Michael O'Leary (22 page)

The new planes were to be used to launch O'Leary's assault on the mainland European market. He told journalists that Europe would be ‘a big part' of the airline's future, but refused to be more specific than confirming plans to fly to two unnamed ‘non primary' airports in mainland Europe: ‘We don't want to forewarn our opposition.' In fact, O'Leary would have found it difficult to be more specific even if he had wanted to reveal his hand, as he had yet to finalize any deals with airports on the continent.

The task of finding the new routes fell to the new operations manager Conor McCarthy, Tim Jeans and O'Leary himself, who
went on a three-day whirlwind tour of Paris, Brussels, Stockholm and Copenhagen. McCarthy and O'Leary had no real interest in talking to the major airports in these cities – they knew that they would find it impossible to strike a deal – and focused instead on small airports that few people had ever heard of. ‘There was no question that we would go into major gateways,' says Tim Jeans. ‘One major issue was price, and the other was timing. You cannot get an aeroplane in and out of Charles de Gaulle airport in Paris in under an hour, and we needed turnaround times of twenty-five minutes or less.'

For Ryanair's early European routes O'Leary had decided that capital cities, with their large populations, were important, yet access had to be cheap and turnaround times fast. Paris – continental Europe's most visited city and near Disneyland's European theme park – was an obvious first choice; Brussels, the home of the European bureaucrat, was equally attractive; Scandinavia, however, would be a shot in the dark.

‘We spoke to Orly [Paris's second main airport] and they treated us with considerable disdain,' says Jeans. ‘I remember the little Peu-geot 106 they sent out to meet us, with the office junior aboard, and that was about as far as we got. We didn't darken Orly's door again.' Instead O'Leary chose Beauvais, a tiny airport forty miles west of Paris, close to the horse-racing centre of Chantilly. There were no rail links – air travellers would have to continue their journey by bus, taxi or hired car – and virtually no facilities. Beauvais was a runway with a shed, but for O'Leary it would be Paris.

In Belgium Ryanair had similar problems. The options were Ostend and Antwerp. Ostend was operationally unsuitable because the runway was too short, and Antwerp was too far from Brussels. The solution was Charleroi, thirty miles south of the Belgian capital and very like Beauvais: a runway where sheep grazed alongside with a terminal building served by sporadic charter flights. It, too, could only be reached by road. Skavsta, in Sweden but sixty miles away from Stockholm, completed the trio of international destinations that O'Leary would use as his guinea pigs for low-cost travel in Europe.

McCarthy remembers the pace of the deal-making. ‘We covered the airports in three days and managed to do a deal with three of them. We didn't even really try to do a deal with the big airports because we knew they just didn't have the psychology or mentality to do that sort ofbusiness.' In May 1997 Ryanair would launch routes from Dublin to Paris-Beauvais and Dublin to Brussels-Charleroi; the following month it would launch Stansted to Stockholm-Skavsta. The routes would be sold as capital-to-capital services even though the airports were up to two hours drive from the capital cities they were serving and the prices would be rock bottom.

In the autumn of 1996 O'Leary had begun talks with Kerry airport about the possibility of starting a service from there. Ryanair had previously withdrawn from Kerry in September 1992, along with Galway and Waterford, because of ‘lack of demand', but four years later the climate and the airline had changed. Ireland was emerging from years of recession into a period of remarkable economic growth, low fares had proved to be as much of a market stimulant in Ireland as they had in the United States, and airports were beginning to realize that the only way to encourage traffic was to strike deals that made low fares possible.

Kerry is in a far-flung corner of Ireland's south-west, but it also lies at the heart of the Irish tourist market. That seasonal business provided a useful basis for an air route, but it was the growing prosperity of the region that provided the second, more important ingredient: locals keen to travel throughout the year. Kerry airport wanted part of the Ryanair action, and a tour operators' conference in Killarney provided the chance.

‘As part of trying to get Ryanair to start a service we chartered a plane off of them to fly the people free of charge from Dublin down to Kerry,' says a former executive at the small airport. ‘A lot of their senior people flew down on it. A lot of them hadn't been in Kerry before and on the day they just said, “Jesus, we should be flying down here.”'

