Michael O'Leary

by Alan Ruddock

  Power says that Caroline Green, then chief executive of Ryanair Direct, was ‘very very pushy about the website’ and instrumental in getting it up and running. But Jeans says it was O’Leary’s acceptance that the Internet had evolved into a serious proposition that could provide a quantum leap in cutting costs which ultimately propelled Ryanair into the digital age. ‘We were trying to get better deals from [booking system companies] like Galileo and Amadeus. Michael and I traipsed around, and they really didn’t take us seriously and would not budge on costs. They really didn’t think that an airline could be run without them. What convinced us about the Internet, and what convinced Michael, because he needed to be convinced, was that easyJet were clearly making a very good fist of distributing their product entirely over the Internet.’

  O’Leary could wait no longer. ‘There are two different stories, both of which are actually true,’ says O’Leary.

  The truest is that for the first three or four years of the Internet I blocked any Internet development here. When easyJet first started off with its site, I said we are not doing the Internet for a very sane and obvious reason. At that stage 60 per cent of our sales were driven through travel agents. The software didn’t exist to sell half of your tickets online…If you were selling through the travel agents you had to have the old tickets with the dye on the back of them and all our tickets had to be like that. We weren’t set up to have both – old-style tickets through travel agents and email tickets as well. So I said that until we have the technology to get rid of the old tickets, we wait. Then later the technology came along where we could sell ticketless flights through the Internet and sell through travel agents as well. And that’s when we went into the Internet. And [from that moment] I pushed the Internet in here. I blocked the Internet for about three years, and it was the right thing to do.

  O’Leary wanted a site that was simple and cheap, and he did not want to be surrounded by computer consultants with ponytails and cargo pants. The first quotations for the Ryanair site came in at around £3 million, and O’Leary said no. There had to be a cheaper way. In order to minimize costs Ryanair opted to entrust the website design to two students – seventeen-year-old secondary school student John Beckett and twenty-two-year-old dentistry student Thomas Linehan.

  ‘Michael couldn’t bear having these dot-com guys come in with fancy brochures, talking about the corporate model. He just wanted a simple website that worked,’ said Power. ‘He used to get a great kick out of talking to the guys that did the website, I think he recognized the genius in them.’

  Beckett and Linehan came to Ryanair’s attention through the airline’s recently appointed human resources director, Eddie Wilson. Wilson had previously been at computer firm Gateway, where Beckett and Linehan had worked during the summer. ‘There was no tendering process for the contract,’ recalls Beckett. ‘They mentioned they had had these ridiculously high quotes of up to £3.5 million. They came to us because in the middle of a management meeting Eddie [Wilson] said, “I know a guy who might be able to do this for us, there’s no harm in chatting to him.”’ The next day, while Beckett was sitting in a classroom in St Andrew’s secondary school in Dublin, his mobile phone rang. It was Wilson, inviting him to come for a meeting with O’Leary and the Ryanair management.

  ‘They wanted it done yesterday, is the quote they used,’ says Beckett. ‘So I gave them three prices: one was for setting up a site in a month, a slightly cheaper price for two months and cheaper again for three months.’

  ‘Michael said, “Yeah, we want you to do it, but you’ll have to reverse the cost of the three-month deal with the one-month deal.”’ O’Leary wanted the fastest job and the cheapest price, and the two students were no match for his negotiation techniques. ‘I just said yeah, fair enough.’ Beckett laughs. ‘The prices we quoted – £17,500, £16,500 and £15,500, I think – were basically figures that we plucked out of our head, and we thought great. It was a smashing payday for us.’

  Beckett and Linehan dealt mainly with Wilson, Michael Cawley and Sean Coyle, a rising young executive known as ‘Mini-me’ because of his ability to ape O’Leary’s mannerisms. ‘O’Leary’s main concern was how long would it take and how much would it cost, and he was going to let everyone else worry about how it worked and what it did,’ says Beckett.

