Michael O'Leary (46 page)

O'Leary knew he needed to construct a scenario that allowed Ryanair to emerge as the winner no matter what the commission finally decided, and he needed to position Ryanair as the uncrowned king of low fares and competition. ‘The ramifications [of an adverse decision] for the other airports loomed large,' says Fitzsimmons. ‘So it had to be fought. There could be no rolling over here.'

The Strasbourg and Charleroi cases had temporarily derailed O'Leary's plans to retire from the spotlight. Now, while the commission started its lengthy probe, he got back on track. In January 2003 Michael Cawley, the chief financial officer, and Howard Millar, the finance director, were promoted to the newly created positions of joint deputy chief executive. Cawley also assumed the title of chief operating officer, with Millar taking over as chief financial officer.

The promotions, which reflected O'Leary's determination to highlight the strength and depth of the company's management, came after a period of some turbulence in the senior ranks. Conor McCarthy, the Aer Lingus executive poached just before the flotation in 1997, had been the first significant major departure,
leaving his role as operations director just over two years earlier. ‘After four and a half years I got pretty tired of doing the job that I was doing and wanted to try and move on to other things,' McCarthy says. ‘I've never regretted leaving.'

The next senior casualty was Tim Jeans, who quit his position as sales and marketing director in July 2002. And then Charlie Clifton, a Ryanair veteran, resigned as director of ground operations and inflight in December 2002. O'Leary shows uncharacteristic regret at Clifton's departure. ‘Charlie was a good guy,' he says. ‘Of them all I was sorry to see Charlie go. It just got too much for him. He'd done so much, he'd just had enough of the stress and the hassle and the remorseless grind of it all.'

Cawley and Millar's promotions put a new structure in place, one designed to both reassure the markets that there was more to Ryanair than its noisy chief executive and establish a stable management structure to steer the company through a period of exceptionally rapid growth. That both men had a firm grounding in finance was no accident; careful financial management was the key to Ryanair's profitable growth.

Below the top team of three sat O'Leary's ‘Z team': the executive management layer who gathered each Monday to review the airline's operations. The regulars were Jim Callaghan, head of regulatory affairs; David O'Brien, director of inflight; Ray Conway, the chief pilot; Mick Hickey, engineering director; Caroline Green, head of customer services; Eddie Wilson, head of personnel; Bernard Berger, head of route development; and Paul Fitzsimmons, head of communications.

The Monday meeting was, and remains, a fraught affair. O'Leary's approach is abrasive and dismissive. Echoing the cry of Margaret Thatcher to her cabinet ministers, he wants solutions not problems, and is relentless in his demands for fresh ideas to curb costs and raise revenues. ‘There were people who had been there for ages, who should really know better, who either walked into trouble or wouldn't know when to stop digging,' recalls one Z team member. ‘You could either let him hear what he wanted to hear, whether or not it would actually happen, or drop the subject.
If you fought him he'd just keep going and keep going. But there's only ever one winner.'

O'Leary chaired the meetings from the head of the table in his starkly furnished glass-walled office, which looks onto a busy open-plan work area. To his left was O'Brien, who was usually first to be called upon for his operations update. O'Brien was promoted to operations director in December 2002, and had arrived at the senior management table via an unusual route. From 1992 to 1996 he had been director of ground operations and inflight with Ryanair but had then defected to Aer Rianta, O'Leary's bête noire, from 1996 to 1998 before returning to Ryanair in 1998 as director of UK operations.

‘David's soft-spoken, good at his job and he has a huge task to try and control. But he's a bit of a digger,' says one team member. ‘Michael would ask, “Have you got the answer to that?” David would say, “No,” and Michael would say, “Don't come to the fucking meeting without the actual stats.”' Instead of retreating, O'Brien would plough on. ‘David would say, “But —” [prompting] Michael [to] say, “David, shut the fuck up.” And so it would go on.'

Next to O'Brien sat Conway, the chief pilot, who joined Ryanair in 1987 and was promoted to the top table in June 2002. O'Leary's natural disdain for pilots did not make life easy for Conway. ‘He was too slick, too good-looking, he was all the things Michael hated,' says one executive.

