Michael O'Leary

by Alan Ruddock

  And then O’Leary called a halt. ‘I think there was suddenly a realization that she wasn’t the right person,’ says Tim Jeans. ‘But no one was close enough within the business to know the whys and wherefores. And nobody really sought to find out either. We were all extraordinarily sorry for him. It was his decision and clearly it was not one that was taken too easily. I just remember saying, “Michael, I’m really sorry it hasn’t worked out.” And he wasn’t dismissive, he was clearly quite affected by it.’

  O’Leary has subsequently refused to discuss the reasons for the split, arguing that Dowling is entitled to her dignity and her privacy. She was, he said, ‘too good for him’. Dowling returned to her previously anonymous life, working as a secretary for Gerry Purcell, the son of a successful beef trader. For O’Leary there would be no time for mourning; his philosophy was that it had happened, it had hurt, now move on.

  Marie Cooney recalls a brief phone call from O’Leary to tell her the news. ‘All he said was, “Marie, I don’t know how to tell you this but we’re not going ahead with that.”’

  Meanwhile, O’Leary’s business life was moving at increasing speed. In January he had set the template for the year by announcing Ryanair’s biggest ever seat sale. The prices were the lowest Ryanair had ever advertised – flights between Dublin and Stansted were to cost just £4 return, plus taxes and charges, a total fare of about £24.99 – and the sale was rolled out across most of Ryanair’s European network, with twenty-one routes included.

  ‘The economics of the operation appear to defy explanation,’ the transport editor of the Guardian noted at the time, but the economics were blindingly obvious to O’Leary. He wanted publicity, he wanted passengers and he wanted Ryanair.com, the website launched three months earlier, to become instantly recognizable as the place to surf for cheap flights. O’Leary had previously recognized that airline passengers represented a captive market for as long as they were on his planes; now, with the Internet, he saw that they could be a captive market while they booked their flights as well.

  The dryly dubbed ‘ancillary sales’, already a significant factor in Ryanair’s profits, were about to become their driving force, and every pound earned from selling more than just a seat could be used to reduce the cost of selling those seats. By February O’Leary was able to make public the next development: Ryanair.com would no longer merely sell tickets, it would also offer travel insurance, hotel accommodation and car hire. Unlike Richard Branson, the entrepreneurial brains behind the Virgin group of companies, O’Leary had no interest in stretching the Ryanair brand beyond the core business of flying passengers from airport to airport. Other companies could compete for the privilege of a presence on the Ryanair.com website; all O’Leary wanted was a large slice of cash.

  Immediately, stockbrokers started to speculate that Ryanair.com could be floated on the stock market as a separate company – the dot-com bubble was a month away from bursting. O’Leary quashed the speculation: ‘We want to concentrate on being Europe’s largest low-fares airline,’ he said. ‘Selling tickets online will help us cut some £10 million in costs, but there is scope for using Ryanair.com to sell a variety of products.’

  O’Leary’s conversion from apparent technophobe to full-blooded embracer of the new world of the web was complete. So complete, indeed, that he decided his cows deserved a website of their own. Sean Coyle, then O’Leary’s personal assistant, was given the job of arranging it, and he turned again to the two young men who had created the Ryanair site. ‘He wanted pictures of the cattle, their family history, their vital statistics, contact numbers for the farm,’ recalls John Beckett. ‘It took a couple of weeks. The pay wasn’t nearly as much as the Ryanair site but it was actually harder to get paid.’

  Coyle was learning at the feet of his master. He knew that the two boys had been hammered on the Ryanair website, and he was determined to prove that he could be as tough a negotiator as his boss. ‘I was surprised how aggressive Sean was in his negotiations after we finished the site,’ says Beckett. ‘A price had been agreed before we began, but Sean was trying to negotiate the price down severely after we had done the work. I was just seventeen and I was way out of my depth. I made one of the worst decisions in my life by not walking out but I didn’t see it that way at the time. I thought I’d better try and get paid something, so I accepted a reduced rate.’

