by Alan Ruddock
Some ideas worked, some failed. At the end of 2004 O’Leary, with some ballyhoo, had announced the arrival of inflight entertainment on a select number of flights and plans to roll it out across the whole fleet throughout 2005. It was a carefully planned project but within months had been abandoned. The average Ryanair flight was simply too short to encourage passengers to part with cash for a portable player with modest amounts of programming. And those who were prepared to pay for a player were less likely to buy anything else on board – like food or a drink – and so the revenue impact even on flights where they proved popular was negligible. ‘It was a good idea but not fully thought out,’ says Paul Fitzsimmons. So inflight entertainment was dropped, without remorse or apology, because it did not work. Charging for baggage, however, would become a firm fixture.
Adding revenue streams went hand in hand with reducing costs, and O’Leary was always on the hunt for ideas, big and small. Aspirant pilots applying for a post with Ryanair had to pay a non-refundable fee of €50 with their applications, and if they landed a job had to pay for their own retraining on Ryanair’s fleet of Boeings. Finding cabin crew for his ever-expanding fleet drove O’Leary into the eastern European labour market, as Ryanair started to employ hundreds of Latvians, Lithuanians and Poles to staff the planes. They too were expected to pay for their training, subsidize their uniforms and work punishing schedules to earn their wages. The more they flew, the more they earned, but it was a far cry from the gentle work rosters of traditional airlines.
Success, though, seemed to have blunted O’Leary’s edge. He started to muse aloud about leaving the company that he had led to such dominance in such a short space of time. He told the Sunday Times he would be gone by 2008, sparking a flurry of speculation about who could replace him and confirming a growing view among stock market analysts that O’Leary was bored. ‘Ryanair is maturing into a solid business, one that will grow steadily and which no longer needs the sort of a driven personality that O’Leary gives it,’ said one. ‘Mature businesses need a different style of leadership.’
O’Leary’s life was starting to change as well. His marriage had been followed that autumn by the birth of his first child, a son, and by a shift in priorities. In an interview that year he said,
I’m nearly certain I won’t be here in five years’ time. I’ll be fifty! I think it’ll be partly staleness, partly boredom. I think it will be time for a change in here. There are good people coming up through the system here; they need to be able to see there’s something. There are about four guys on the senior management team here who could run this place tomorrow morning. The best businesses have a logical sequence of succession. One of the weaknesses of the company now is it is a bit cheap and cheerful and overly nasty and that reflects my personality.
But if O’Leary’s competitors thought they could relax, they were wrong. Far from laying down a template for the three years to come, O’Leary was simply doing what he always does with the media: mischievously thinking aloud and letting the press coverage flow. He may be gone by 2008 or he may still be driving the airline forward; he just does not plan that far ahead. ‘There’s no point in having some long-term plan because that long-term plan gets knocked on its ass. We have a five-year plan here, the next twelve months is set in stone, years two to five are fluid. There is no point in having too many plans.’
One plan, though, was about to be unveiled.
Five days before Christmas O’Leary announced he would be hosting a press conference the following morning. It had already been a busy month: he had finalized a new ten-year deal with Charleroi airport in Belgium, had announced seventeen new routes from Glasgow, Stansted, Shannon, Stockholm, Beauvais, Frankfurt-Hahn and Liverpool, had signed a new five-year deal with Hertz and had revealed another 25 per cent increase in passenger numbers for the previous twelve months. But he had kept his most dramatic announcement for the final week before Christmas, when news media are traditionally starved of information and desperate for a story.
‘This is a momentous day for Ryanair,’ he said, as he revealed that he would launch eighteen new routes from Dublin the following year, basing five new aircraft at Dublin airport. ‘This is the largest ever single investment in Irish tourism. The five new aircraft to be based in Dublin represent an investment of over $300 million. The eighteen new routes from Dublin to Europe together with the additional flights on seven existing routes will mean an additional 1.5 million passengers a year at Dublin airport.’
It was, he said, a direct assault on Aer Lingus.
These new routes from Dublin to Europe mean that Ryanair’s operations at Dublin airport will become substantially larger than Aer Lingus’s. Ryanair will carry over seven million passengers on fifty-two routes from Dublin next year compared to Aer Lingus’s less than six million passengers on just forty-three year-round routes. Ryanair’s average fare of €39 is less than half Aer Lingus’s average European fare of €80. Ryanair now offers more routes and services than Aer Lingus to both the UK and now continental Europe. With these new routes and passengers, Ryanair will now carry more passengers than Aer Lingus at each of the main Irish airports (Dublin, Cork and Shannon) as well as serving the bigger regional airports (Derry, Kerry and Knock) which Aer Lingus no longer operate to. Ryanair is now twice the size and just half the price of Aer Lingus here in Ireland, and has long since displaced any claims Aer Lingus might have had to being Ireland’s national airline. Aer Lingus’s only remaining title is that of Ireland’s highest-fare airline. Aer Lingus can’t compete with Ryanair’s prices, they can’t match our punctuality, and now they can’t match our route network from Dublin to the UK or Europe.
