Michael O'Leary

by Alan Ruddock

  To Conway’s left was Mick Hickey, one of the more experienced executives, who had joined the company in 1988 and had established a rapport with O’Leary that few enjoyed. ‘He got off relatively lightly,’ says another executive. ‘Michael had a lot of respect for him.’ It helped too that Hickey was responsible for safety, an area where O’Leary would not compromise.

  Next to Hickey, at the end of the table, was Michael Cawley, who became known as Daddy because part of his role was to protect other executives from O’Leary’s explosions. ‘If he saw that O’Leary was being unreasonable he would try and interject,’ says one executive. ‘He’d defend you or he’d try to deflect it. He’d say, “Come on, Michael, we should really come back to this…” and O’Leary was usually okay with that.’ Cawley had no qualms about tackling O’Leary. ‘Cawley argues back with him a bit and is quite dogmatic,’ a colleague says. ‘He’d say, “Michael, you’re not listening, you can’t do that.” His priorities were always commercial, what routes weren’t working, what airports weren’t giving good deals.’

  Next to Cawley, at the opposite side of the table, sat Jim Calla-ghan. A lawyer trained in the US, Callaghan had been head of regulatory affairs since May 2000 and company secretary since June 2002.

  The only woman at the table, Caroline Green, was to Callaghan’s left. Green’s brief was and still is customer services, or ‘the warm and fluffy department’, as O’Leary calls it. ‘She wouldn’t get it that much,’ says a colleague. ‘She stood her ground quite well with him but he would have her in tears a couple of times. He would stop once she started crying. He’d say, “Don’t take it too personally.” And afterwards he’d make sure he’d be nice to her.’

  Paul Fitzsimmons, the newly arrived head of communications, sat next to Green. ‘He never really got it too bad from him at the meeting,’ says an executive. ‘He’d say, “I hear what you’re saying, Michael. I’ll do that, Michael.”’

  Next to Fitzsimmons was Eddie Wilson, who had assumed the position of director of personnel and inflight on Clifton’s departure in December 2002. ‘Eddie would have been like David [O’Brien],’ says a source. ‘He would have got it in the neck a lot. He would have been a digger. It’d be like, “But Michael, but Michael—” “Eddie, just fucking do it.” “But Michael, but Michael—” “Eddie, just fucking do it.”’

  To Wilson’s left and O’Leary’s right, sat Millar. While Millar lacks O’Leary’s dynamism, insiders say he is cut from very much the same financial cloth as his chief executive. ‘Howard is very close to O’Leary in the financial sense,’ says one former colleague. ‘He trusts Howard. Howard does the fuel hedging, the stuff like that…O’Leary knows a fair bit about it but not as much as Howard does. If you want someone moving money around and investing and making money on money, in the money market, hedging, bonds, Howard is brilliant at that.’

  The dynamics of the meetings never changed: O’Leary demanding answers, ideas and innovations, his executives scrabbling for answers and hoping to be left alone. Outside the company he was trying to create the impression of a team, but inside Ryanair remained as driven as it had ever been by the obsession and determination of one man. The others made it happen – striking deals with airports, organizing schedules, juggling the finances, keeping the planes in the air – but the glue that bound them into Europe’s most aggressive and successful young airline was still O’Leary. His executives did not have to like him, and did not have to know him personally (few did), but they had to respect and respond to his urgings.

  The promotion of Cawley and Millar did however provide some ballast in upper management. For investors, their grasp of the finances projected an image of a company that cared more about substance than style. Internally, though, little changed: O’Leary led, others followed. But Cawley and Millar had become the front-runners to replace O’Leary if disaster were to strike, and investors now had the opportunity to assess them.

  20. Home Fires Burning

  At the start of 2003 O’Leary was poised to increase the tempo of Ryanair’s expansion with an opportunistic bid for a dying rival.

  Rumours had been circulating for a number of months that Buzz, a low-cost offshoot of Dutch airline KLM, was in deep financial trouble and would be closed or sold by its parent. Gambling that consumers would be prepared to pay a little more for extra comfort, KLM had positioned Buzz well away from Ryanair’s low-cost, no-frills service. The strategy failed to understand the simple dynamics of the new market: price was paramount.

