Tony Ryan

by Richard Aldous

  Undeterred, Tony attempted to go over Wendt’s head by appealing directly to Welch. He conceded that there had been ‘a learning curve period for both parties’ involving ‘certain inevitable cultural and style differences’. He reminded him that GECC’s $18 million investment was now worth ‘in the region of $56 million today’. But most of all he complained about Wendt, presenting him as incompetent, discourteous and duplicitous. His initial announcement, made ‘without any notice whatsoever’, had come ‘as a bombshell’. Wendt had then left him ‘under the impression that GECC had reconsidered its position.’ Later he ‘categorically stated GECC’s intention was to sell’, only then to do another about-turn by saying that ‘further GECC Board review was required’. Inevitably such ‘vacillation has been extremely disruptive’ and raised ‘serious questions’ for both companies. Therefore, Tony concluded, ‘I would like the opportunity of personally meeting with you at the earliest opportunity.’

  The letter was a dud. Within Welch’s multi-billion GE conglomerate, GPA was nothing more than loose change. In 1983 it had looked like a tidy way to handle some of the problem accounts within GECC’s commercial airline portfolio and a means to develop new business activity in used-aircraft refinancing. Now that the relationship had failed to work as expected, Welch and GE simply bailed out. Welch replied offhandedly by asking Tony to ‘contact Mr Wendt’, adding that, ‘hopefully, we can resolve this issue to our mutual advantage.’

  It took another seven months for GECC to divest itself of a stake in GPA. ‘With the transaction closed and the check cleared, please be assured that all hatchets have been buried,’ Wendt wrote cheerfully to Tony afterwards. ‘In case you’re not familiar with that American phrase, it means no ill feelings remain and that best wishes are granted.’

  Tony didn’t bother to reply. More important was the declaration from Wendt in an earlier letter. ‘GECC and GPA’, it said, ‘should be viewed more as competitors than partners.’ This wouldn’t be the last time he would cross swords with General Electric. At the time, however, Tony hardly seemed to care. As GECC departed, the American share of GPA’s business had jumped from 16 per cent in 1981 to more than 60 per cent in 1985. The company’s move into the American market, helped by the GECC capital and prestige, was paying off. GPA Corp. now had a smart new office in Connecticut, opened by the Taoiseach, Garret FitzGerald, as Tony’s mother looked on. ‘I cannot think of a prouder moment,’ Tony said afterwards.

  Chapter 7

  LONDON (LUTON) CALLING

  Waterford Airport, 8 July 1985

  It was a low-key place to begin a new era. Despite the famous crystal glass and ‘sunny south-east’ weather, Waterford was neither an important commercial centre nor a draw for overseas tourists, in the manner of Cork, Kerry and the west. The city was a relative backwater, albeit a charming one. Not many people needed to fly in and out, a fact amply demonstrated by the size of the plane waiting on the stand that day. The white twin-turboprop Embraer EMB 110 Bandeirante had a capacity for only fifteen passengers. Space was so tight that the flight crew had been recruited primarily on the grounds of height: attendants had to be under 5 feet 2 inches even to stand up straight in the aircraft.

  In many ways this service was not much more than a quick-fix solution to a minor business problem. Guinness Peat Aviation had recently acquired a job lot of planes: three jets and the Bandeirante. The jet aircraft were straightforward to lease out, but there was little demand for the small twin-turboprop. Rather than the plane being left wasting in Shannon, it had been sent off to Waterford to service a new route to Gatwick Airport. The annual number of passengers was expected to be not much more than five thousand.

  When the former Aer Lingus chief pilot, Captain George White, turned over the engine and the twin-turboprop spluttered into life, he could not have known that he was firing up a revolution in European travel. For this was the first flight of Ryanair, the airline that would go on to dominate commercial aviation on the Continent and change the way Europeans thought about the very notion of travel.

