Michael O'Leary (29 page)

Before submitting the plans, O'Leary had tried to rally support at a Dublin Chamber of Commerce meeting in mid–April, telling the assembled crowd of businesspeople that Ryanair was prepared to spend £20 million on the new terminal as a way to break ‘the totally unfair and appalling monopoly of Aer Rianta'. The move would also make good financial sense for Ryanair, O'Leary said, because the airline was paying Aer Rianta £10 million a year to use Dublin airport, so the airline would recoup its investment in just two years. Ryanair's terminal would be built on Aer Rianta land which adjoined the airport and would have enough gates to allow Ryanair to operate more flights, O'Leary said. And, eager to capitalize on his public image as the champion of the consumer, he added that the new terminal would mean cheaper fares for those flying from Dublin airport.

Convincing the business community of the merits of his proposals was a relatively easy challenge, but O'Leary was to have a much tougher time winning over Mary O'Rourke, the minister for transport, who would ultimately decide the fate of the plan. O'Rourke hailed from Athlone, in the same electoral area as O'Leary's Mullingar home. The pair had met occasionally at local events in Westmeath before O'Rourke came to transport, but didn't know each other ‘in any meaningful way', O'Rourke says. Once she took over the transport ministry their contact became much more frequent, and O'Leary soon became a thorn in the minister's side. ‘I wasn't long in the office when he made contact with me,' she says.

There was often twenty letters a day. All that is quite silly, I mean if you want to write one punchy letter that's grand, but twenty letters a day, that's silly.

I have never met anyone like him in my life. It is not persistence – I've met persistent people – he is obsessive, about himself and his business. He's not interested in a good business relationship, or a social relationship, he is interested in none of those things, it's just me me me me. I just think he is a horrid, horrid little man.

The hostility was mutual. ‘She's an idiot,' he says. ‘I'm very supportive of people who come from the [Irish] midlands but I'm not supportive of an idiot no matter where they come from. Most politicians are idiots, but if you look on the scale of idiocy she'd be right up there at the top.'

O'Rourke was prepared to meet O'Leary to discuss his proposals, but the omens were hardly inspiring. A privately owned terminal would be a direct competitor to the state's own operator, and required O'Rourke and her cabinet colleagues to take a decision that would inevitably spark serious confrontation with the trade unions that controlled the existing airport, and would provoke political opposition both within and outside the government parties. Either way, there would be no fast decision. The wheels of Ireland's public service churn slowly, and a decision on something as momentous as a second terminal for the country's largest airport would not be swift.

O'Leary had commercial logic on his side – a second terminal would give Dublin airport room to grow – but his battle with the unions at the start of the year, and in particular his refusal to engage with Bertie Ahern when he wanted to appear to be solving the crisis, had set O'Leary on a course to conflict with the Irish government. Ahern's hostility was made evident in a barely concealed swipe at O'Leary in May, when he hit out at managers ‘who don't seem to believe in social partnership but who have done very well out of a strong economy' and attacked ‘people who weren't around ten years ago'who had been'jumped up a bit'by economic growth and'who are now telling us how we achieved what we collectively achieved'.

The lines had been drawn: O'Leary could expect no political support for a plan that would deliver extra jobs and extra tourism to Ireland, largely because that plan was opposed by the trade union movement, whose grip on Dublin airport would be loosened by a privately owned second terminal. For the moment it was a confined battle, one that pitched O'Leary as the people's champion against a government that refused to deliver better and cheaper services for consumers, and while it undoubtedly alienated O'Leary from the political establishment, it gave him and his company precisely the profile and media coverage that he had hoped for.

In the summer of 1998 Ryanair bolstered its route network further by launching three new routes into Italy – Stansted to Venice, Pisa and Rimini – and two new French routes – Stansted to Lyons–St Etienne and Carcassonne/Toulouse. The routes followed Ryanair's now established approach of selecting remote airports and hammering out favourable deals on landing charges, promotional and marketing incentives and grants. Each time the offer was the same: We can deliver passengers, what can you do for us to make it worth our while?

