Michael O'Leary (33 page)

No employee was in any doubt about the company's mission, or its style. Where rivals baulked at the simplicity of the Ryanair model, they paid the price with higher costs. For O'Leary there was no middle ground. He did not want to be a little bit cheaper and a little bit more efficient than the major airlines. He wanted revolution, not evolution: fares that were eye-wateringly low, matched by costs that were lower still, generating ever-rising passenger traffic and ever-rising profits. There was no magic formula, no creative accounting, just hard work, obsession and relentless aggression.

The airline industry had begun to notice Ryanair's skill. At the Paris Air Show the following June the airline was presented with the Best Managed National Airline award, a rare accolade from its peers. But far from becoming complacent, O'Leary's plans for the airline were more ambitious than ever.

I think we can revolutionize Irish tourism to and from Europe, and I think it is a cause worth fighting for. We have a plan over the next five years to double the size of the airline again. This year we'll carry six million passengers; in five years time we want to carry twelve million passengers. That will make us Europe's fifth-biggest airline. My hope is that one million of those passengers will be on low-fare services from the Irish airports to Europe, but if not we'll continue to grow out of Stansted, and from points within Europe.

Ryanair's plans were all the more ambitious against the backdrop of an increasingly competitive European aviation market. When talking to investors, O'Leary expressed caution about the changing situation, pointing out, ‘the trading environment is not all blue skies' and yields would be affected by the competitive nature of the market. He was much more bullish when talking to journalists. When asked in December if he was worried about competing with low-cost carriers out of Stansted, he responded with a laugh.

Hardly…Competition from other low-cost carriers is just not an issue. We compete with British Airways, Alitalia, Lufthansa, SAS on routes all over continental Europe. Why the hell would we fear Go? It's lost GB£21 million on a GB£41 million turnover. And Virgin Express is a tiny airline which has issued twelve profit warnings in the last four quarters. It's not an airline that anybody in Europe would fear or acknowledge as a serious threat.

The emergence of a flurry of new low-cost carriers had also concentrated some minds on possible alliances and mergers between the start-ups. Not O'Leary though. When asked about the prospect of a merger he replied, ‘No thanks. I'd rather have a social disease.'

As the end of the millennium drew near, technology swept all before it. The dot-com boom, which would implode in early 2000, was in full swing. The Internet, still a relatively new but fast developing phenomenon, was unavoidable; every business wanted to understand how to exploit its possibilities and was prepared to invest millions in the hope of hitting the Internet jackpot. The dot-com boom was based on the premise that profits did not matter. It was, in effect, a land grab, as new businesses raised money from credulous investors and then spent lavishly to achieve brand recognition. No matter their losses, the share prices of Internet companies were driven into the stratosphere on a wave of irrational exuberance. Few really knew how to make any money from the Internet, but investors were convinced that it represented a new world order.

O'Leary, though, was not prepared to rush in. EasyJet, his main rival in Europe's emerging low-cost industry, had sold its first seat online in April 1997 and even the slow-moving Aer Lingus had joined the information superhighway with a website, albeit without a regular online booking facility. O'Leary could see the possibilities but saw no need to be an innovator. ‘Michael was hugely resistant to the Internet; he didn't sign on at all,' recalls Tim Jeans. ‘Michael took a lot of convincing,' agrees Ethel Power. ‘At that stage he didn't have a computer in his office.'

His opposition was not based on fear of technology or fear of the new; O'Leary was simply far from certain that the Internet could deliver what he wanted. He had dabbled the previous year, launching a brochure site which gave information on the airline's route network but had no booking facility. It was a presence, a toehold in the market, but nothing more.

By 1999, the case for a genuine Internet presence was growing
stronger. EasyJet had led the way, and now other airlines had begun to successfully sell tickets online. Senior managers at Ryanair could see the Internet's promise as a business tool and knew that their company was in danger of being left behind.

