O’Leary is losing the plot

CoUlD Ryanair become the next Sports Direct? Michael o’leary’s no-frills carrier and Mike Ashley’s retail chain have much in common.

Both are run by autocratic founders, and both believe that if you give customers what they want for the cheapest price they won’t cry foul.

And both have subscribed to the view that as long as you keep on expanding by adding ever more flights or more outlets and brands, then sales and profits will rise and big battalion investors will remain tame.

But in adopting a winning formula, which has made o’leary and Ashley very rich, they lost sight of some key ingredients for long-term success.

Keeping the workforce loyal is critical. And in the end there is only so much pain the customer is willing to take for low prices. When the culture of the enterprise starts to come unstitched, investors vote with their feet by selling down their stakes and new deals become harder.

So far the share price of Ryanair has survived the slings and arrows of its flight cancellations but, as we have seen with Sports Direct, it doesn’t take long for poor culture to damage market value.

In its latest effort to deal with its pilot capacity problems, Ryanair is cancelling another 18,000 flights between November and March, affecting 400,000 passengers.

It has not been able to persuade its self-employed pilots to fill the gaps, as it had hoped.

Were it to pay its pilots more generously and offer them more down-time for doing a high-pressure job it might not be in its current pickle.

So far the market has focused on the cash cost of the cancellations, which at less than £44m is a fraction of the £1.3bn of pre-tax profit projected for 2017.

What is more important is the psychological blow of the disruption and the possibility that many people buying flights, already disgusted with poor service and endless add-on charges, will look elsewhere. And while Ryanair is going backwards, some of the flag carriers have been learning how to compete on price while offering the advantage of polite service and airports which are not miles away from passengers’ intended destination.

It is interesting to note that Ryanair already is backing out of its grandiose ambitions by pulling plans to bid for Alitalia.

It is not the first time it has been thwarted, having been outmanoeuvred by BA owner IAG in the battle for Aer lingus.

At a moment when the Dublin carrier is inundated with compensation claims for cancelled and postponed flights, its lutonbased rival EasyJet is upping its game.

It has teamed up with American aircraft designer Wright Electric to develop an electric powered plane. It is also enhancing cabin service by providing passengers with the means to stream film and video on mobile devices.

As we have seen at JD Sports, Dixons Carphone and others on the High Street, improved culture and service can, over time, triumph.

Train sets

WHIlE all eyes have been on Bombardier’s troubles with Trump and Boeing, the Canadian firm finds itself in a spot of bother in Europe. Two main rivals in building trains, France’s Alstom and Germany’s Siemens, have come together to form a European champion to take on the Chinese.

The deal is described as a merger of equals, but on this occasion Paris looks to have won hands down.

Siemens looks to be the better business, with profitable high-speed trains and signals, including assets once owned by Britain’s Invensys.

Siemens may have the larger stake in the joint enterprise but, after the deal is done, Alstom boss Henri Poupart-lafarge will run the company which will have a French headquarters and a Paris quote. Sound like game, set and match.

As for Canada’s Bombardier, which makes its trains in Britain, it will be a minnow in a world of giants.

Grexit threat

GERMANy’S election has produced its first casualty in the shape of finance minister Wolfgang Schauble, architect of austerity reviled in Greece among other places.

It may be too soon for Athens to hang out the bunting. Schauble likely will be replaced by a nominee from the Free Democratic Party, which out of government was an advocate of Grexit rather than bailouts.

Teutonic plates are moving.