  Within weeks of the seat sale O’Leary announced seven new routes to Europe from Stansted and an additional 250 jobs at the London airport. It was a stunt designed to capitalize on the publicity he had already generated at the start of the year and create the impression of unstoppable growth. The routes and the jobs would happen, but not for another year when Ryanair was to take delivery of another five Boeing 737s.

  O’Leary’s timing was also intended to place additional pressure on the Irish government and Aer Rianta. Jobs and routes that could have gone to Dublin were moving to the UK, he said, because of the Irish government’s refusal to introduce competition at Dublin airport by agreeing a second terminal, and because of Aer Rianta’s decision to eliminate its rebate scheme and increase its charges.

  We were disappointed that the Irish government permitted the Dublin airport monopoly to increase costs for all airlines from 1 January, and this has already resulted in the average cost of air travel to and from Ireland rising for the first time since 1986. The Irish government has got it wrong. The days of protecting these state-owned monopolies are gone. Dublin airport will once again lose out as all our new routes this year will operate between the UK and Europe.

  What mattered for the company, though, was not snubbing Dublin but the sheer scale of the planned expansion. At the start of 2000 Ryanair operated eight routes to continental Europe. The new launches would almost double that number and set the airline firmly on the path to O’Leary’s stated ambition of becoming Europe’s dominant low-fare airline. In his mind dominant meant more than being the biggest in a growing but still small market; it meant reaching a scale that would represent a serious challenge to the traditional airlines. Some fretted that O’Leary was moving too fast, that the thin layer of senior management would not be able to cope with the multiplying organization beneath them. But O’Leary was unconcerned. To him the growth was as controlled as it was essential.

  The trick was to keep the business model simple and to keep chipping away at costs. Ryanair was a point-to-point airline, and would stay that way. Passengers could choose to fly from Dublin to Stansted and then onward to a European destination of their choice, but they did so at their own risk. Landing at Stansted, passengers planning to fly on to Sweden would have to collect their bags, clear customs and then check in again at the Stansted departure desk. If their Dublin flight had been delayed and the connection was missed, tough. It was not Ryanair’s problem. No Ryanair staff would ease passenger transfers, no planes would be held back to facilitate delayed passengers and no refunds would be given for flights missed. It was a reiteration of Ryanair’s existing policy, but as the airline expanded its route network, offering destinations across Europe, it would attract a new generation of customers who would have to be educated in the ways of the low-cost airline business. The O’Leary mantra was unforgiving: low fares meant basic service. It was a novel approach to public relations, but it was working. O’Leary had decided he did not need to be loved; all that mattered was that Ryanair was well known for what it delivered.

  In mid-February 2000 O’Leary announced the airline’s results for the third quarter of 1999. Pre-tax profit had risen by more than 29 per cent, compared with the same period in the previous year, to almost £16 million, helped by some exceptional gains on foreign exchange and by the sale of shares in a communications company. The results also revealed that Ryanair’s fares had risen by 18 per cent during the quarter to an average of £45 – a rise that had given O’Leary the room to launch his January sale.

  A week later Ryanair announced the destinations for the seven new routes it had flagged up. Flights
would operate from Stansted to Lübeck (‘near Hamburg’) in Germany, Malmö (nowhere near Stockholm) in Sweden, Nîmes and Perpignan in southern France, and Brescia and Lamezia in Italy. Further north, Ryanair also added a flight from Prestwick to Frankfurt Hahn. The routes were an eclectic mix, but with the exception of Prestwick–Hahn were linked by a common factor: substantial population centres were being offered cheap flights to London, one of the world’s greatest tourist destinations as well as one of its most important financial centres. British tourists might want to visit Nîmes or Perpignan or even Malmo, but Ryanair’s expectation was that the seats would be filled mainly by Europeans travelling to London – a point missed by sceptics who wondered how O’Leary planned to fill his planes on such seemingly unglamorous routes.

