Michael O'Leary (7 page)

At the time Ireland's department of transport was known as Aer Lingus's downtown office; the relationship between the department and the airline it owned was seamless. Aer Lingus executives were routinely asked to provide information for the department and allowed, in effect, to dictate government policy. Ryan's confidence that the new routes would be granted was entirely misplaced; he understood markets but he had no feel for the politics of the situation. The department of transport sought, and took, Aer Lingus's advice. The new routes would be refused.

The official reason for the refusal was that Ryanair had yet to
prove itself as an airline. The Luton route, however, had quickly established itself. In Waterford early teething problems had also been countered. Poor weather conditions – Waterford airport is prone to fog – caused almost one in five flights to be diverted to other airports, but the introduction of the larger Viscount reduced the diversion rate.

Passenger numbers continued to grow as Ryanair introduced larger jet aircraft from the end of 1986. By early February 1987 the airline had carried its 100,000th passenger on the Dublin–Luton route. Ryan and his team were ready to expand further, but the rules of the day were that the government called the shots. New routes had to be approved, and getting that approval required convincing the department of transport that Aer Lingus, the fount of all its knowledge, was wrong.

A former Aer Lingus executive says that the airline was divided internally by the threat of competition, with conservatives arguing that it had to be killed at source and some liberal elements relishing the prospect of a livelier, expanding market. ‘But management was dominated by the conservatives,' he says.

Ryanair had yet to prove itself to a hostile government but it had made its mark on an equally important constituency. The travelling public and initially the Irish media embraced the new company with an enthusiasm that unnerved its detractors. Eugene O'Neill, young, handsome and dynamic, captured the imagination; he was a David taking on the Aer Lingus Goliath, offering cheap flights and friendly service. His image was burnished by the skills of Anne O'Callaghan, his public relations adviser, who charmed the media and made it possible for O'Neill to shine. Significantly, too, the public wanted Ryanair to succeed because they had tasted low fares, and seen the immediate impact that Ryanair had had on Aer Lingus's fares, and they liked what they saw.

‘Our customers were extremely forgiving because they genuinely wanted Ryanair to succeed,' says Charlie Clifton, who worked his way through the ranks at Ryanair from 1986 to 2002.
We had very very good public relations – Eugene was excellent at that – and the whole company really got a lot of public support. They could see that we were trying to break the monopoly. And they could also see that we were a bunch of kids as well, so it wasn't like you had crusty old folk who'd been there for years doing the stuff. We were just out of school, with no experience, trying to be as nice as we could. So you rarely got your head taken off. And people were pretty forgiving.

In just two years the company grew from being a one-plane operation out of Waterford into a serious player on the Dublin–London route. Its ability to survive, despite a deteriorating financial position, was a source of deep irritation to Aer Lingus. Hostilities were not restricted to the executive teams in both companies. Ryanair's young workforce was committed and passionate, and had no time for the patronizing disdain of the state-owned airline and its comfortable, well-paid staff. On the ground the battles were just as intense as in the boardrooms and Ryanair's people needled their Aer Lingus counterparts at every opportunity.

Clifton recalls the skirmishes, and Ryanair's minor victories still bring a smile to his face. When Ryanair moved into Cork airport in the spring of 1987, Clifton says, ‘Aer Lingus acted as if it had owned that airport forever and then along came bright-eyed Ryanair. There was all sorts of messing. We'd say, “Can we have those stands there?” and they'd say snootily, “No, those are the Aer Lingus stands.” We didn't have chocks for putting under the aircraft's wheels, so we merrily helped ourselves to the Aer Lingus chocks, then they'd come round and steal them back.'

To settle their differences, Ryanair eventually challenged Aer Lingus to a soccer match. ‘We took them all out, eleven against eleven; we beat them 3–1 and we rang up the
Cork Examiner
and we got it put into the paper,' Clifton says, still pleased by the victory almost twenty years later. ‘There were two brothers working for us, and there was something like eleven brothers in the family, and one of them played for Cork City and he came out for us. Of course the Aer Lingus guys didn't know who was working for Ryanair and who wasn't.'

