TCS Daily


Unfriendly Skies

By Val MacQueen - October 28, 2003 12:00 AM

For an airline so bereft of frills that the check-in crew is also the flight crew, Ireland's Ryanair flies full, carrying tens of thousands of repeat customers who, thanks to rock bottom fares, can afford breaks in France three or four times a year. It's possible to fly Ryanair from London to Perpignan in the far south of France -- some 500 miles -- one way for around $45.

 

Tens of thousands of Brits and Irish have bought second homes in the poor but sunny and hot French region of Languedoc-Roussillon predicated on being able to afford Ryanair for vacations plus three or four long weekends a year. Ryanair's cheap fares, in fact, have made a considerable contribution to the economy of many French towns and cities.

 

Its success is due not just to paring of fares and a ruthless attitude to refunds -- they don't give them -- but innovative marketing, all captained by Mike O'Leary, Ryanair's less than typical CEO. O'Leary is a 42-year old hard-edged, sharp-witted, confrontational Irishman who took the airline over when it was failing and turned it around to becoming the turbo success it is today. He also has an unselfconscious foul mouth. Results or no, there are hard-bitten financial analysts in the City of London who feel uneasy attending his presentations due to the speed at which the air turns blue when he starts to speak.

 

Recently, O'Leary struck a marketing deal with the wealthy French city of Strasbourg, the seat of the European Parliament. Ryanair contracted to deliver 375,000 foreign (mainly free-spending British and Irish) passengers to the city over a five-year period in return for approximately $1.5 million to spend on local marketing and a hefty reduction in airport charges.

 

On hearing of the deal, and ever responsive to keen-edged competition, state-subsidized Air France complained to the French government, arguing that the deal constituted an illegal (albeit local) subsidy. Without hesitation, Paris ruled the deal out of order.

 

The decision got O'Leary's Irish up and his muscular response was typical. He simply closed the route. The appeal judgment was made known on September 11. Ryanair flew out of Strasbourg's airport for the last time on Sept 24. Passengers who had booked in advance are being given tickets to a town 25 miles on the other side of the German border and will have to make their own way into Strasbourg from there. As O'Leary told London's Daily Telegraph, "If we move airports because they break agreements, we move airports."

 

O'Leary claims there was no animosity involved, that it was purely a business decision, and indeed, it is difficult to impute pettiness to this pragmatic operator. He also says he doesn't think that Air France leaned on the judge, although he believes that French judicial thinking tends to be swayed by French interests and the fortunes of Air France are very much interwoven with the fortunes and amour propre of France. Personally, I think he is being too kind.

 

However, animus or no, O'Leary may take his decision one step further. Ryanair flies to 14 French destinations in all. All are profitable, both for Ryanair and for the cities and towns it serves. During the high season, the airline delivers around 17,000 visitors a month to most destinations. O'Leary is considering closing them all. He already has nine towns in other European countries lined up begging to get in on the Ryanair approach, so it looks like the long au revoir for France. Towns such as sleepy Perpignan near the Spanish border, which has benefited economically since Ryanair started its flights, will not be quick to forgive the haughty French establishment for provoking a man who isn't particularly dainty-mannered but who delivers on his promises.

 

France has a large economy and certainly Ryanair's cessation of flights will not make the tiniest ripple nationally. But there are poor pockets around the country that will feel the loss of those 17,000 tourists a month. In the past two years, O'Leary has more than doubled passenger manifests, to 15 million, and he plans to do it again by 2005 with the intention of making Ryanair the largest airline in Europe.

 

O'Leary, who went to prestigious Trinity College Dublin, but never graduated, now has a personal fortune of around $500 million, thanks to his periodic selling off of tranches of his shares in the company. He's been criticized for hiving off his shares, but he explains himself with his usual quiet eloquence: "I don't want to get stuck like those dot com f----ing goons that lost everything because they failed to realize their paper wealth."

 

Footnote: As to bringing tourists to benighted Strasbourg, Air France has announced that it will graciously carpetbag the market Ryanair developed. Its very lowest, rock bottom, one-way fare will be a nuanced $130 -- four times Ryanair's price to the same destination.

 

A former editor in Houston and Singapore, Val MacQueen now writes from the south of France.




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