  The noise of the early months of 2000, with the seat sale, website relaunch and route announcements, set the scene for O’Leary’s decision to ask the stock markets to fund the acquisition of ten more Boeing 737s and ‘to exploit opportunities for the purchase of second-hand aircraft’. Ryanair, he said, wanted to raise GB£100 million. ‘We are facing into a period of great opportunity,’ O’Leary said. ‘The successful launch of Ryanair.com has the potential to transform both Ryanair’s business and European air travel.’

  The new shares were to be offered to new and existing institutional investors in Ireland, the UK and continental Europe, but not in the United States because European rules on the ownership of airlines meant that the majority of shareholders had to be European. O’Leary also planned to liberate some of his own assets by selling five million Ryanair shares at the same time, in a move that was to earn him £38 million and reduce his stake-holding below 10 per cent. O’Leary’s sale came less than a year after the share placement in 1999 which earned him £25 million but analysts were unconcerned at the move. ‘The company decided now is a good time to raise some cash because the share price is full and fair and since the chief executive makes the decision for the company, it’s logical that he also thinks it is a good time to sell some of his own shareholding,’ airline analyst Shane Matthews said.

  The share placement raised €122 million for Ryanair, while O’Leary’s sale raised €48 million.* After previous share sales, O’Leary had always insisted his money was hoarded away in his local post office. This time O’Leary told investors that he had serious plans for his money – paying for his upcoming wedding. The post office, however, would not be disappointed. Within weeks of the sale, the wedding had been called off.

  If Michael O’Leary had been about to walk up the aisle of his local Roman Catholic church on 1 July, he might have paused before launching his May advertising campaign. It was a classic of its type: cheap, crudely executed and mightily effective. Placed on the front page of the Irish Independent, Ireland’s largest-selling daily newspaper, the advertisement was headlined, ‘Pope reveals Fourth Secret of Fatima’, and showed the pontiff whispering to a nun, ‘Psst! Only Ryanair.com guarantees the lowest fare on the Internet.’

  The advertisement sparked outrage among members of the Roman Catholic Church, and the publicity flowed for Ryanair. ‘It is surprising that a reputable airline couldn’t have found a more appropriate way of reaching the public than the use of advertising

  copy linking the Pope and a facetious reference to Fatima,’ a statement said, describing the advertisement as ‘pointless and without particular focus’. How wrong that was. The advertisement was both pointed and focused. Ryanair had a foothold in the Italian market and had just announced two more routes, and a spat with the Catholic Church was a sure-fire way to generate plenty of free publicity.

  Back home, the sisters of La Sagesse Convent in Sligo complained to the Advertising Standards Authority that ‘the advertisement was an affront and a gratuitous insult to the Pope and the thousands of practising Catholics and was in poor taste. It trivialised and demeaned the head of a worldwide religion, and it attempted to make a joke of the Fatima experience which for many was the focus of devout respect.’

  The Catholic Church was not alone in failing to see through a transparent piece of attention-seeking. The advertising standards authorities on both sides of the Irish Sea regularly complained about Ryanair’s advertisements, rising to whatever bait O’Leary threw their way. The previous year the Irish ASA had said that an O’Leary advertisement that made fun of a bank robbery had been ‘gravely offensive’ and in June, just after the Fatima campaign, Tom Kitt, a junior minister in the Irish government, launched an attack on Ryanair’s advertising policy. Kitt said there was ‘widespread dissatisfaction’ about the way its fares were advertised, claims dismissed by O’Leary as ‘rubbish’. The UK ASA was on hand to back up Kitt’s assertions, denouncing Ryanair as the ‘most complained about airline’ and revealing that it had issued a special alert to British newspapers advising them to seek advice from the ASA before publishing the airline’s advertisements.