Aer Lingus's naivety on the playing fields did not diminish its determination to put manners on Ryanair. It matched Ryanair's low fares with cheap, if difficult to obtain, headline fares of its own; it increased capacity on key routes; and it used aggressive marketing. The depth of Tony Ryan's pockets had kept Ryanair afloat, but Aer Lingus was determined to increase the pressure to breaking point.

O'Neill fought Aer Lingus with panache, positioning Ryanair as the cheeky, friendly alternative to the national monopoly and poking fun at it with effective advertising campaigns. Ryanair's youth and exuberance were in stark contrast to the stodgy, corporate middle-aged world of Aer Lingus; there was a swagger about the company, a confidence that comes naturally to the young and to those who have not had their ideals quashed by the dead hand of bureaucratic management.

If carrying passengers was the ultimate measure of success, then O'Neill was doing well. New route launches in 1987 had opened up the Cork–Luton market (although for the first few months the service had to land, taxi and take off again in Dublin en route because the British government still had the power to object to the new service), as well as routes from Dublin to Cardiff and Dublin to Knock, a new airport in the west of Ireland. The Knock service had been won in direct competition with Aer Lingus's new commuter service – a propeller-plane division which the airline established to compete with Ryanair – and the state airline responded by opening routes to the nearby airports of Sligo and Galway, a move that ratcheted up competition between the two airlines to a new, and more painful, level.

By the middle of 1987 O'Neill's Ryanair had carried its 250,000th passenger and with the addition of the new routes managed to carry 318,000 passengers in the whole of 1987. Its fleet of aircraft had been boosted during the year by the addition of three BAC One-Eleven jet aircraft from Tarom, the Romanian carrier, which were delivered in the early summer. That April Cathal Ryan had told newspapers Ryanair was heading for a ‘substantial profit' and was expecting to have a hundred flights
a week between Ireland and the UK by the summer of 1986, a fourfold increase on the summer of 1986. ‘The public response has been incredible in Ireland,' he said.

O'Neill's marketing skills won him recognition from the media – Ryanair won the
Sunday Tribune
's advertisement of the year award in 1987 for a campaign against Aer Lingus – and the admiration of his staff. The customers, too, were happy – the service was often as chaotic as the airline's finances, but in a country gripped by recession Ryanair's low prices won the airline many fans. Reservations, handled by phone and often scribbled on pieces of paper, were routinely lost, but the early Ryanair put a premium on customer relations.

‘We were so customer-focused in the very early days that if you were a flight steward or stewardess and you clocked in for your flight maybe an hour beforehand and the flight was delayed, you'd be sent up to the boarding gate, and you'd float around the boarding gate talking to passengers, apologizing profusely and buying them a cup of tea or coffee. So people loved it,' says Clifton. ‘It was very touchy-feely. And, erm, pretty hopeless. People really liked that, but it was unsustainable.'

European expansion, however, remained elusive because of the government's refusal to grant new route licences. Ryanair's ambitions to get a foothold in the continental market were continually thwarted by the government's willingness to protect Aer Lingus from further competition.

Frustrated by his failure to win licences to Paris and Amsterdam Tony Ryan had dabbled with European expansion by paying £630,000 for an 85 per cent stake in struggling Luton-based London European Airways in late 1986. Ryan's original intention was to run LEA and Ryanair separately, with Cathal Ryan at the helm of the new UK operation. In January 1988, however, LEA was relaunched as Ryanair Europe, and began to cooperate with Ryanair, allowing the Irish airline to sell services from Dublin through to Brussels using Luton as a hub. Despite a steady trickle of Ryanair passengers, Ryanair Europe's attempts to start profitable services from London to Amsterdam and Brussels foundered
quickly and the airline limped to eventual closure at the start of 1989.

The profit Ryan had envisaged for Ryanair remained similarly elusive, and by mid-1987 his airline had racked up losses of more than £2 million. The money itself wasn't a problem for Ryan – in 1987 alone his dividend from GPA had been in excess of five million – but he was becoming increasingly frustrated with Ryanair's swelling losses despite its rising passenger numbers, and with its failure to provide a serious challenge to Aer Lingus beyond the Irish Sea.