  On a symbolic level the Bandeirante could hardly have been better chosen, the name coming from that of the Portuguese adventurers and treasure-hunters of the sixteenth and seventeenth centuries. In the case of Ryanair, everyone knew the adventurer behind the new operation. First there was the name of the airline. Then there was the shamrock on the tail fin of the aircraft, which to anyone looking closely was made up of three Rs. Each represented a Ryan—Cathal, Declan and Shane—and they were the three children of the finance and brains behind Ryanair: the GPA boss, Tony Ryan.

  ‘Mr T. Ryan is not in any way involved with Ryan Air,’ Declan Ryan had written to a potential investor only a few months before. That may have been technically true, but everyone, not least Declan himself, understood that Ryanair was Tony’s project.

  Five years earlier Tony had been frustrated in his plans for Irelandia. The ambitious project would have seen the new airline competing directly with Aer Lingus on the prestigious transatlantic route. That initiative had provoked fury among Aer Lingus executives, especially because many of them considered GPA to be an Aer Lingus company and Tony, by extension, their employee. On that occasion he had been forced to back away from the plan, but he never stopped thinking about a low-cost, no-frills competitor to the national carrier. By 1985 he had improved his tactics. There was no point in taking on Aer Lingus head-to-head. Tony needed to establish the principle of competition without engaging in a direct fight.

  Late in 1984 Tony invited his old friend Christy Ryan down to Kilboy. The two men had started out together in Shannon in the 1950s, and Christy had been part of the GPA start-up. More recently he had been general manager of the small airline Aer Arann, running a scheduled service from Shannon to Dublin. He could be a difficult character—‘Christy is Christy,’ wearily noted one personnel report at GPA—but Tony trusted him. It was a bond that went back to when they were just lads on the back of a motorbike, happy with their jobs as counter-jumpers in Shannon.

  Christy had an idea for running an air-taxi service out of Waterford, his home county, but he had been unable to raise the capital. Tony, on the other hand, despite his losses on the Sunday Tribune, had millions in tax-free dividends from GPA burning a hole in his pocket. He had already tried without much success to get a hydrofoil ferry service operating across the Irish Sea. Now he wanted to get the airline project back up and running. Christy was no entrepreneur, but he was a trusted friend and a highly accomplished manager. It was no surprise that Tony should want him involved in Irelandia, not least because he was the ideal mentor for the other key figures in the new airline.

  Ryanair was not just a business investment for Tony: it was a family one. He saw the project as an ideal way to get his two eldest boys back home to Ireland and, in a trust shared equally with Shane, who was still at school, to start them off in business. Declan was working in the United States for America West. Cathal was flying Boeing 747s as a co-pilot with Air Lanka. The two had acquired the necessary background and experience in aviation. Now they could return to run their own company under the watchful eye of their father and his oldest, most trusted friend. ‘It’s disgraceful that so many youngsters have to leave the country,’ Tony told friends. ‘I want my boys to follow me into the aviation business, but there are no jobs. So we’ll create our own airline, because Ireland needs it.’

  Over a few pints in Tony’s local pub in Dolla, he and Christy worked out their plan for the new airline. After the previous tricky experience with the GPA board over Irelandia, Tony wanted plausible deniability over his involvement. It was for this reason that he initially baulked at Christy’s idea of trading under the name ‘Ryanair’, preferring instead ‘Trans Tipperary’. But Christy wanted the Ryan name on the plane, so in the end Tony reluctantly agreed. It made little difference in the long run to Christy, who dropped out early in the project and always felt that his name had been written out of the Ryanair story.

  On 28 November 198
4 the company was formally incorporated as Danren Enterprises, soon changing its name to Ryanair Ltd. The ambition of the original business plan, dated 2 March 1985, was uncharacteristically modest. ‘Ryanair’s overall strategy for Year One’, it stated, ‘is based on achieving break-even or better operations with a single Bandeirante competing in two distinct but complementary markets.’ This identified, firstly, a night-mail service operated under contract to either An Post or a leading courier company such as UPS and, secondly, cheap passenger charters to special events such as football matches at locations not serviced by scheduled airlines. The immediate objective was to secure 1,339 hours of business in the year from 1 May 1985, when the company would begin trading.