  ‘Buzz had additional services and better conditions for passengers who wanted to change seats,’ says KLM spokesman Bart Kotser. ‘They had inflight catering. They served both primary and secondary markets whereas Ryanair was only flying from secondary airports. Buzz was seen as the chic low-cost product, versus the non-chic from Ryanair.’ Big mistake.

  Buzz had enjoyed some success in the French and Spanish markets, conveying the British middle classes to their holiday homes. But as the low-cost market became more and more crowded, it began to feel the strain. ‘At that time there were so many start-ups that it was very hard,’ says Kotser. ‘The economy, the political situation, made people very reluctant to fly anyway, and in the end it wasn’t possible for Buzz to make money.’

  Almost as soon as rumours of Buzz’s impending sale or closure began to circulate, Ryanair was linked with the Dutch airline. The Irish initially remained coy, claiming that while they were indeed talking to Buzz, it was about cooperating on common issues such as passenger compensation. But behind the scenes furious negotiations were taking place.

  O’Leary had repeatedly rejected the idea of Ryanair engaging in mergers and acquisitions. His principles, though, were always ready to be sacrificed to pragmatism. He could see the value of Buzz’s slots at Stansted and of its routes into France and Spain. He was not alone. Ryanair was just one of a number of buyers interested in taking over Buzz. According to Kotser, KLM looked at three main factors. ‘One was a social one, how to keep as many people at work as possible. And the second was long-term risk management for those same people. And the third one was we wanted to do it quick and transparent, and so you look at the financial risks that you have there.’

  At the end of January, the deal was announced. Ryanair had bought Buzz for just €23.9 million, substantially less than the list price of one Boeing 737. Buzz came with €19 million in cash, so O’Leary was quick to boast that he had effectively acquired it for less than €5 million. On the same day Ryanair placed orders for another twenty-two Boeing aircraft and secured options on a further seventy-eight. ‘Fortune favours the brave,’ he said later. ‘The time to buy is when everyone else is selling and prices are low. I believe this is one of those times.’

  Less than a week after Ryanair announced it was buying Buzz, O’Leary announced a survival plan for the airline. Top of the list was the immediate culling of a hundred jobs, reducing Buzz’s workforce from 570 to 470. Buzz’s trade unions were indignant but O’Leary was clear.

  If Balpa [the UK pilots’ union] wants to go strike on 1 April, when Ryanair formally takes over, it will not be a question of sacking them, we will close down Buzz. We are not hanging around for long negotiations; it is take it or leave it. It is losing shedloads of money [its losses were running at €1 million a week] and must be turned round. It is tough and unfortunate to lose a hundred jobs, but the alternative was to lose all the jobs.

  Airports were in line for a similar message, as O’Leary sought to drastically reduce the number of routes served by Buzz. High-cost airports were first to go while the others were invited to fight it out for a place in the Ryanair network, with price as the key determinant. ‘They had twenty French destinations; we were going to cut that down to about ten,’ says O’Leary. ‘We would have an auction and get cost deals out of them.’

  The victorious airports ended up with a better proposition than Buzz, O’Leary argues. ‘Buzz had loads of routes they were flying twice a week and three times a week and we were goi
ng to go daily,’ he says. ‘We had bigger aircraft, lower cost base; we knew what we were at.’ As for the airports that lost, they could ‘fuck off’.

  The original plan for Buzz would have seen the Dutch airline acting as a subcontractor to Ryanair, with its own UK air operator’s certificate. But as the indignation of Buzz’s Stansted staff became increasingly hard to drown out, O’Leary’s plans began to evolve. By the end of February, the plan to make a hundred of Buzz’s staff redundant had changed. Now, O’Leary decided, two thirds of the airline’s workforce would have to go.

  The cuts extended to every area of the airline – 25 per cent of the pilots were out along with up to 80 per cent of cabin crew, 50 per cent of ground operations staff and all of the cargo and sales staff. The remaining 200 staff would be offered new contracts with ‘significant’ increases in pay and productivity allowances. Predictably, the unions screamed. Paul Kenny, who represented Buzz’s administration and ground staff, said it was an ‘absolute outrage’ and accused Ryanair of treating staff with ‘contempt’. Balpa general secretary Jim McAulsan said the takeover was being approached ‘as if it was a fire sale’.

