‘I’m like Pep – I deserve my €100m pay deal’
Ryanair boss defends his incentive bonus, comparing himself with top football managers, writes Christopher Jasper
Ryanair boss Michael O’Leary has defended his proposed €100m (£86m) bonus by comparing himself with football managers Pep Guardiola and Jürgen Klopp. The outspoken airline chief said it is unfair that lucrative payouts for corporate bosses spark such anger given the lack of scrutiny around the vast sums paid to Premier League managers.
Not that Mr O’Leary, a Manchester City fan since boyhood, disagrees with Guardiola’s pay packet. Rather, he is simply readying his defences as his own windfall looms. The payout will be triggered if Ryanair’s share price, currently at €20.36, hits a threshold of €21 and stays there for 28 days.
Mr O’Leary said: “If I do get it, all the City types will be railing against excessive executive pay and I’m not putting up with any of that mewling nonsense. Footballers are getting half a million a week. Pep, who I think is a genius and deserves every penny, is getting £25m a year, Klopp too – and nobody says boo.
“Yet some guy running a serious business employing 20,000-plus people gets paid £5m or £10m and it’s suddenly excessive.”
Mr O’Leary said the prospective sum should be viewed not as a one-off reward but as payment for five or more years of work in expanding Ryanair, which has established itself as the dominant player in European short-haul aviation.
He is also irked that the share option scheme is often referred to as a bonus, arguing: “It is the shareholders who pay it, not the company.”
He added: “If you turned round to any investor, as we did with ours, and said, ‘The share price is €11, if we double it to €21 would you give me options over €10m?’ then every one of them would do it.”
When the share plan was announced in February 2019, the airline industry had completed its recovery from the global financial crisis and passenger numbers were hitting an all-time high. It was long before a global pandemic nearly killed the industry altogether.
At the time, Ryanair itself wasn’t in quite such rude health, having issued two profit warnings in the previous four months, had its wings clipped by high oil prices, a fare squeeze and a stand-off with striking workers.
However, the rewards plan was accompanied by a contract extension for Mr O’Leary when many in the industry were speculating that he might even be forced to stand down.
For Mr O’Leary, 63, to hit the jackpot, Ryanair’s annual earnings must surpass €2.2bn or its shares hit the required level, with both metrics required to effectively double in value compared with their 2019 levels.
Ryanair has issued options for 10m shares to the chief executive at a strike price of €11.12, which he can buy should either target be attained. The difference between that number of shares at the two prices is €99m.
The incentive scheme was originally expected to expire in 2024 but was extended by four years some
18 months ago when Ryanair’s share price was languishing below €13 post-pandemic.
Mr O’Leary, a Grand National and Cheltenham Gold Cup-winning racehorse owner, most likely won’t be getting his money on the basis of profit performance, with the airline guiding for a figure of about €1.9bn after tax for the year that ended on March 31.
He said there’s a “reasonable prospect” of hitting the profit target in fiscal 2025 as Ryanair seeks to carry 200m passengers for the first time, unless “the bats in Wuhan suddenly take off again”. But by then the company’s share price is already likely to have seen him over the line.
The stock first pushed through the €21 barrier in late March and has bubbled near that point ever since, without racking up the required four weeks above that level.
Possible controversy over the size of the payout has already been touted, with shareholder advisory service Pirc claiming in 2019 that Mr O’Leary should be “sheepish” about accepting it. The debate over executive pay has gained traction in recent weeks as companies seek sign-off from shareholders for increased bonuses.
AstraZeneca suffered an investor backlash last week over a £19m pay award for boss Pascal Soriot, as 35pc of investors rejected the drug maker’s remuneration report and changes to its bonus plan at the annual meeting.
David Schwimmer, the head of the London Stock Exchange Group, said in February that the Square Mile risks losing its status as a global financial centre if executives are stopped from earning more. Mr Schwimmer himself secured a new package last week that will see his pay double to £13.2m.
By any measure, Mr O’Leary, while known for his F-bomb laden rants and a belief that if fares are low then good customer relations are largely irrelevant, is a titan of aviation. Some even go further by claiming he is quite possibly the most important European airline chief of his generation.