Power says that Caroline Green, then chief executive of Ryanair Direct, was ‘very very pushy about the website' and instrumental in getting it up and running. But Jeans says it was O'Leary's acceptance that the Internet had evolved into a serious proposition that could provide a quantum leap in cutting costs which ultimately propelled Ryanair into the digital age. ‘We were trying to get better deals from [booking system companies] like Galileo and Amadeus. Michael and I traipsed around, and they really didn't take us seriously and would not budge on costs. They really didn't think that an airline could be run without them. What convinced us about the Internet, and what convinced Michael, because he needed to be convinced, was that easyJet were clearly making a very good fist of distributing their product entirely over the Internet.'

O'Leary could wait no longer. ‘There are two different stories, both of which are actually true,' says O'Leary.

The truest is that for the first three or four years of the Internet I blocked any Internet development here. When easyJet first started off with its site, I said we are not doing the Internet for a very sane and obvious reason. At that stage 60 per cent of our sales were driven through travel agents. The software didn't exist to sell half of your tickets online…If you were selling through the travel agents you had to have the old tickets with the dye on the back of them and all our tickets had to be like that. We weren't set up to have both – old-style tickets through travel agents and email tickets as well. So I said that until we have the technology to get rid of the old tickets, we wait. Then later the technology came along where we could sell ticketless flights through the Internet and sell through travel agents as well. And that's when we went into the Internet. And [from that moment] I pushed the Internet in here. I blocked the Internet for about three years, and it was the right thing to do.

O'Leary wanted a site that was simple and cheap, and he did not want to be surrounded by computer consultants with ponytails and cargo pants. The first quotations for the Ryanair site came in at around £3 million, and O'Leary said no. There had to be a cheaper way. In order to minimize costs Ryanair opted to entrust the website design to two students – seventeen-year-old secondary school student John Beckett and twenty-two-year-old dentistry student Thomas Linehan.

‘Michael couldn't bear having these dot-com guys come in with fancy brochures, talking about the corporate model. He just wanted a simple website that worked,' said Power. ‘He used to get a great kick out of talking to the guys that did the website, I think he recognized the genius in them.'

Beckett and Linehan came to Ryanair's attention through the airline's recently appointed human resources director, Eddie Wilson. Wilson had previously been at computer firm Gateway, where Beckett and Linehan had worked during the summer. ‘There was no tendering process for the contract,' recalls Beckett. ‘They mentioned they had had these ridiculously high quotes of up to £3.5 million. They came to us because in the middle of a management meeting Eddie [Wilson] said, “I know a guy who might be able to do this for us, there's no harm in chatting to him.”' The next day, while Beckett was sitting in a classroom in St Andrew's secondary school in Dublin, his mobile phone rang. It was Wilson, inviting him to come for a meeting with O'Leary and the Ryanair management.

‘They wanted it done yesterday, is the quote they used,' says Beckett. ‘So I gave them three prices: one was for setting up a site in a month, a slightly cheaper price for two months and cheaper again for three months.'

‘Michael said, “Yeah, we want you to do it, but you'll have to reverse the cost of the three-month deal with the one-month deal.”' O'Leary wanted the fastest job and the cheapest price, and the two students were no match for his negotiation techniques. ‘I just said yeah, fair enough.' Beckett laughs. ‘The prices we quoted – £17,500, £16,500 and £15,500, I think – were basically figures
that we plucked out of our head, and we thought great. It was a smashing payday for us.'

Beckett and Linehan dealt mainly with Wilson, Michael Cawley and Sean Coyle, a rising young executive known as ‘Mini-me' because of his ability to ape O'Leary's mannerisms. ‘O'Leary's main concern was how long would it take and how much would it cost, and he was going to let everyone else worry about how it worked and what it did,' says Beckett.

The students' task was to create a website that would combine a simple marketing function – information on routes and special offers – with a sophisticated computerized booking system. Ryanair's telesales department was already using the Open Skies system, and the objective was to integrate it with the website. It was a complex job, and IBM was retained to create the bridge between the marketing element of the website and the booking system.