  Ryanair was unconcerned. ‘The poor old staff were working for a basket case company,’ says Charlie Clifton, who had by then resigned as director of Ryanair’s ground operations.

  It’s the classic, ‘Ah, how could you?’ Well, if we didn’t they were all going to be made redundant. So now some of them had an opportunity to work, to sign on the dotted line and say we’re going to work the Ryanair way because Ryanair is successful. And a number of people have and will always find that absolutely too awful a medicine to take. Good luck to them. Nobody’s putting a gun to their head.

  Ryanair’s new plan specified the axing of fifteen of Buzz’s twenty-four routes and the reduction of Buzz’s fleet from twelve to eight aircraft. Fares on the remaining routes were to be cut by 50 per cent and seat capacity doubled. The plan, however, hinged on the 200 staff agreeing to sign up to Ryanair’s offer. In early March Ryanair wrote to the chosen few. ‘If we don’t get sufficient acceptances, we would go ahead and close it down, and operate it ourselves by hiring in pilots and cabin crew,’ O’Leary said.

  By mid-March, the verdict was in and O’Leary could boast that 90 per cent of the Buzz pilots offered new contracts had signed on the dotted line, along with 50 per cent of the invited cabin crew. There was, however, another issue: Ryanair’s due-diligence trawl of Buzz’s accounts had discovered losses far greater than those expected. O’Leary managed to whittle KLM down to €20.1 million from the previously agreed €23.9 million. He then decided to implement his doomsday plan, and shut Buzz down completely for the duration of April, ahead of a planned relaunch in May.

  ‘The unions would have played ducks and drakes with us if we were trying desperately to keep it going,’ says O’Leary. ‘We said, “Fuck that, we’re going to shut it for a month.” The unions realized, “Shit, this is serious.” And shutting it down was the master stroke, because then we weren’t dealing with any of the bullshit.’

  Despite O’Leary’s tactics, Kotser said KLM had no regrets about the choice it made. ‘Ryanair was the best option,’ says Kotser.

  We were aware of redundancy plans. We also were aware that if we had chosen any of the other options the same thing would have happened and even more people would get made redundant. If you decide to withdraw from a market and you cannot make money, then the options are limited of course. In the end, we only would have been happy if Buzz had turned out profitable. Knowing that was not the case we still think it was the best decision from the options we had.

  O’Leary, with his new acquisition on board and with new planes arriving by the month for his ever-expanding Ryanair fleet, had taken on a huge challenge. Buzz accelerated Ryanair’s expansion into Europe, increased its dominance at Stansted and made the Irish airline a fixture in the lives of Britain’s growing army of French homeowners, but it was also about to give O’Leary a severe bout of indigestion.

  On 1 May 2003 Ryanair relaunched Buzz. Or, more accurately, it relaunched a handful of Buzz routes, staffed by a handful of Buzz staff now kitted out in Ryanair uniforms. The relaunch was without fanfare; former Buzz routes restarted alongside a tranche of new Ryanair services. The result was the most intense two days of Ryanair’s eighteen-year history. On 30 April and 1 May Ryanair launched twenty-one routes from Stansted and a further two from Pisa and Hahn. The flurry of launches was the culmination of Ryanair’s aggressive march through Europe, which had intensified dramatically in previous months.

  In February the airline had launched eight new routes; in March, two more and early April had seen a further eight. The frenzy continued throughout the summer, and by the start of June forty-seven new routes had been launched in 2003, almost double the twenty-four inaugurated in the whole of 2002.

  ‘It was all about the deals on offer from the airports,’ says one executive. ‘O’Leary had no time for demographics or detailed market research. He needed routes for his planes, and he needed money from the airports to keep his costs down. So the airports prepared to offer the best deals got the routes.’

  As always, though, there was method in O’Leary’s apparently chaotic approach. His trump card, he believed, was Ryanair’s strength at Stansted. The British capital was a magnet for tourists and businessmen alike, as well as being a vast catchment area for potential airline customers. Routes to and from London, almost no matter where they went to, were certain to attract passengers. Low airfares were still a novelty in continental Europe, and Ryanair was offering people who had never flown before an opportunity to travel and explore at prices too tempting to refuse.