The small airports were chosen for a number of straightforward business reasons: they were underused or barely used at all, meaning Ryanair had no competition on the route and also guaranteeing swift turnaround times for their aircraft; they were typically distant from the main cities they were expected to serve, creating opportunities for Ryanair to earn more money from its passengers through deals with car-hire companies, hotels and bus operators, as well as drawing passengers from a greater hinterland. Starved of passengers and planes, they were desperate to please them and were prepared to charge little or nothing for their services and to subsidize Ryanair's arrival.

For Venice the airline flew to Treviso airport, some nineteen miles from the city centre – a short walk in Ryanair terms – and little more than a shed attached to a runway. The airport at the destination Ryanair dubbed Carcassonne/Toulouse is on the outskirts of Carcassonne but more than fifty miles from the region's
major city, Toulouse. Similarly, a flight to Lyon-St Etienne leaves passengers quite close to St Etienne but some forty miles away from Lyon. Pisa's airport is close to the city centre – but the main city in Tuscany is Florence, some fifty miles away. Meanwhile, Rimini airport is quite close to Rimini, but quite far from anything else of interest.

For Ryanair each route was but another notch on an ever-expanding belt, but for the five chosen cities the launches were far more significant. ‘It's equivalent to somewhere like Longford [a small town in the Irish midlands], that doesn't have an airport, and suddenly has three million people coming in every year,' says Ethel Power, who helped organize the route launches that summer.

On the launch day for the three Italian routes Ryanair arranged a trip for the press, who would be accompanied by O'Leary and Power on a visit to the airports. Power remembers the reception Ryanair received that day in Italy as the best day of her three years at the airline. Coming in to land at Rimini, ‘We saw the runway and we saw a big guard of honour of all the fire engines down along it,' Power says. ‘And then as we came in close to land we saw thousands and thousands of people on the apron – breaking security really, they shouldn't be on the apron – waiting for Ryanair to arrive. They were waiting for God; Michael O'Leary was God coming to these places. I still remember the cheers that went up. Seventeen different television stations had come to see who this man was.'

O'Leary was not overcome by the occasion. The crowds may have wanted to see him, but he had a blunter message that he wanted transmitted on the news programmes. ‘The first thing we did when the door of the plane opened was to carry out a massive sign that said simply, “Londra, 999,000 lira” [about £40]. We held that up before Michael came out of the plane because that's the shot we wanted on every television camera. We didn't want pictures of Michael, we wanted pictures of 999,000 lira. That's what hit them. They were used to paying millions of lira to fly to London,' Power says.

On the ground, the Italians had gone out of their way to welcome the new airline. ‘Every single tourism organization had
rolled out and they were giving a big party. We do the press conference, then an hour later we're back on the plane, on to Pisa, touch down, repeat the sign, greet thousands of people, and then on to Treviso.'

For O'Leary it was another day's work, but a hard one. He preferred the office to the road, found the meeting, greeting and posing exhausting. He played to the crowds and to the press to get the news coverage and to transmit the message, but it was tough. The Italian job, though, had pleased him. ‘At the end of the day he said, “Well done,”' Power says. ‘But “Well done” from Michael O'Leary means you did a fantastic, amazing, amazing job.'

Ryanair's presence in the Italian market was a clear shot across the bows of Alitalia, which was already teetering on the edge of collapse and insatiable in its demands for capital from the Italian government. Of the major flag carriers, it was one of the most vulnerable to attack from the low-fare airlines, and one of the least capable of making a competitive response. By choosing small regional airports O'Leary avoided direct competition on comparable routes, but the challenge was serious.

In mid-June, after almost a year of hints and speculation, Ryanair announced plans to list its shares on the London Stock Exchange, to complement the listings in Dublin and New York. About £50 million in new shares was to be offered to the market, and the airline's main investors were to sell another £50 million worth of their shares, so £100 million in total would be available to London investors. All three major shareholders were sellers – David Bond-erman and the Ryan family were both to sell the equivalent of 2.4 per cent of the company, while O'Leary was to sell 1.2 per cent of the company, about 8 per cent of his £130 million stake.