Since he took over in 1994, Dublin-based Ryanair and its no-frills peers, easyJet and Wizz Air among them, have transformed the landscape of short-haul flying.
They’ve stripped market share from veterans of the industry such as British Airways and Lufthansa, opened swathes of Europe to overseas tourism for the first time and invented the city break in the process. The carriers have also become hugely influential with the likes of Boeing, so much so that the US manufacturer produced a high-capacity version of its 737 Max just for Ryanair.
Mr O’Leary took his inspiration from Southwest Airlines, having travelled to Texas to meet its founder Herb Kelleher, regarded as the grandfather of low-cost aviation, early in his career.
The penny dropped after he saw the carrier prepare a plane for its next flight in just 25 minutes, shaving almost an hour off the typical turnaround time in Europe.
Mr O’Leary acknowledges that his company, which has its biggest base at Stansted Airport, is now mature and no longer the disruptive new kid on the block. He said: “We’re growing sensibly. If we keep costs down, keep airfares low and keep the price between us and other airlines widening, the business will continue to thrive.”
For someone so outspoken, Mr O’Leary is uncharacteristically disarming when pondering the secret of his success. He said much of it is simply down to his background as an accountant, and his ability to repeat the same successful processes over and over without becoming distracted.
In fact, he argues that many companies and perhaps the world in general would be in better shape if accountants were allowed to make more of the big decisions.
It was in that spirit that he sprang to the defence of Stephanie Pope when Boeing appointed her head of its beleaguered commercial aircraft division last month.
With a degree in accountancy and a career dominated by roles in financial management, industry insiders argued that Ms Pope’s lack of engineering experience made her ill-suited to tackling the production problems and safety crisis that have gripped the plane maker since a door plug blew out of an Alaska Airlines 737 at 16,000 feet in January.
However, Mr O’Leary said: “People are saying that Boeing needs to put the engineers back in charge. No, they don’t. Engineers want to go off and redesign everything and blow $50bn (£40bn) developing some shiny new plane. What Boeing needs now is just boring, everyday execution. So I would put far more accountants in charge who can do the logistical stuff and get the widgets out of the door on time and on budget.”
So enthused is Mr O’Leary about Ms Pope’s appointment that he hopes she is overlooked for promotion to Boeing chief executive following the planned departure later this year of Dave Calhoun, who is stepping down as a result of the production crisis.
Boeing needs a chief who will firefight political problems in Washington DC, he says, while Ms Pope must be left alone to fix the company’s quality-control glitches and eliminate the delivery backlog at its Seattle manufacturing hub. He said: “The last thing you need is engineers in charge. It’s a bit like putting doctors in charge of hospitals. Doctors are great at curing people but awful at running hospitals.”
The Irishman has even suggested to Ms Pope that, as one of Boeing’s biggest customers, he fly to Seattle to deliver a talk to encourage workers in the assembly line – an offer she has so far declined. He said: “Customers do need to be supportive of Boeing and also the shop floor. I would tell them that they’re building great aircraft and to focus on the fundamentals.”
Mr O’Leary also contrasts his own background in finance, having studied business and economics at Trinity College and trained as a tax accountant at Stokes Kennedy Crowley, with that of many other airline leaders whose ascent to the boardroom came by way of the flight deck.
He said: “Airlines for many years were run by former pilots who were only interested in flying the next toy. What we’ve demonstrated at Ryanair is that you put the accountants in charge and it will be dull, boring and repetitive, but actually, we’re very good at delivering. Put accountants in charge of the world. It will be dull and boring but they will do the detail and they will do the execution. We’re a much-maligned species.”
As for his proposed bonus, the €100m coming his way would certainly put him in a league of his own when it comes to pay, even if he jokes that financial institutions may coordinate a mass sell-off “just to spite me”. Yet, like Guardiola and Klopp in the Premier League, the Ryanair boss insists he is more focused on results than the prospect of a payout: “I don’t get that upset about it.”
‘We’re growing sensibly. If we keep costs down and fares low the business will thrive’
‘Airlines for many years were run by former pilots who were only interested in flying the next toy’