  The key to pricing would be ‘a degree of flexibility’, with an average mark-up on direct costs of 65 per cent, increasing to 100 per cent ‘where the market will stand it’. Working on these figures, the business plan confidently predicted: ‘Preliminary projections indicate that these (or equivalent) Market and Price Targets will enable the company to achieve approximately break-even results in its first operational year.’ The initial equity funding, supplied by Tony, of £250,000 (in addition to £35,000 in start-up costs) would be ‘sufficient to keep the Company in credit at all times.’

  It was on the basis of this business plan that Ryanair made its formal application on 5 March 1985 to the Department of Communications for a class C operating authorisation to run the Bandeirante. The two shareholders of the company were listed as Cathal Ryan (90 per cent) and Christy Ryan (10 per cent). On the board they were joined by a chairman, Ken Holden, who had acted as a consultant for Tony at GPA, and Declan Ryan, who became company secretary. To cover Tony himself, the application stated in explicit terms that the company ‘has no direct or indirect connections with any other company in Ireland or elsewhere.’

  The first, difficult months might have given even Tony pause for thought about his involvement in the new enterprise. The Waterford–Gatwick route itself was popular enough with a niche market. Local businesspeople immediately recognised the advantage of an air taxi to London without the bother of the two-hour drive to Dublin or Cork. Moreover, Gatwick was a ‘proper’ airport, with an excellent rail connection to the heart of the city. The idea of having breakfast at home in Waterford, lunch in London and dinner back home in Waterford had an obvious appeal. Less attractive was the endless circling of Waterford Airport, waiting to land before getting diverted to Dublin. Aircraft could land at Waterford only when the cloud base was above 800 feet (as opposed to 300 feet at the rival Cork Airport), which meant, the Irish Times reported, an ‘unacceptably high’ number of Ryanair diversions to Dublin, ‘with consequent damage to customer relations and Ryan’s reputation.’

  Other problems for the fledgling airline surrounded its management. Part of the original concept behind Ryanair in 1984/5 had been a tie-up with Club Travel, a prominent Irish travel agency for both scheduled and charter flights. They acted as the principal agent for the new airline. In June 1985, a few weeks before the first flight took off, the owner and operator of Club Travel, Liam Lonergan, was appointed managing director of Ryanair. He brought energy and marketing savvy to the airline but had little experience of the aviation industry. That led to a series of spectacular rows with Tony, who quickly lost faith in him. Five months after he was appointed, Lonergan resigned. ‘A number of things came to a head in the last ten days or so,’ he said, ‘and I felt it was not appropriate to continue on as managing director.’

  Tony was glad to see him go. Lonergan, through Club Travel, had been an important part of setting up Ryanair, but he had never been Tony’s man. To replace him Tony now turned to Eugene O’Neill. The young accountant had not had a particularly auspicious beginning to his career with Tony. He had been chief executive during the unhappy experience of owning the Sunday Tribune. Then he had run Tony’s investment vehicle, Irelandia (the name was rescued from the original airline idea), where the most notable bit of business had been the disastrous purchase and subsequent sale of a B&I Line hydrofoil. No-one, least of all Tony, doubted O’Neill’s ability. He just needed him to be lucky the third time round.

  Not that luck was the main currency now at work with Ryanair. From the beginning, Tony had viewed the unsatisfactory Waterford route as the ‘sprat to catch the mackerel’. Once it established the principle of competition with Aer Lingus, he could turn to his real target: the Dublin–London route. A new business plan outlined a vastly more challenging project than the initial document of March 1985. Now the scope of Tony’s ambition was revealed for the first time: Ryanair’s five-year objective was ‘to become firmly established as Ireland’s second airline.’

  Tony was prepared to invest huge sums and take vast early losses to meet that objective. By the end of 1986 Ryanair would have recorded a deficit of £2.2 million.