After that Kerry talked to Ryanair ‘on and off', and in November 1996 Ryanair decided that it was ready to push ahead with the route.

‘It all happened very fast, as it does with Ryanair,' says the executive. He says that Peter Bellew, the airport's marketing manager, received the call from Ryanair and was tasked with tracking down Denis Brosnan, the airport's chairman, who was in Chile that day. Bellew told Brosnan that Ryanair was ‘hot to move' and Brosnan agreed to meet them just two days later in Dublin. ‘Brosnan cut his journey and came straight off the transcontinental flight. He got off the plane and walked down in the rain with Bellew into Ryanair. It was very interesting because Denis wasn't going to leave the building until they had agreed to do it. Not in a hectoring way, he just kept talking and talking and talking.'

Brosnan was no hick from Ireland's Wild West. Like O'Leary, he represented a new generation of successful international businessmen. He had created Kerry Foods, a multi-million-pound food ingredients empire which was spreading its reach into North America, and he was a match for O'Leary. ‘Jesus, would you not clean the place up and get yourself a suit, Michael,' he said at one point during the negotiations.

The new route was signed off later that day, and the first planes took off the following June.

By the beginning of November 1996, just three months after Bonderman hadjoined the company as a director and major shareholder, the chairman was being eased out. ‘Tony was being sidelined, and we fought quite hard to maintain his chairmanship,' says Brian Bell, one of Ryan's media advisers, who had previously worked for Ryanair. ‘At one stage Michael wanted Tony completely off the board, and our advice for Tony at the time was to stay put.'

Ryan, O'Leary had decided, would be a liability for the company when the time came to sell it to the stock market. GPA's collapse four years earlier was still fresh in his mind and, he thought, in the minds of the investment community. Ryan, no matter how much he had invested and how visionary he had been, was a symbol of hubris, arrogance and stock market failure.

‘Tony was quite dispassionate about it,' says Bell. ‘He took
soundings from various people. Michael was saying to him that the feedback from the UK was that if he stayed he would be a liability because of GPA. We did our own research on Tony and we found that was rubbish.' O'Leary, though, was not for turning. He believed that Bonderman was the obvious choice to take over from Ryan as chairman. Bonderman had the respect of the market in the United States and his reputation for sound investments combined with his knowledge of the airline market would command respect in the UK.

The name Ryanair, O'Leary felt, was bad enough; having Ryans on the board was worse, but having Tony Ryan as chairman was just impossible. ‘You wouldn't have been able to float it,' he says. ‘Tony didn't realize that. But Bonderman brought us huge credibility in the States, a lot more than we knew at the time. A lot of this is just luck, but the judgement call had to be made.'

Ryan was determined to stay on the board but prepared to concede the chairmanship. He had too much at stake to risk another market failure: this was his chance of financial redemption and an opportunity for his children to be secure for life. He had thought GPA would deliver that security, and now he had a second chance he was not going to let it slip. It was a blow to his ego, but his wallet was more important. In the end, says a fellow director, ‘It was all quite amicable. We were a small regional airline, so we needed someone bigger for when we floated. The board was fully supportive of putting Bonderman in as chairman, and it's been proved right since.'

One of Ryanair's investment bank advisers says that the banks did not apply pressure for Ryan's removal, but were more than comfortable with the choice of successor. ‘It wasn't an atypical decision by a company that was planning a flotation. Bonderman had written a fairly sizeable cheque to get involved, so it's not unusual for the new financial investor to say, “I'm now going to control the business and control the board and be the chairman.” So part of it was related to the fact that Bonderman had arranged this capital,' he says.

Ryan's resignation and Bonderman's appointment in his place
were announced on 19 November 1996. Three days later O'Leary tried to play down rumours of a rift in the company by telling the
Irish Times,
‘Dr Ryan indicated some time ago that he wanted to step down as chairman in the medium term.'