Not content with the impact of his words, O’Leary hammed up for the occasion, wearing a Santa Claus outfit, while Peter Sherrard, his newly appointed public relations executive, wore an elf’s costume. Stacks of gift boxes emblazoned with the names of the new routes were stacked on either side of the top table.
For Aer Lingus, the news could not have been worse. Under Willie Walsh the airline had successfully expanded away from Ryanair, concentrating on new route launches to European destinations. Walsh knew that O’Leary would not ignore Dublin for ever, but he had been determined to move at speed and secure the routes before Ryanair changed its tactics. Since his departure, however, the airline had wobbled. Dermot Mannion, Walsh’s replacement as Aer Lingus chief executive, had not taken up his post until the late summer and barely had time to grow accustomed to his new job before O’Leary struck. Mannion’s background as a senior executive in Emirates, the successful long-haul airline, had not prepared him for the viciousness of the new European short-haul market. Mannion believed Aer Lingus could expand its way to a profitable future and was convinced there were opportunities to launch long-haul routes to the Middle East and further afield, and to America too once deregulation was agreed between Europe and the US. It was a credible strategy, and one that he would use in the coming months to persuade international institutions to back the privatization of the state-owned airline.
But he had not factored in a full frontal assault on his most profitable European routes by Ryanair. ‘O’Leary’s aggression was breathtaking,’ says one Dublin analyst. ‘He was picking off Aer Lingus’s best routes – to Madrid, Berlin, Rome – and launching head-to-head competition. It was a blow to the solar plexus for Mannion.’
‘We were confident in our own model that it would work,’ says one Ryanair executive. ‘And we were confident because our costs were lower and we could sustain a head-to-head competition with anybody else longer than anybody else could.’ Mannion and Aer Lingus were about to discover just how long, and how painful, that competition could be.
26. Mischief and Mayhem
It was an unusual night for a party, an otherwise quiet Monday evening in early February 2006, but Michael O’Leary was in attack mode. That night Channel 4, a British television station, was broadcasting a documentary on Ryanair, the result of a five-month investigation by two
undercover reporters. According to the programme makers, the documentary would expose serious flaws in Ryanair’s safety practices, showing scenes of overworked pilots and cabin crew, dirty aircraft and security lapses.
O’Leary had decided that the best way to defuse the programme was to ridicule it. Instead of chastising those members of staff who had been caught on hidden cameras moaning about their working conditions, he organized an ‘Oscars’ night to be held in Stansted, where the airline employs close to 1,000 staff. The prizes would include an award for the Ryanair staff member ‘who tells the best whopper on air’, as well as a special award for the staff member who delivered the best chat-up line to one of Channel 4’s ‘undercover investigative dollies’, the term O’Leary had coined for Charlotte Smith and Mary Nash, the two reporters who had trained and served as Ryanair cabin staff.
‘The Oscars night wasn’t for the press, it was for the staff,’ said O’Leary. ‘Either they’d all be sitting at home worried that they were going to be sacked, or we could deal with it the best way we know how. So we said, “Right, we’re going to have a free bar; everybody comes in and nobody gets fired.” We were not going on a witch-hunt. And it was great.’
O’Leary’s counter-attack against Channel 4 had started weeks earlier, when the allegations were put to him by Steve Boulton Productions, the programme makers. In a letter to O’Leary the company said that Smith and Nash had uncovered incidences of pilot and crew fatigue including crew falling asleep on duty, inadequate staff training, breaches of safety and security and a cynical attitude to passengers. During one flight, they alleged, vomit had been discovered on the floor of a plane but had not been cleaned up because of the constraints of the twenty-five-minute turnaround time, and the undercover reporter had been told to spray aftershave to disguise the smell. A Ryanair pilot said on air that if he refused to fly because he was tired he would ‘probably be fired and definitely demoted’. Most dramatically, Smith claimed that during her training she was told that any passenger sitting in seat 1A on a Ryanair flight would be killed on impact in any crash because a piece of metal used to attach a handrail would go straight into their head.
O’Leary responded directly, and caustically, to each allegation and offered to appear on the programme in an unedited interview to combat them. He dismissed the claim about seat 1A as ‘ludicrous’, saying the handrail attachment was not on aircraft used by Ryanair, and described the pilot’s claim that he would be sacked or demoted as ‘without foundation’. His offer of an unedited interview was rejected – Channel 4 said it was logistically impossible to guarantee an unedited version, though it was prepared to carry an edited interview that fairly reflected his point of view – and O’Leary decided on a pre-emptive assault instead. The programme’s claims were rubbished in advance by Ryanair, and the Oscars night was organized to show that neither he nor his airline cared about them. Channel 4 had, however, struck a raw nerve. Three times in the previous twelve months Ryanair flights had come close to danger.
On an approach to Rome the previous summer a co-pilot had been forced to take the controls from his senior officer, who had been suffering from stress; in December a flight to Glasgow had suffered a loss of cabin pressure after the captain and co-pilot had failed to carry out checks which could have identified the problem; and earlier in the year a flight to Beauvais airport in France had had to abort its landing because the pilot failed to line up his approach correctly. All three incidents had been resolved safely, and O’Leary could claim that Ryanair’s internal procedures and failsafes had ensured that crises were averted, but they revealed how close the airline – any airline – was to disaster.
