Ryanair boss: I’ve got it wrong
Ryanair’s outrageous boss faces up to a fall in profits
CALL Michael O’Leary what you like, and plenty of people have, just as long as you keep flying Ryanair. That has always been the philosophy of the budget airline’s ever-colourful boss. Or it used to be. With the budget airline about to report its first fall in profits for five years, O’Leary is out to change his ways.
He’s said it before, but he repeats: ‘I’ve decided to stop p***ing people off unnecessarily.’
No boss is more closely associated with his company than O’Leary is with Europe’s biggest low-cost airline. And until recently he has been of the view that all publicity is good publicity.
Just as well, given that there are entire websites dedicated to such sentiments as: ‘Michael O’Leary is a . . . [fill in the four-letter word of your choice]’. One such site offers the 53-year-old suggestions as to what he should do with a shotgun.
And all of this, of course, is because of Ryanair’s policies to charge for... well, just about anything. O’Leary charged customers if they hadn’t printed out their boarding pass or if they lost it between check-in and arriving at the airport, if they had an extra bag, if their hold baggage exceeded the 15kg weight limit – and
We needed to address parts of the service. The ladies like the extra bag
for failing to check in online. Ryanair even charged a man with cerebral palsy for using a wheelchair.
O’Leary toyed publicly with the idea of charging people to use the toilets on his planes, with the tonguein-cheek suggestion that passengers ‘pay a pound to spend a penny’. That never quite happened, but the headlines were good.
Speaking to The Mail on Sunday, O’Leary is charm itself. But while he defends his strategy so far, he admits its may be time for a little more finesse.
‘We’ve grown to 82million passengers and we are the number one airline in most European markets. But after 20 years of very rapid growth we needed to address those parts of the service that clearly needed to be addressed,’ he says.
For the first time for years, Ryanair’s annual results for the year to March, out tomorrow, will be heading in the wrong direction.
O’Leary warned twice over the past year that the airline’s profits would not meet expectations and tomorrow the City is forecasting profits to be down to between €500 million (£415 million) and €520million for the year to the end of March – a big fall from €570million previously.
‘We have always said it is going to be pile it high and sell it cheap. It is about low fares and growth. But when you go through an 18-month period when you are not growing, then there are things you need to do,’ he says.
Increased competition from others budget carriers such as easy Jet, Vueling – a Spain-based airline-started by British Airways-owner International Airlines Group – and newcomers such as Norwegian Air Shuttle, has hit hard.
Average fares, which had been rising for five years, are expected to have fallen by 4 per cent in the year to the end of March.
Partly this is down to exchange rates and a weaker European economy, but it is also the result of steep discounting, which O’Leary initiated last year in response to the rising strength of rivals. ‘Weaker pricing because of ‘weaker demand’, he says. It would break City rules for him to comment on Ryanair results before they are published – O’Leary may be outrageous but he’s not stupid. He is happy, though, to talk about the changes at the airline over the past year and is keen to reassure passengers and investors that it is not in a tailspin from which it cannot recover.
A €10 million revamp of the Ryanair website means you should be able to book a ticket in five clicks rather than 17 – during which passengers were offered the chance to pay extra for everything, from sightseeing bus tours to a ‘play to win your trip for free’ game. A ‘cheapest fare finder’ and new mobile app are also in the offing.
O’Leary has also loosened the tough controls on hand baggage. ‘The ladies like the extra bag we’ve said they can take on board,’ he says, sounding quaintly old-fashioned.
Plus, allocated seating, which Carolyn McCall, boss of its great rival easy Jet, reckons was the single most significant change it had introduced, has been available on Ryanair since February. Neither airline offers it free – old habits die hard, it seems.
But the core of the Ryanair proposition remains: tickets are cheap. ‘We haven’t changed our commitment to low prices and punctuality, but we’ve been behind the curve for the past year,’ says O’Leary.
He notes that Ryanair is like German discounters Aldi and Lidl, which are transforming the supermarket sector, but which could learn from rivals on service. He grudgingly admits: ‘To be fair, some of the things easy Jet has done, like allocated seating, have been very effective. ‘We can certainly learn from the competition and we will. But they have not managed to do anything about the fares gap between us and them, which is getting wider. Our unit cost is €30 per passenger and easy Jet’s is €60.
‘Low fares have got us to 82 million passengers and over the next few years we’re aiming for 110million. We are about 3 or 4 per cent ahead of where we were in forward bookings for June to September this time last year,’ he says.
As part of the transformation of the airline, O’Leary has axed 222 routes, mainly to smaller airports on the outskirts of cities, while adding 138, many to bigger major city airports such as Rome, Athens, Lisbon and Prague. It’s part of a bid to shuffle off that other old chestnut that Ryanair flies you almost to where you want to go.
‘Over the past two years a lot of major airports have been affected by the decline of their big-flag carriers, such as TAP in Lisbon, and it’s the same in Athens and Rome. So they have asked us in and we can get a good deal on landing fees at these places,’ he says.
Ryanair has about 175 new aircraft on order, which will begin to arrive in September, and then the revamp should be more or less complete.
All O’Leary has to do is keep his mouth shut.