TCS Daily

Pluck of the Irish

By Val MacQueen - June 2, 2005 12:00 AM

Mike O'Leary, the handsome, irrepressible CEO of Ireland's wildly successful discount carrier Ryanair has been infuriating the unions again. This time, it's because he has forbidden employees to charge their mobile phones in the office at a saving of, perhaps, a penny a charge. This comes hot on the heels of disallowing the purchase of Post-It notes and high-lighters for office staff. Worse, it follows a directive that employees should try to pick up pens elsewhere.

Ingo Marowsky, the secretary of the civil aviation section of the International Transport Workers' Federation, commented darkly: "This penny-pinching is certainly not the worst thing happening at Ryanair -- but it is another example of a lack of respect and a culture that always picks on the company's workers first when any savings are to be made."

But that's not quite fair. Mike O'Leary applies equally unforgiving discipline to Ryanair's passengers.

His latest cost savings slash cabin comfort to the barely credible. He has removed reclining seats, so now passengers have to endure the whole flight sitting up straight.

Onboard, it's the law of the jungle. There are no seat allocations. No newspapers. No pull-down shades on the windows. And your sick bag is the photo-processing envelope in the pocket of the seat in front of you. But passengers flying happily off for weekend breaks in destinations they hadn't even heard of two years previously -- Carcassonne, Murcia, Zaragoza -- for peanuts endure the hardships and pony up for their drinks and snacks without complaint. CEO O'Leary explains the ethos with his legendary Irish charm: "For years flying has been the preserve of rich f***kers. Now everyone can afford to fly."

Late last year, Ryanair announced its intention to start charging for checked baggage. Prices quoted in the media range from £5 to £10 per bag ($9 to $19) -- although I have read estimates as high as £50 ($90) -- not, says O'Leary, to generate more revenue from passengers, but to discourage them from bringing check-in baggage at all. This is because he wants to eliminate airport charges for baggage-handling crews and equipment at airports. And once carry-on luggage is eliminated, he can also do away with check-in counters and staff. So it will be strictly carry-on, and do-it-yourself check-in.

Although passengers endure in-flight lack of frills without complaint, it seems the one thing that earns Ryanair universal condemnation is the famous "no refunds under any circumstances" policy, a quibble met with typical O'Leary insouciance. "We don't fall all over ourselves if they say 'my granny fell ill'. What part of no refund don't you understand? You are not getting a refund so bugger off."

In the cause of saving money, Ryanair has also frozen out travel agents. "Screw the travel agent," says O'Leary. "Take the f***ckers out and shoot them. What have they done for passengers over the years?"

Yet at a time when major airlines are suffering severe drops in revenues, O'Leary, who recently had his Mercedes registered as a taxi so he could avoid traffic jams by zooming along Dublin's bus lanes -- to the cold fury of immobile drivers watching him fly by -- continues to pilot Ryanair to healthy profits. In the last four months of 2002, when airlines all over the world were suffering crippling losses, Ryanair's profits soared by 50 percent to €43.2 million. Passenger numbers increased by 46 percent during the same period. More recently, in November last year, the airline announced record half-year profits of €201.3 million. Traffic grew by 24 percent to 14.2 million passengers. Total revenues rose by 21 percent to €721 million.

The Scotsman, quoting Ryanair's own figures, writes that the carrier handles 10,000 passengers per employee, compared to no-frills rivals EasyJet's 6,300 and British Airways' 760.

Wired magazine lists Ryanair as one of the "top 40 companies driving the global economy." O'Leary himself comes in at No 19 in The Sunday Times 2004 Rich List, with a personal fortune of £224 million.

The one false step the sure-footed O'Leary has made was the introduction of hand-held computerized entertainment which he had expected to rent to hundreds of thousands of passengers at around $10 per flight. Wrote Newsweek's Daniel McGinn, "The plan has all the markings of the strategies Ryanair has made famous. The handheld units are far cheaper than installing the seat-back TVs other airlines use, and renting them gives Ryanair a whole new way to squeeze money from its passengers during flights."

However, O'Leary may not have allowed sufficiently for the nature of his passengers. Many of them are first-time fliers -- or, at best, people who have flown very rarely and for whom flying is still a great novelty. Many will never have been abroad before. Flights around Europe are short -- most under two hours -- and the thrill of being on an airplane, having a drink and heading for a foreign destination doesn't wear off before the descent. There was no great take-up and O'Leary removed them.

The confrontational O'Leary walks on his lone and doesn't fraternize with either the EU power structures nor the behemoth national airlines which, until Easyjet and Ryanair hit the skies, fixed their bloated fares amongst themselves and created tens of thousands of unnecessary union-run sinecures. (He's not friendly to unions, either.) Air France took Ryanair to court for striking a deal with the French city of Strasbourg, whereby Ryanair guaranteed to bring planeloads of spend-easy tourists to the Alsatian city in return for big concessions on costs of ground services at the airport. The passengers got cheap flights to a lovely town, Strasbourg merchants and the hospitality industry got planeloads of free-spending British and Irish shoppers per month, Ryanair got its passengers and everyone was happy.

Except Air France, which also flew into Strasbourg. They sued.

No one's jaw dropped when the French court found for Air France and fined Ryanair. So far as I can gather, Ryanair has not paid the fine and O'Leary has employed typically robust language to suggest that they will not be doing so. What he did do, however, was stop flying to Strasbourg.

On Lufthansa, he has this to say about chief executive Jurgen Weber: "Weber says Germans don't like low fares. How does he know? He's never offered them any. The Germans will crawl bollock-naked over broken glass to get them."

It's not just other airlines O'Leary feels combative against. It's the whole airline establishment. The British Airports Authority, which owns all three London airports, wants to build an extra runway, as well as expand surface transport links, at Stansted, the airport used by Ryanair and entertained the innocent notion that Ryanair could be coerced into contributing. O'Leary says he's not helping BA to build "a £4 billion Taj Mahal to itself". In this, he has as an unlikely ally, the mighty British Airways iself, which flies out of Heathrow and, according to The Telegraph, says it will take court action to prevent being forced to pay for facilities that will be of benefit only to their rivals.

The growth potential for low cost flights to and from London is probably over, he told American shareholders in Boston, so Stansted doesn't need an extra runway, never mind one costing £4 billion. "If the London airports were broken up and competing against each other, would Stansted really be talking about spending £4 billion on a runway it doesn't need? Of course not!" O'Leary is adamant that BAA's plans for Stansted will be stopped and he says he has the support of the other users of the airport.

Meanwhile, he keeps his eye on the horizon. What's next for low cost airlines?

Free flights, he answers without hesitation. Perhaps the day is coming when passengers will be paid to fly to destinations. What will the European courts have to say about that?


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