  The business model remained as simple as before: Ryanair would fly point to point, offering no complicated connecting flights; turnaround times on the ground would be kept to a minimum so that the planes spent as much time as possible in the air; bases would be established in European countries so that planes, pilots and cabin crew could be grouped locally and cheaply; small airports would be used because they wanted the business and were prepared to pay handsomely to get it; ticket sales would be handled directly, with Ryanair.com growing in importance by the day and simultaneously providing an ever-growing profit centre.

  The airline’s accelerating expansion made it easier for O’Leary to punish airports who dared challenge his demands for low charges and marketing support. In February Ryanair reduced frequency on the Shannon–Hahn route over a row with the Irish airport about charging levels. O’Leary had originally planned to move the extra capacity to Italy, but the personal intervention of an executive at Kerry airport – only seventy miles from Shannon – swayed his plans in just a matter of hours.

  ‘I was following the Shannon row and I had heard that the plane was going to Italy,’ says Peter Bellew, a former manager at Kerry airport.

  The plane was a Hahn-based plane, so rather than flying Hahn–Shannon they were going to fly from Hahn to Bergamo, and I thought, Jesus, that’s a bit of a dog. A friend of mine operates walking holidays in Kerry and west Cork. And he said to me, ‘What am I going to do, this flight’s gone and that’s where I’m getting all of my customers from.’ So I said to him, ‘We’ll try and see what we can do to get it to Kerry.’

  Bellew had dealt with O’Leary before and knew he was not averse to an unconventional approach to business. Bellew recalls:

  I started thinking about it on the Monday, and on the Tuesday I knew Michael was speaking at a function in Trinity. So I decided I’d doorstep him. He was walking into the lecture theatre and he saw me outside and he just said, ‘What the eff are you doing here?’ I said, ‘We want your Hahn flight.’ And he said, ‘You can’t have it, the plane is gone to Italy.’ I said, ‘I want it.’ And I actually grabbed him by both arms and I shook him and said, ‘We want it,’ and he said, ‘Well, you have to give me a deal.’ And I said, ‘What deal do you want,’ and he mentioned a figure and I said, ‘We’ll do it.’

  Bellew sta
yed for the rest of the talk, and the details of the deal were hammered out in a car with O’Leary on the way back to Dublin airport.

  For Kerry the deal was a coup as the airport only had three destinations – Dublin, London and Zurich. The deal was also a winner for Ryanair, who could now claim that reducing services at Shannon would have almost no impact on passenger numbers as the Hahn passengers would simply fly to Kerry instead. And the move also served to put manners on Shannon by reminding the airport how easily it could be replaced by its privately owned neighbour and rival.

  The deal was typical of the airline’s casual attitude to route selection. Ten of the forty-seven routes launched in early 2003 were to last less than a year, but the scale of Ryanair’s expansion meant that they were swiftly replaced by other services. Because Ryanair operated point to point, closing one route had minimal knock-on effects on the rest of the network. ‘There was an element of churning, of course, but the pace of expansion was being dictated by the arrival of new aircraft and the determination to fill them,’ says one executive. ‘We were going to make mistakes, but so many airports wanted our business that the failures could be replaced quickly.’

  Coupled with the acquisition of Buzz, the speed of expansion was putting Ryanair under intense pressure to fill seats. The result was tumbling fares and soaring passenger numbers. Between January and March 2003 average fares fell by 6 per cent, while passenger numbers were up by 50 per cent. The trends were matched between April and June, when fares fell by a further 8 per cent while passenger numbers rose by 60 per cent.

  The pressure to sell seats demanded a high-profile publicity campaign to generate free publicity, and O’Leary was willing to act the fool if required. The anonymous accountant of the early years had been transformed into a showman. O’Leary did not care how ridiculous he appeared as long as seat sales went up. His personality was a tradeable commodity and he was determined to exploit himself to deliver the maximum profile for his company across Europe. One of his more controversial stunts took place on 13 May 2003, when publicity for the new route launches was essential. That morning O’Leary changed his jeans and check shirt for the military fatigues of a tank commander, climbed on board a Second World War tank and set off for Luton airport, the headquarters of easyJet.