While he had been replaced as chairman, Ryan remained umbilically linked to the company, which still bore his name and which, through his nearly 60 per cent shareholding, he still controlled. ‘I don't think it would have made much difference if Ryan had stayed,' says the investment banker. ‘There's not much difference in perception between chairman and majority shareholder. The flotation would still have been successful – GPA was in the past and the market has a short attention span.'

By the end of 1996 O'Leary had completed the transformation of the airline and of his own fortunes. Bonderman had been installed as chairman and his presence gave Ryanair instant credibility in the financial markets. Ryanair was progressing smoothly to a flotation: its profit performance was strong, its route network was growing, six more planes were joining the fleet and European destinations had been lined up for the following year.

O'Leary's profit-share deal would earn him more than
£
8 million in 1996 – indicating the scale of the airline's improvement – but this would now be transformed into a major shareholding in an airline that would soon be worth hundreds of millions. For the moment O'Leary appeared to have everything that he had ever wanted, but it was not, and never would be, enough. ‘Michael just has to go on and on, succeeding and accumulating,' says one former colleague. ‘It's just the way he is. It's too simplistic to say that it's all a game; it's far more serious than that. He makes money, and he succeeds, because that is what he does. There is no endgame, no point at which he steps aside and smells the roses. He is perpetual motion, restless, insatiable, driven – but by what? Who knows? It's just what he does, and it's all he knows.'

Nine years after he had first been asked to sort out Ryanair, Michael O'Leary remained a largely anonymous figure in Irish life. Ryanair was still a private company and flew under the radar of the financial media. Coverage of the airline's progress from loss maker to serious profit generator had been muted, and scrutiny of the man who had led that transformation was underwhelming. The scale of O'Leary's wealth was unknown even to his closest colleagues. All that was about to change.

David Bonderman's arrival at Ryanair had altered the dynamics of the company. Until Bonderman had invested, Ryanair had been a small and moderately successful regional airline. It could have stayed that way: a small, profitable, niche operator. Bonderman's investment, however, heralded a far more ambitious strategy.

Publicly, the company tried to dampen speculation that flotation was imminent. In early January Tim Jeans tackled the gossip by saying that he had ‘read with interest the speculation about a stock market flotation, but would stress that it is just that – speculation. We have recently announced the acquisition of six Boeing 737 aircraft from Lufthansa which were financed by the traditional methods of cash and bank finance. These will be sufficient for the medium-term expansion into Europe, so there is no pressing need for finance on any grand scale. When you have a guy like David Bonderman coming on board the industry tends to start putting two and two together. I feel that this time they may have come up with five.'

Behind the scenes, though, Ryanair's executives were moving with pace. Within weeks of Jeans's attempt to downplay speculation, O'Leary was in New York to talk to major investment banks about a flotation, an exercise known as a beauty parade. ‘We went for a day, and all the major banks were pitching,' says
O'Leary. Each bank was trying to convince O'Leary and Bonder-man that it would be best suited to take the Irish airline to the stock market, and in time-honoured fashion bragged about how much it could sell the company for. ‘The lowest valuation was $600 million and the highest was $3.5 billion,' says O'Leary. ‘Crazy stuff. We went with Morgan Stanley, who were somewhere in the middle.'

The valuations bandied about by the Wall Street bankers were far in excess of Ryanair's assumed value. Bonderman's investment just six months earlier had valued the company at about
£
130 million, yet now, at the start of 1997, bankers reckoned that the lowest achievable price was $600 million. That valued O'Leary's stake alone at more than $100 million, enough to catapult him, age thirty-six and still single, into the top rank of Ireland's wealthiest individuals.

On 9 February 1997 the speculation ended and the countdown to the stock market began when the
Irish Times
announced that Morgan Stanley had been chosen to ‘pilot Ryanair through' its flotation.

For O'Leary, life was about to change irrevocably. The anonymous obsessive who spent his life at his desk was about to be thrust into the limelight. While potential investors would sift through his financial accounts, hunting for signs of weakness before they committed their millions, Ireland's media was about to discover a new target.