Conway, who served as an officer with the Irish Air Corps for fourteen years before joining Ryanair, was immune to O'Leary's hostility. ‘He had a nice life, earned nice money and had a flash car. He'd argue a bit but then he just couldn't be bothered. He'd say, “Right Michael, if that's what you want that's what you'll get,”' says the executive.

To Conway's left was Mick Hickey, one of the more experienced executives, who had joined the company in 1988 and had established a rapport with O'Leary that few enjoyed. ‘He got off relatively lightly,' says another executive. ‘Michael had a lot of respect for him.' It helped too that Hickey was responsible for safety, an area where O'Leary would not compromise.

Next to Hickey, at the end of the table, was Michael Cawley, who became known as Daddy because part of his role was to protect other executives from O'Leary's explosions. ‘If he saw that O'Leary was being unreasonable he would try and interject,' says one executive. ‘He'd defend you or he'd try to deflect it. He'd say, “Come on, Michael, we should really come back to this…” and O'Leary was usually okay with that.' Cawley had no qualms about tackling O'Leary. ‘Cawley argues back with him a bit and is quite dogmatic,' a colleague says. ‘He'd say, “Michael, you're not listening, you can't do that.” His priorities were always commercial, what routes weren't working, what airports weren't giving good deals.'

Next to Cawley, at the opposite side of the table, sat Jim Calla-ghan. A lawyer trained in the US, Callaghan had been head of regulatory affairs since May 2000 and company secretary since June 2002.

The only woman at the table, Caroline Green, was to Callaghan's left. Green's brief was and still is customer services, or ‘the warm and fluffy department', as O'Leary calls it. ‘She wouldn't get it that much,' says a colleague. ‘She stood her ground quite well with him but he would have her in tears a couple of times. He would stop once she started crying. He'd say, “Don't take it too personally.” And afterwards he'd make sure he'd be nice to her.'

Paul Fitzsimmons, the newly arrived head of communications, sat next to Green. ‘He never really got it too bad from him at the meeting,' says an executive. ‘He'd say, “I hear what you're saying, Michael. I'll do that, Michael.”'

Next to Fitzsimmons was Eddie Wilson, who had assumed the position of director of personnel and inflight on Clifton's departure in December 2002. ‘Eddie would have been like David [O'Brien],' says a source. ‘He would have got it in the neck a lot. He would have been a digger. It'd be like, “But Michael, but Michael—” “Eddie, just fucking do it.” “But Michael, but Michael—” “Eddie, just fucking do it.”'

To Wilson's left and O'Leary's right, sat Millar. While Millar lacks O'Leary's dynamism, insiders say he is cut from very much the same financial cloth as his chief executive. ‘Howard is very
close to O'Leary in the financial sense,' says one former colleague. ‘He trusts Howard. Howard does the fuel hedging, the stuff like that…O'Leary knows a fair bit about it but not as much as Howard does. If you want someone moving money around and investing and making money on money, in the money market, hedging, bonds, Howard is brilliant at that.'

The dynamics of the meetings never changed: O'Leary demanding answers, ideas and innovations, his executives scrabbling for answers and hoping to be left alone. Outside the company he was trying to create the impression of a team, but inside Ryanair remained as driven as it had ever been by the obsession and determination of one man. The others made it happen – striking deals with airports, organizing schedules, juggling the finances, keeping the planes in the air – but the glue that bound them into Europe's most aggressive and successful young airline was still O'Leary. His executives did not have to like him, and did not have to know him personally (few did), but they had to respect and respond to his urgings.

The promotion of Cawley and Millar did however provide some ballast in upper management. For investors, their grasp of the finances projected an image of a company that cared more about substance than style. Internally, though, little changed: O'Leary led, others followed. But Cawley and Millar had become the front-runners to replace O'Leary if disaster were to strike, and investors now had the opportunity to assess them.

At the start of 2003 O'Leary was poised to increase the tempo of Ryanair's expansion with an opportunistic bid for a dying rival.

Rumours had been circulating for a number of months that Buzz, a low-cost offshoot of Dutch airline KLM, was in deep financial trouble and would be closed or sold by its parent. Gambling that consumers would be prepared to pay a little more for extra comfort, KLM had positioned Buzz well away from Ryanair's low-cost, no-frills service. The strategy failed to understand the simple dynamics of the new market: price was paramount.

