Lufthansa to mount a new legal challenge against Ryanair’s decision to refer to Hahn airport as Frankfurt Hahn.
Since Ryanair had announced the new routes in November 2001 tensions had been steadily building between the two airlines. Ryanair opened hostilities in early December by slashing fares on existing routes from Hahn to Stansted, Glasgow and Shannon. Lufthansa responded by lodging complaint after complaint about Ryanair’s advertisements, which resulted in Ryanair lodging three complaints with European regulators about the sheer volume of Lufthansa’s complaints.
‘This is basically chapters one and two of the big airlines’ book on how to stamp out competition,’ O’Leary said.
All they’re trying to do is keep us tied up in the courts for a couple of months because they know that if they can head us off for the first few months we’ll never get these new routes off the ground. Lufthansa went to a court in Cologne [where it is headquartered] where it can get these things done at nine o’clock on a Friday night by convincing some dotty old judge that Lufthansa will face irreparable damage because Ryanair is slagging it off.
Unnerved by the emergence of low-cost rivals in its home market, Lufthansa had responded aggressively on a number of routes, slashing its prices by up to 60 per cent. This was too predatory for the German Cartel office, which ruled in February that Lufthansa would have to raise fares on the Frankfurt–Berlin route because its new fares did not cover its costs. Its strategy, the Cartel office said, was to force its rival off the route and then recoup its losses by raising fares once it had succeeded. Lufthansa had cut its one-way fares from €254 to €100 in response to the €99 fare offered by newcomer Germania. The Cartel office decided that Lufthansa would have to charge at least €35 more than Germania.
For O’Leary the skirmishes with Lufthansa were all part of the game. Each time Ryanair was hauled into a German courtroom and served with an injunction against producing advertisements which compared Ryanair’s fares to Hahn with Lufthansa’s fares to Frankfurt, it would drop them and then produce yet more comparative advertisements and find itself back in court yet again. But the fighting escalated in mid-January when a German court banned Ryanair from advertising Hahn airport as Frankfurt–Hahn. O’Leary’s initial reaction was to downplay the ruling – ‘As is the case with all of these ludicrous injunctions, Ryanair will appeal,’ he said – but this case had the potential to be far more damaging than arguments about comparative advertising. Ryanair’s expansion strategy had been based around flying to small, low-cost, airports and marketing them as their nearest local cities. Flights from London to Stockholm or Brussels to Glasgow were easy to sell, but flights from Stansted to Skavsta or Charleroi to Prestwick were an entirely different proposition.
For Hahn airport the battle was even more critical. It had ambitious expansion plans for itself, and any interruption in Ryanair’s growth would hurt it more than it hurt the airline. ‘Ryanair had trouble in court, so we thought, How could we help them?’ says Andreas Helfer, manager of Hahn. ‘And we decided, let’s rename the company. So we went to court and said we wanted to rename the company. Not Hahn but Frankfurt Hahn. And the judge said, “Oh you are good guys, you bring lots of jobs to the region so I find for Frankfurt Hahn…”’
On 11 February Ryanair announced victory when an injunction against the use of the Frankfurt Hahn designation was thrown out by a Cologne court. ‘We’re delighted with ourselves this morning,’ O’Leary said. ‘I feel like the Michael Owen of the airline industry, beating the Germans on their home turf. Through all these court cases, Lufthansa has probably created more [publicity] for us than we’ve had on any other route we’ve launched.’
A month later, on 19 March, the courts delivered another verdict which attempted to balance the competing demands of the two German parties central to the case – Lufthansa and Frankfurt Hahn airport. With the wisdom of Solomon, it found that Ryanair could use the name Frankfurt Hahn as long as it clarified that Hahn was actually a long way from Frankfurt. But the court also agreed with Lufthansa that the use of the name was ‘misleading’. This was enough for O’Leary. Once again, he had been allowed to generate acres of free publicity that hammered home the basic Ryanair messages.
Michael O’Leary’s belief that all publicity is good publicity was tested to the limit at the end of February 2002, when Jane O’Keeffe, Ryanair’s millionth passenger, entered Dublin’s High Court. The case was guaranteed extensive media coverage, none of it favourable for Ryanair. ‘We were shooting ourselves in the foot,’ says one former executive, but O’Leary was unrepentant. He thought O’Keeffe’s demands were unreasonable – he claimed that she had broken an understanding that the airline would be given at least two weeks notice of her flight requests.
From the very first day the case went badly for O’Leary. O’Keeffe told the court that when she had spoken to O’Leary on the telephone he had shouted, ‘Who do you think you are, ringing up demanding flights?’ On the second day Ryanair dangled an olive branch by offering O’Keeffe free flights for life plus €4,000, which she rejected immediately; she wanted £500,000. O’Leary then had to take the stand and answer allegations that he had bullied and abused O’Keeffe. Asked if his manner had been ‘hostile’, O’Leary replied, ‘I had no reason to be hostile. I knew the call was coming through and what it was about. I knew she was not getting satisfaction and we would not be offering her a free flight on the basis that she was ringing up the day before [the flight].’
O’Leary said the first he had heard of the bullying allegation was ‘when I read it in the papers at Heathrow last Friday’. He added, ‘I’m not sure how it’s possible to bully someone on the phone.’
Several other Ryanair staff members were called to give evidence, including Tim Jeans. ‘That was the nadir of my career,’ he says.
I’ll never forget, I walked up and I was so nervous going up to the stand. And the judge had clearly taken an instant dislike to us. Nothing we were going to do or say in that courtroom was going to win over that judge. And the first thing he told me to do was take my hands out of my pockets. For some reason I had walked onto the stand with my hands in my pockets. It started badly and it went downhill from there.
Jeans sympathized with O’Keeffe’s position. ‘I had negotiated one to one with Jane O’Keeffe, who was actually a perfectly decent human being. I really couldn’t argue with her,’ he said. ‘She had been given free flights for life and Michael decided she wasn’t going to have them any more.’
It would take Justice Peter Kelly more than three months to deliver his verdict, and it contained no good news for O’Leary. Kelly concluded that he had indeed been ‘hostile and aggressive’ to O’Keeffe, and awarded her €67,500 in compensation. The money was irrelevant to Ryanair and substantially less than O’Keeffe had been hoping for, but Kelly’s criticism of O’Leary was damning.
‘I found the plaintiff [O’Keeffe] a more persuasive witness than Mr O’Leary and I therefore find as a fact that the version of events given by the plaintiff is what occurred,’ Kelly said. ‘I reject Mr O’Leary’s assertion that he was not hostile or aggressive or bullying towards the plaintiff. I find that he was.’ The judge also indicated he was wise to O’Leary’s media games. ‘The whole event was designed to, and did in fact attract enormous publicity,’ he said, in a written judgment.
‘I think of all the things that Ryanair has done this was one of them with the fewest upsides,’ says Jeans. ‘I think we just looked mean, which we were. We looked vindictive, which we were. And the individuals involved, myself and Michael, came out of it with no credit whatsoever.’
Those close to O’Leary say that privately he recognized the case had been a mistake, but felt it was an unavoidable one. It is a position that O’Leary still clings to. No matter the bad publicity, no matter the perception of meanness and vindictiveness, he still believes he had no choice. And he also claims that his position was proved correct. ‘For three days we got the worst publicity any company has ever had in its life, our bookings soared by 30 per cent day by day by day,’ he claims. ‘The more we were in court the bigger the bookings were.’