  These were losses that Tony was prepared to bear, because he recognised that the times demanded it. He had wanted to compete with Aer Lingus five years earlier, but he backed away, as the context of the day had been wrong. By 1985, however, that context had been transformed beyond recognition. There could hardly have been a more propitious time for bringing the fight to a complacent national carrier. In the space of a year Ireland had metamorphosed from one of the most uncompetitive airline environments in Europe into one of the most cut-throat. That world was made for Tony Ryan.

  The new aviation environment had seemed a long way off in the summer of 1984, when the Fine Gael-Labour Party coalition Government introduced one of the most draconian anti-competitive pieces of legislation in the history of the state. The Air Transport Bill was a direct response to the Government’s failed legal attempts to stop Transamerica Airlines and various Irish travel agents selling tickets for Transamerica’s charter flight service from the United States to Shannon. The Minister for Communications, Jim Mitchell, had sought an injunction from the High Court to prevent ticket sales on the grounds that it interfered with the Government’s right to control air fares. The High Court granted the injunction against Transamerica but ruled that the minister could not control fares set by travel agents. Moreover, when Transamerica appealed to the Supreme Court even this injunction was overturned. The Government prepared to appeal but in the meantime set about changing the law to close the competitive loopholes the court case had revealed.

  The penalties the Government sought to introduce were enough to put off any agent selling a cheap airline ticket: a £100,000 fine, two years in prison and the loss of a travel-agency licence. Such was the punishment for ‘undermining the system of control’ within Irish aviation. ‘The minister’s powers would be undermined,’ the Government argued. ‘Discounting and other malpractices could take place on a scale that would undermine approved tariff structures and could have serious implications for airlines generally and for Aer Lingus in particular.’

  The introduction of the bill was met with fierce opposition within and outside the Dáil. Leading economists, headed by Sean Barrett, publicly denounced it as being ‘to the obvious detriment of the fare-paying public’ and ‘wholly at variance with public pronouncements on the need to encourage efficiency and lower cost’, adding that it ‘further lowers public confidence in our legislators’.

  In the Dáil, opposition was led by Des O’Malley. As a TD for Limerick East, he had taken a strong interest in GPA. It was through Tony, O’Malley says, that he first became interested in the lack of competition within Irish aviation and the problem of the Aer Lingus monopoly. Over the years, at meetings and dinners, Tony had briefed him on how deregulation was transforming the worldwide aviation industry, particularly in the United States, and he constantly urged him to take on the issue within Ireland. In many ways he was pushing at an open door, as O’Malley’s own political thinking was already developing towards the free market. By 1985 he would have established a new political party, the Progressive Democrats, committed to the liberalisation of Irish markets. In the United States and Britain a similar process had
put airline deregulation and privatisation at the forefront of the debate. It was no surprise in 1984 that O’Malley, by now an independent TD after losing the Fianna Fáil whip, should have chosen such ground on which to plant his flag.

  Tony kept close to O’Malley during the debates, supplying him with information when it was helpful. Not that O’Malley was a stooge of Ryanair: he pursued the issue with tenacity, taking advice from voices outside the industry, most notably Barrett. He also used contacts developed in Europe during his time as Minister for Industry. By the mid-1980s the European Commission was keen to encourage competition in aviation. It supplied O’Malley with key statistics and expert analysis with which to bolster his case.

  To this barrage of academic and bureaucratic information O’Malley added his own skill in framing the debate to maximum effect. The Dutch airline KLM, he pointed out, was being paid half a million pounds a year by Aer Lingus not to fly to Dublin, thereby allowing the Irish carrier to charge up to £500 for a return fare to Amsterdam. How did they get away with it? he asked. Because the Department of Transport was the ‘downtown office of Aer Lingus’. The phrase stuck, because it perfectly conveyed the image of a cosy or even corrupt relationship that put the interests of the airline above those of the Irish people.

  When the Air Transport Bill was read for a second time, on 27 June 1984, the Government’s complacency was demonstrated by the minister, Jim Mitchell, not even being present for the debate. Instead, the minister of state, Ted Nealon, outlined how the bill would ‘close off a loophole … in the general national interest.’