Despite the stories of O'Leary's technophobia, Beckett doesn't recall him as particularly computer illiterate.

I didn't get that from him. But maybe when I thought he was being shrewd by only looking at the things that affected him, like price and time, he was actually avoiding like the plague the technical side of things. He certainly seemed to know what he was talking about, but we were talking basic Internet design terms, ‘We'll put the logo there, we'll put the links there,' that kind of thing. We didn't discuss platforms or anything like that with him. When we tried, he got up and left the room and said, ‘I'll leave you to sort that out.'

When the job was done, O'Leary tried to hardball Beckett and Linehan, offering to pay £12,000 instead of the agreed £15,500. ‘At that stage I knew he was in the wrong, so I stuck to my guns. They had signed what effectively was a purchase order – somebody signed the quote we had given them which outlined the price – but it was very informal.'

Beckett, however, did not stick too hard to those guns. Even though he and Linehan had produced a website for a fraction of what a design company would have charged, they were still beaten
down on their original tender. ‘Two schoolkids couldn't go up against Ryanair,' says Beckett, and O'Leary had no qualms about hardball negotiations with a schoolkid and student.

‘Eddie gave us a cheque signed by Michael and Cawley,' he says. ‘The last thing Eddie said to us, because we had invoiced them plus VAT, was, “I hope you're registered for VAT, are you?” They thought we were trying to squeeze an extra few pounds out of them.'

Beckett and Linehan thought the cheque signalled the end of their dealings with Ryanair, but they had forgotten one thing. Ryanair had been given a site designed to sell seats, not one that encouraged, or envisaged, interactivity with the airline. ‘When we finished the site they didn't have a single email address at all for Ryanair on it,' recalls Beckett. ‘And the phone number led to Ryanair reception. Sometimes you'd get an answer and sometimes you wouldn't.'

The only online contact details were for the site designers, Beckett and Linehan. ‘A month after the launch we asked them to remove our contact info from the site. It was huge publicity for us but it was getting ridiculous. We would get hundreds of emails every day saying, “This is a disgrace, my ticket blah blah blah, my flight was delayed.” We were like, what do you want us to do about it, we are web designers, we've got nothing to do with Ryanair at all…'

To drive Internet sales up, Ryanair began to shut down their other sales channels. It was a high-risk strategy. Just under half of Ryanair's business came through travel agents, with the balance coming from direct telesales. Internet penetration in Ireland was still well below the European average and years behind the US, but having made the decision to go with the Internet, O'Leary would tolerate no half measures.

‘We were taking nearly 40 per cent of our passengers through Galileo and most of the [other] airlines were too,' says Jeans.

We took the decision to turn Galileo off. Travel agents could still book seats for their clients, but they would have to use Ryanair's own Internet site rather than the Galileo system. But booking direct meant there
would be no commission. The theory was that if people wanted low fares there was only one place to go, and that was
Ryanair.com
The carrot was the low fares and the stick was you couldn't get it from anywhere else.

The booking options had been reduced to just two routes – Ryanair's own Internet site and its telephone sales operation Ryan-air Direct. There would be no more travel agents and no more commissions. Just as significantly, the new technology would give Ryanair complete and instant knowledge of every booking on every route, as soon as that booking was made.

Online booking catapulted the airline's accessibility to a new level. People no longer had to traipse down to a travel agent to make a reservation or endure long periods on hold for Ryanair's reservation centre. Instead, they could choose to book a ticket whenever they wanted, and the whole transaction could be completed in a few minutes.

With the aid of the Internet, Ryanair's growth was beginning to change the lives of a generation. For decades scheduled air travel in Europe had been the preserve of the moneyed classes, but now hopping on a plane was becoming as easy and familiar as hopping on a bus. Importantly, too, the young Irish had money to spend because the economy was booming.