  The students’ task was to create a website that would combine a simple marketing function – information on routes and special offers – with a sophisticated computerized booking system. Ryanair’s telesales department was already using the Open Skies system, and the objective was to integrate it with the website. It was a complex job, and IBM was retained to create the bridge between the marketing element of the website and the booking system.

  Despite the stories of O’Leary’s technophobia, Beckett doesn’t recall him as particularly computer illiterate.

  I didn’t get that from him. But maybe when I thought he was being shrewd by only looking at the things that affected him, like price and time, he was actually avoiding like the plague the technical side of things. He certainly seemed to know what he was talking about, but we were talking basic Internet design terms, ‘We’ll put the logo there, we’ll put the links there,’ that kind of thing. We didn’t discuss platforms or anything like that with him. When we tried, he got up and left the room and said, ‘I’ll leave you to sort that out.’

  When the job was done, O’Leary tried to hardball Beckett and Linehan, offering to pay £12,000 instead of the agreed £15,500. ‘At that stage I knew he was in the wrong, so I stuck to my guns. They had signed what effectively was a purchase order – somebody signed the quote we had given them which outlined the price – but it was very informal.’

  Beckett, however, did not stick too hard to those guns. Even though he and Linehan had produced a website for a fraction of what a design company would have charged, they were still beaten down on their original tender. ‘Two schoolkids couldn’t go up against Ryanair,’ says Beckett, and O’Leary had no qualms about hardball negotiations with a schoolkid and student.

  ‘Eddie gave us a cheque signed by Michael and Cawley,’ he says. ‘The last thing Eddie said to us, because we had invoiced them plus VAT, was, “I hope you’re registered for VAT, are you?” They thought we were trying to squeeze an extra few pounds out of them.’

  Beckett and Linehan thought the cheque signalled the end of their dealings with Ryanair, but they had forgotten one thing. Ryanair had been given a site designed to sell seats, not one that encouraged, or envisaged, interactivity with the airline. ‘When we finished the site they didn’t have a single email address at all for Ryanair on it,’ recalls Beckett. ‘And the phone number led to Ryanair reception. Sometimes you’d get an answer and sometimes you wouldn’t.’

  The only online contact details were for the site designers, Beckett and Linehan. ‘A month after the launch we asked them to remove our contact info from the site. It was huge publicity for us but it was getting ridiculous. We would get hundreds of emails every day saying, “This is a disgrace, my ticket blah blah blah, my flight was delayed.” We were like, what do you want us to do about it, we are web designers, we’ve got nothing to do with Ryanair at all…’

  To drive Internet sales up, Ryanair began to shut down their other sales channels. It was a high-risk strategy. Just under half of Ryanair’s business came through travel agents, with the balance coming from direct telesales. Internet penetration in Ireland was still well below the European average and years behind the US, but having made the decision to go with the Internet, O’Leary would tolerate no half measures.

  ‘We were taking nearly 40 per cent of our passengers through Galileo and most of the [other] airlines were too,’ says Jeans.

  We took the decision to turn Galileo off. Travel agents could still book seats for their clients, but they would have to use Ryanair’s own Internet site rather than the Galileo system. But booking direct meant there would be no commission. The theory was that if people wanted low fares there wa
s only one place to go, and that was Ryanair.com The carrot was the low fares and the stick was you couldn’t get it from anywhere else.

  The booking options had been reduced to just two routes – Ryanair’s own Internet site and its telephone sales operation Ryan-air Direct. There would be no more travel agents and no more commissions. Just as significantly, the new technology would give Ryanair complete and instant knowledge of every booking on every route, as soon as that booking was made.

  Online booking catapulted the airline’s accessibility to a new level. People no longer had to traipse down to a travel agent to make a reservation or endure long periods on hold for Ryanair’s reservation centre. Instead, they could choose to book a ticket whenever they wanted, and the whole transaction could be completed in a few minutes.