‘Buzz had additional services and better conditions for passengers who wanted to change seats,' says KLM spokesman Bart Kotser. ‘They had inflight catering. They served both primary and secondary markets whereas Ryanair was only flying from secondary airports. Buzz was seen as the chic low-cost product, versus the non-chic from Ryanair.' Big mistake.

Buzz had enjoyed some success in the French and Spanish markets, conveying the British middle classes to their holiday homes. But as the low-cost market became more and more crowded, it began to feel the strain. ‘At that time there were so many start-ups that it was very hard,' says Kotser. ‘The economy, the political situation, made people very reluctant to fly anyway, and in the end it wasn't possible for Buzz to make money.'

Almost as soon as rumours of Buzz's impending sale or closure began to circulate, Ryanair was linked with the Dutch airline. The Irish initially remained coy, claiming that while they were indeed talking to Buzz, it was about cooperating on common issues such as passenger compensation. But behind the scenes furious negotiations were taking place.

O'Leary had repeatedly rejected the idea of Ryanair engaging in mergers and acquisitions. His principles, though, were always
ready to be sacrificed to pragmatism. He could see the value of Buzz's slots at Stansted and of its routes into France and Spain. He was not alone. Ryanair was just one of a number of buyers interested in taking over Buzz. According to Kotser, KLM looked at three main factors. ‘One was a social one, how to keep as many people at work as possible. And the second was long-term risk management for those same people. And the third one was we wanted to do it quick and transparent, and so you look at the financial risks that you have there.'

At the end of January, the deal was announced. Ryanair had bought Buzz for just €23.9 million, substantially less than the list price of one Boeing 737. Buzz came with €19 million in cash, so O'Leary was quick to boast that he had effectively acquired it for less than €5 million. On the same day Ryanair placed orders for another twenty-two Boeing aircraft and secured options on a further seventy-eight. ‘Fortune favours the brave,' he said later. ‘The time to buy is when everyone else is selling and prices are low. I believe this is one of those times.'

Less than a week after Ryanair announced it was buying Buzz, O'Leary announced a survival plan for the airline. Top of the list was the immediate culling of a hundred jobs, reducing Buzz's workforce from 570 to 470. Buzz's trade unions were indignant but O'Leary was clear.

If Balpa [the UK pilots' union] wants to go strike on 1 April, when Ryanair formally takes over, it will not be a question of sacking them, we will close down Buzz. We are not hanging around for long negotiations; it is take it or leave it. It is losing shedloads of money [its losses were running at €1 million a week] and must be turned round. It is tough and unfortunate to lose a hundred jobs, but the alternative was to lose all the jobs.

Airports were in line for a similar message, as O'Leary sought to drastically reduce the number of routes served by Buzz. High-cost airports were first to go while the others were invited to fight it out for a place in the Ryanair network, with price as the key
determinant. ‘They had twenty French destinations; we were going to cut that down to about ten,' says O'Leary. ‘We would have an auction and get cost deals out of them.'

The victorious airports ended up with a better proposition than Buzz, O'Leary argues. ‘Buzz had loads of routes they were flying twice a week and three times a week and we were going to go daily,' he says. ‘We had bigger aircraft, lower cost base; we knew what we were at.' As for the airports that lost, they could ‘fuck off'.

The original plan for Buzz would have seen the Dutch airline acting as a subcontractor to Ryanair, with its own UK air operator's certificate. But as the indignation of Buzz's Stansted staff became increasingly hard to drown out, O'Leary's plans began to evolve. By the end of February, the plan to make a hundred of Buzz's staff redundant had changed. Now, O'Leary decided, two thirds of the airline's workforce would have to go.

The cuts extended to every area of the airline – 25 per cent of the pilots were out along with up to 80 per cent of cabin crew, 50 per cent of ground operations staff and all of the cargo and sales staff. The remaining 200 staff would be offered new contracts with ‘significant' increases in pay and productivity allowances. Predictably, the unions screamed. Paul Kenny, who represented Buzz's administration and ground staff, said it was an ‘absolute outrage' and accused Ryanair of treating staff with ‘contempt'. Balpa general secretary Jim McAulsan said the takeover was being approached ‘as if it was a fire sale'.