There was some confusion about the motivation for the share sale, which came just a year after Ryanair's original £300 million flotation. In his first interview with the Irish press, Bonderman told
Irish Times
journalist Cliff Taylor that this was an ‘ideal time' for Ryanair to issue new stock. ‘This will enable us to expand the shareholder base here in Europe as we expand our route network
in Scandinavia, France and Italy,' he said. Michael Cawley told journalists that the funds from the sale would be used to finance new aircraft purchases. But earlier that month O'Leary had told UK trade magazine
Commuter/Regional Airline News
that money wasn't the primary motivation for the London flotation. ‘We want to raise awareness, broaden our shareholder base and give our existing UK shareholders a means of holding shares in the company,' he said. ‘We are still perceived as Irish, but 75 per cent of our traffic does not originate in Ireland, and 40 per cent does not even touch Ireland.'

In truth it was a combination of all those factors, and the timing was also advantageous. Rival easyJet was starting its third year, and while the airline had yet to publicly report profits, confidence was high and it had just acquired 40 per cent of Swiss charter airline TEA Basel AG, which went on to be renamed easyJet Switzerland. Several new players were also entering the fray, most notably Go, the much-anticipated low-cost operation of British Airways, which began flying on 22 May 1998. BA's commitment was a sign that low-cost carriers were here to stay and not some passing craze.

Go's initial three routes – Stansted to Rome, Milan and Copenhagen – were picked because they were not served by either easyJet or Ryanair. Go's chief executive, Barbara Cassani, was keen to position her airline away from low-cost carriers such as Ryanair. ‘Low price will not mean low service,' she told journalists in April. ‘We have excellent staff and we are hoping to encourage people who have not previously travelled far in Europe to fly with us.'

Ryanair professed to be unconcerned by Go's appearance. ‘Go was never going to be a threat to Ryanair,' says Power. ‘At that point in time BA was the biggest fat cat around – BA were never going to show Ryanair how to run a low-cost airline. Did we have sleepless nights about Go? No.'

Ryanair's London offering came to market on 10 July, when twenty-one million ordinary shares were placed at £5 per share. The placement was a resounding success, with demand for the shares more than five times oversubscribed. The Ryan family grossed GB£34 million, as did Bonderman, after each decided to
offer an additional 1.15 million shares to the market to satisfy the heightened investor demand. O'Leary stuck with his 1.8 million share sale, and grossed GB£10 million, which he claims he duly deposited in his local post office.

He had plans for the money. Between 1995 and 1998 O'Leary had carefully restored his home. Now he wanted luxury. He asked Westmeath County Council for permission to renovate the existing courtyard buildings and to add a swimming pool, terrace and leisure centre. The development would more than double the size of the house, turning what had been a comfortable family home into a luxurious retreat. He also sought permission to build a dressing room and bathroom adjoining the master bedroom – an expensive storage solution for his undemanding collection of jeans and check shirts.

Controversy was never far away, no matter how successful the international expansion. The baggage handlers' dispute, which had been on ceasefire since the end of February, had not been resolved. In July the Labour Court findings on the dispute that had shut Dublin airport loomed over Ryanair, and O'Leary knew that he would come in for heavy criticism. He decided on a pre-emptive strike against the bad publicity by issuing share options to all 1,000 employees to a total value of £20 million. It was the first time that an Irish public company had granted shares to all its employees directly, rather than through an ESOP scheme, in which the shares are held in trust.

The details of the share grant were to be finalized on 12 June, when Ryanair was to publish its full-year results. Michael Cawley said the scheme would be salary-related, with employees on higher salaries gaining more shares. O'Leary was keen to add that the share option scheme was in addition to basic pay increases of between 3.25 per cent and 5 per cent, which were significantly ahead of the increases agreed in Partnership 2000, the national wage agreement struck between the government, employers' representatives and trade unions. ‘We are determined to continue to try to create substantial wealth for our outstanding people, by
encouraging them to become long-term shareholders in Ryanair,' O'Leary said.