  With the aid of the Internet, Ryanair’s growth was beginning to change the lives of a generation. For decades scheduled air travel in Europe had been the preserve of the moneyed classes, but now hopping on a plane was becoming as easy and familiar as hopping on a bus. Importantly, too, the young Irish had money to spend because the economy was booming.

  Once one of the poorest and least progressive in Europe, Ireland’s economy had been growing at a phenomenal rate. The country was in the grip of a virtuous economic cycle, with surging employment delivering high tax revenues for government, which in turn spent ever more on the nation’s infrastructure, further fuelling the boom. The demographics were young – in 1999 40 per cent of the population was under twenty-five – and the traditional powers in Irish society were falling away. The Roman Catholic Church, the moral power behind Irish governments up until the late 1980s, had been brought to its knees by emerging stories of systemic child sexual abuse by parish priests and in Church-run institutions, and Ireland’s political class was rocked by allegations of corruption at the highest levels of the establishment, allegations that prompted the creation of a series of public tribunals of inquiry which would expose a rotten culture of self-aggrandizement.

  Freed of the inhibitions that had governed their parents and grandparents Ireland’s youth was letting down its hair. Instead of being forced to emigrate, as half a million had in the decade from 1979 to 1989, they were able to get jobs at home and had money to spend. They had the world at their feet, and Ryanair was the airline to help them explore it.

  Irish pilots were among the direct beneficiaries of the airline’s growth. In the late 1990s opportunities for pilots in Ireland were few and far between. Aer Lingus, which was finally carving out a modest profit after its latest reconstruction, was not expanding, and carriers with smaller planes, such as Aer Arann, were not an attractive prospect to men and women who dreamed of flying the newest jet aircraft. ‘I joined in 1999,’ says one pilot who is now a captain with the airline. ‘It was the only job for pilots. It was a different time. Before that there was no jobs. You got a job with Aer Lingus if you were very lucky, or you flew little aeroplanes for small companies like Iona. When Ryanair [started to expand] there was lots of jobs.’

  Aer Lingus was still offering a small number of highly coveted cadetships, which included fully paid training for new pilots, but at Ryanair things were different. ‘It was do it yourself,’ says one pilot. ‘Ryanair would train you on the 737, and the cost of the training was taken out of your salary over the next three years.’ Ryanair’s pilots also learned that flexibility was an absolute requirement of the job. ‘You join the company, and the contract says you can be sent to any base at any time,’ says the pilot. Back in 1999 the only other base was Stansted.

  ‘I hated Stansted,’ says one staff member who was based there. ‘It is not London, it is forty minutes on the train from London. It’s like living in Naas [a satellite town some thirty miles from Dublin] and saying you live in Dublin.’

  O’Leary’s doggedness, his refusal to let even the smallest irritation remain unscratched, came as a shock to Kerry airport in the late summer of 1999. The airport’s management had hoped that the temporary furore caused by its decision to introduce a £5 levy on passengers would fade away and that O’Leary would learn to live with a minor inconvenience.

  ‘The levy had operated peacefully for a couple of months,’ says a former Kerry executive. Ryanair’s pamphlet campaign against the charge had had an impact – about half the passengers at the airport refused to pay, while the other half handed over their £5 without a murmur. Those who would not pay were still allowed to board their flights as Kerry sought to raise money and avoid controversy. ‘And then,’ he says, ‘without much discussion either way, Ryanair went down the legal route. In a way we weren’t surprised, because to be honest nothing would ever surprise me with Ryanair.’

  O’Leary, frustrated by the airport’s persistence, had decided to force the issue to a conclusion. Ryanair, according to the executive, argued that ‘the terms of the particular agreement they had with us stipulated that additional charges could not be imposed. They argued that even if they were not imposed directly on Ryanair they could not be imposed on passengers using Ryanair.’

  What had started as a minor row, a scuffle over a small charge at a relatively unimportant airport, escalated into a bitter dispute that would now demand a disproportionate amount of Ryanair’s management time. O’Leary, though, was sending out a clear message to all other regional airports. In early August he had threatened to ‘re-evaluate’ Ryanair’s future at Kerry if the levy was not dropped, but his threats had been ignored.