Safety always gnawed at O’Leary. He always maintained that the one thing that could ground Ryanair was a crash, particularly if it could be shown that the crash had been caused by scrimping on safety. The perception of Ryanair was that it was cheap and occasionally nasty, but was also safe. Its Boeing 737s were fast becoming the youngest fleet in the skies as aircraft arrived each month, and while the new planes delivered operating efficiencies – primarily through lower fuel and maintenance costs – they also created an aura of safety around the airline. Bright shiny Boeings reassured passengers that while their tickets might have been cheap, they were not expected to fly in ageing rust buckets.
O’Leary’s obsession with safety transcended his normal approach to costs; it was a corner that he was not prepared to cut, yet it could destroy his airline if something went wrong. It was, in short, his Achilles heel, and there was nothing he could do about it other than ensure he could not be faulted if the worst happened. By exposing sloppiness in Ryanair’s training procedures and tiredness in its staff, Channel 4 was creating an uncomfortable context if anything did go wrong. Trade unions, particularly the pilots’ unions, were also acutely aware of O’Leary’s vulnerability on safety. In any dispute about union recognition – and despite the individual issues that might arise with pilots, every dispute was ultimately about recognition – the unions would use safety, particularly pilot fatigue, as a weapon.
That was why Channel 4’s documentary had to be attacked so aggressively and publicly. O’Leary’s approach would prove successful, but he was greatly assisted by the programme’s failure to convince Ryanair’s critics that it had uncovered anything of substance. The media response was desultory, while the Irish Aviation Authority, the regulator responsible for ensuring that the airline conformed to international safety standards, said it had investigated the allegations and was satisfied that no safety breaches had occurred. ‘I do not accept that there is a slack approach to safety in the low-cost sector,’ said Lilian Cassin, a spokeswoman for the IAA.
Simon Evans, of the consumers’ rights organization the Air Transport Users’ Council, concurred. ‘I didn’t see anything horrendous. You would have heard the same comments and apparent disregard for customers at any low-cost airline and, indeed, most organizations. It’s not a bad thing if the airline realizes it is under scrutiny by the public and the media, but the show will have no effect on the industry and I don’t think it will affect Ryanair’s bookings.’
O’Leary was not content with simply ridiculing the programme and exonerating his staff. ‘We’re doing a follow-up,’ he said the following week. ‘We have pulled in all of our cabin-crew trainers this week; we’ve sat down with the safety instructors and we’ve gone to the handling agents. And we sold 20,000 extra seats yesterday.’
One month later the publicity was even better. The Cheltenham Festival, held annually in March, is the marquee event for fans of National Hunt, or jump, racing. Each race in the four-day festival is a championship final, with the best horses from Britain and Ireland battling for supremacy. While the Grand National at Aintree is the most famous jump race of them all, the Cheltenham Gold Cup is the ultimate event for racing fans, and particularly Irish racing fans. Tens of thousands make the journey each year to the Cotswolds, thronging the racecourse for the duration of the festival and filling bars and hotels for miles around. Drinking and gambling to excess – the all-night poker games are legendary – they crave Irish victories but enjoy themselves no matter what. Although held on British soil, it is a quintessentially Irish affair that bemuses the British media. Each year the racing coverage is peppered by stereotypes, as newspapers tell tales of gambling priests, straying husbands and outrageous betting coups, and they are always on the hunt for the story that justifies the clichés.
This year, 2006, with the Gold Cup scheduled for St Patrick’s Day and Irish challengers hot favourites to take the prize, they did not have to look far for the main story.
Michael O’Leary’s family had always kept horses, but unlike his siblings he had never taken to riding. ‘I fell off a horse at the age of four and I realized it was a stupid activity. My brothers and sisters didn’t realize how stupid it was and kept going.’ Eddie O’Leary had kept going all the way, becoming a respected breeder and owner in an industry that still holds a special place in Ireland. Eddie’s
involvement was the key to his brother Michael’s conversion. ‘If Eddie wasn’t involved, I wouldn’t be,’ O’Leary says.
He’s the judge. He decides what we buy or don’t buy. It’s important to have someone like that. Someone you can trust. It’s like any walk of life. There are great people in racing and there are messers. Eddie’s advice is vital. It’s 90 per cent frustration and 10 per cent fun. But then the 10 per cent does vastly outweigh the other side. The owner is the mug at the bottom of the food chain. As long as you know that, you’ll be okay. But you have to know you will lose your money. Which makes me an idiot.
Four of the first five horses O’Leary owned had to be put down. ‘Deaths and injuries are what I hear about most of the time. It’s very hard to take. But it’s what you have to accept as part and parcel of the game. If you can’t deal with them, you shouldn’t be in it,’ he says.
For the first time at Cheltenham O’Leary would have a horse challenging for the Gold Cup. His horse, War of Attrition, had been an unlikely runner-up two years earlier in the Supreme Hurdle but had failed to live up to its promise when being roundly beaten the following year in the Arkle Chase. This time O’Leary was not sure whether to run him in the Gold Cup or in the lesser Ryanair Chase – which carried an obvious attraction.