  They just did not get it. Kitt and both ASAs were trying to protect customers from misleading advertisements – complaints ranged from Ryanair’s destinations, like Beauvais being sold as Paris, to its fares, which excluded taxes and charges, making the advertised fare significantly lower than the price actually paid by the customer – but by engaging with Ryanair, they played its game. Ryanair wanted as much controversy as possible by spending as little money as possible. ‘We track coverage sometimes,’ says Paul Fitzsimmons, Ryanair’s former head of communications. ‘I don’t mean hiring a research company to track it, I mean googling it and seeing where it is getting to and putting cost estimates to it. On the Pope one, we tracked it [as being worth] four or five million dollars.’

  The simplest way to have restrained O’Leary would have been to refuse to react to any campaign unless it breached a certain impact point: one or two cheap advertisements, no response; a multi-million pound campaign, response. O’Leary would have been stumped. Instead, he cast the flies and those he offended swallowed them whole. ‘Bookings peak for big ads,’ says O’Leary, ‘and they’ll peak even more if somebody reacts badly to them.’

  Publicity could come from any quarter, and O’Leary would seize it gratefully. Just before he offended the Pope he had happily capitalized on the success of Brian Dowling, a Ryanair employee who had been chosen as a contestant in the second series of Big Brother. In a format which has been replicated across the world, Dowling and others would live together in a house, their every moment recorded on camera. Each week, viewers would vote to eject one contestant from the house, and the last man or woman standing would take the spoils.

  Ryanair pledged to give GB£1,000 to a children’s charity for every week Dowling stayed in the house, and painted a Big Brother logo and a good luck message on one of its aircraft. ‘Everyone here is delighted that Brian made it into the house,’ said O’Leary. ‘He’s been two years in the Ryanair madhouse, which is perfect training. We will be holding his job for him and hope that he will be returning to us – unless, of course, he becomes an international superstar through this.’

  Dowling, an early favourite and the only gay contestant, duly won. ‘I don’t imagine he will want to come back if he is making a fortune,’ said O’Leary. ‘If he does, then we would be glad to have him, and perhaps we would use him in promotion. But if he is looking for appearance money he can feck off.’

  *

  The promise of the third-quarter results for 1999, released in February, was confirmed by the full-year results O’Leary announced in June. Pre-tax profits had grown by 19 per cent to €90.09 million. Passenger numbers were up by 13 per cent to 5.6 million for the year, turnover was up 25 per cent to €370.1 million and Ryanair now had forty-five routes serving eleven countries. Investors, who had driven the shares from €3.85 the previous November to €8.22 by the close of business on the day of the results, had been rewarded for their faith. Ryanair.com was a success, generating 50,000 seat bookings a week and rising.

  ‘We intend to make Ryanair.com the largest air travel website in Europe,’ O’Leary said.
He was also able to put flesh on his earlier promises that the website could become a profit centre in its own right by formally announcing that a deal had been done with Hotel Systems International on the first website tie-in. The deal would allow Ryanair’s customers access to 13,500 hotels worldwide from 28 June, and Ryanair would earn money on every booking made.

  Media commentators and stock market analysts were impressed. ‘The Ryanair formula of low fares and no frills continues to carry all before it, and there are few clouds on the immediate horizon,’ said the Financial Times. ‘The oil price risk is fully hedged, airport charges are under control, the cost of aircraft acquisition is locked in and the older parts of the fleet are almost fully depreciated.’

  At the airline’s AGM later that year O’Leary announced that Ryanair was exercising options to buy three more Boeing 737–800s at a cost of €136 million. The airline had already taken delivery of eight 737–800s in 2000. Profits, too, continued to rise and analysts were forecasting that the result for 2000 would exceed €120 million on a turnover of more than €480 million.

  In O’Leary’s seven years as chief executive the company had been transformed beyond recognition. The chaotic losses of the early years had been turned into modest profits by the time O’Leary stepped into the main job, but progress since 1994 had been exponential and the effect on European air travel had been revolutionary. As the Wall Street Journal wrote that summer, ‘Ryanair’s rise from Irish puddle-jumper to Continental contender is more than one airline’s growth story. The Gaelic upstart and its followers, such as London-based easyJet, are fundamentally shifting the economics of flying around Europe.’