  So he took his battle to the High Court. The Irish courts are practically dormant in August, as barristers and judges swap the Four Courts for their annual holidays, so Ryanair applied for a temporary injunction to prevent Kerry airport from levying the fee until the courts returned to normal service in September. The job of marketing the legal challenge to the media fell to Michael Cawley, Ryanair’s then commercial director. ‘We left a legal challenge until now because we thought the airport management would come to their senses,’ Cawley told journalists. ‘At this stage, however, things have got out of hand.’

  The legal battle was to prove complex and costly. The High Court initially granted Ryanair’s injunction in September, but the airport was subsequently granted a stay against the injunction so it could appeal to the Supreme Court. The Supreme Court backed Ryanair, and Kerry airport was once again prevented from applying the charge until a full hearing had been arranged in the High Court.

  As costs rose, settlement became a priority for the airport, which did not have the deep pockets required for a lengthy legal battle. ‘It got very bitter towards the end,’ says the executive, ‘and it was going to start getting very expensive. On top of that Ryanair had cut back some flights, so it was down to three or four days a week. It just didn’t make any sense for them or us to prolong it.’ He says that it came to a head when Peter Bellew, a senior manager at the airport, received notice that he was going to be a star witness at the legal hearing. ‘Bellew just said enough was enough. He was about to go on holiday, his wife was pregnant and it was a stupid dispute,’ the former executive says.

  Bellew reckoned that a full legal hearing could be embarrassing and potentially damaging for Ryanair because once ‘you get into the discovery of documents, we could have sought discovery of all the deals they had made across Europe. It didn’t make sense for two Irish companies to be fighting each other like that.’

  With a settlement his sole objective, Bellew called O’Leary. ‘He said, “Listen, lads, I don’t know anything about the lawyers, but can we not sort this out?” He had to listen to a bit of a tirade for a few minutes and then he said, “So what do you want?” And O’Leary mentioned a figure to sort it out that was ridiculous. Bellew said a figure and O’Leary said, “No no no, I can’t do that.” And Bellew said, “Go on go on go on go on” like Mrs Doyle [a character in Father Ted] and he started laughing. Michael Cawley was on the speaker phone as well and he started laughing as well.’

  Eventually, a figure was agreed and O’Leary insisted on immediate c
losure. ‘He agreed the figure, and then said, “If we don’t get all the paperwork done by four o’clock it’s double that, and if we don’t get agreement by tonight it’s treble that.“’ Bellew met the deadline, and peace was re-established. ‘They [Ryanair] very publicly acknowledged that it had been sorted out and that we were back on level ground,’ says the executive, ‘and they acknowledged very publicly that even while the legal [dispute] had been going on that operationally our relationship had always gone well. And then they had a seat sale.’

  Once again, O’Leary capitalized on media coverage of a dispute to promote routes and sell tickets. At the same time he won his battle by eradicating the levy. It was a comprehensive victory over a tiny, vulnerable airport operator. For once O’Leary had been Goliath, and he had shown no mercy.

  While Kerry rolled over, Aer Rianta was a much more resilient foe. The trigger for renewed hostilities was the government’s plan to break up the state monopoly, replacing it with separate authorities to run the airports at Dublin, Cork and Shannon. There was widespread speculation that Shannon would be the first piece of the Aer Rianta jigsaw to be hived off.

  Shannon’s fortunes were largely dependent on an archaic quirk of Ireland’s bilateral air travel agreements with the United States, which required a large percentage of flights to the US to touch down there even though it was just twenty minutes’ flight time from Dublin airport. The rule had been designed to save Shannon from closure. Europe’s westernmost airport, technological advances in air and jet travel since the 1950s had made it redundant. Modern airliners could travel with ease from the US to Dublin, London or any European capital without the need to refuel at Shannon. Ireland, however, had continued to insist on the rule because successive governments feared that the airport had no future without it.