O'Leary too was getting restless. In the previous two years he had made about £200,000 from the newsagents – ‘serious twine' as he puts it – but his interest in shopkeeping was waning. ‘I was bored,' he says, ‘but it was very good money. I wasn't overly concerned about the future. I just wanted to make a lot of money by the time I was thirty.'

He had, he says, no grand plan, just a hunger to make money. The shops were sold, and O'Leary invested his money and his energies in property dealing. ‘I'd made very good money in the newsagents,' he says. ‘I'd had enough of them and I sold them, bought some property, was making some nice money. That was the first time I didn't need to work for money.'

He felt invincible. Barely three years out of university, with a short career in tax affairs already in his past, he now had more money in his pockets than any of his contemporaries – and more, indeed, than many of the partners in the accountancy firm that he had left behind. He could choose his own future and decided that he still had plenty to learn. Smart, driven and ambitious, he decided to see whether Tony Ryan, who had courted him in the past, was still prepared to offer him a job – on O'Leary's terms.

O'Leary wanted to learn at the feet of a master, and money gave him the freedom to try his luck. He decided to offer his services to Ryan for free, asking only for a 5 per cent cut of any money that he made for Ryan in a year. Ryan didn't hesitate. O'Leary was hired as a personal assistant or apprentice with a bizarre array
of duties ranging from the menial to responsibility for overseeing Ryan's private investments.

‘I just wanted to see how somebody at that level operated,' he says.

Ryan was working at an international level; I had been working at a newsagent in Walkinstown. I'd already worked at SKC, so I'd seen a lot of big Irish business. But here was a guy who was going across the UK, across the US, across Asia. He had a global business and I don't think there was another business like it – maybe Jefferson Smurfit [the packaging giant] was close – but there certainly wasn't another business like it in Europe. He was the guy who started with nothing and was going all the way across the world. And I thought if I can't learn off this guy in a year or two…

O'Leary's learning curve was steep in his first year with Ryan.

Ryan's style was abrasive: he did not suffer fools, ruled his company aggressively and regularly savaged his senior executives at their weekly management meetings. He demanded excellence, worked obsessively long hours and was at the peak of his considerable powers. A consummate salesman and superb negotiator, Ryan also understood the dynamics of the airline industry better than the men who ran it. His ability to predict the industry's fortunes and to plan for future trends before they were apparent had made GPA astonishingly profitable, and its location in Shannon airport's business park allowed the shareholders to take tax-free dividends each year. The company had just reported profits of $25 million for 1986, and 1987's profits were expected to almost treble.

Under Ryan's dominance GPA was a battleground, with little room for the faint-hearted. Each week started with an 8 a.m. meeting at Kilboy, Ryan's farm in County Tipperary. The meetings were infamous for their bad temper. The cellar in Kilboy was the nerve centre of the operation. Filled with electronic equipment, it resembled NASA mission control, where Ryan could track the planes that he had leased and the movements of his GPA executives throughout the world and chart them onto large maps.

Anxious to be accepted as a serious player in world business circles, Ryan collected a heavyweight board of non-executive directors, inviting high-profile businessmen and statesmen to join GPA. The company was growing so fast and was making so much money that a stock market flotation was already a possibility; big names, he believed, would ease his company's acceptance and would enhance its burgeoning reputation. In April 1987 Ryan secured the services of a former Irish taoiseach, Dr Garret FitzGerald, who had just retired from politics. FitzGerald was joined on the board by Sir John Harvey-Jones, who had just left ICI, the chemical company, and who had chosen the GPA appointment over a position on several other higher-profile boards.

While GPA prospered, however, Ryanair continued to struggle financially.

‘I was trying to get involved in private investments,' recalls O'Leary, ‘like the farm at Kilboy and Ryan's property investments. [Ryan] had a huge dividend income from GPA, and I had to advise on what to do with the money.' O'Leary had come in at a time when Ryan's personal finances were in some disarray. Money had been lost on a variety of failed investments ranging from an Irish Sunday newspaper to a jetfoil boat service, according to O'Leary.