He might just be right. A glance at the corporate record since O’Leary took charge in 1991 suggests his optimism is well founded. Appointed CEO at 29, he’s turned a failing family company, inconveniently based in Ireland, into Europe’s most profitable airline. More than 50 Ryanair routes now crisscross the continent, mostly from Britain. Profits for the six months to September topped a record $88 million. His own stake is now worth a reported $322 million.
Not that O’Leary, a champion of inexpensive travel, makes a big deal of his success: “Trying to do better than BA or Lufthansa really isn’t that hard. The simple fact of life is that if they weren’t so high-priced I wouldn’t be so successful.”
The bloated fares charged by the national flag carriers certainly provide a partial explanation for his triumph. Ryanair grew big by keeping prices much closer to ground level. A trip to the United States 10 years ago convinced O’Leary that the company’s best hope lay with the “no frills” model pioneered by Southwest Airlines in the United States. There are no free meals on a Ryanair flight–but a round-trip ticket from London to Brussels can cost as little as 90 euro, less than one third of the BA fare.
But high-flying O’Leary has to do much more than undercut the flag carriers. Europe’s cheapskate market is growing more tight as rivals move in. Other budget carriers with catchy brand names–Go, Buzz and easyJet–have been crowding the terminals since the EU’s deregulation splurge opened up the airways in the late 1990s. And other bargain-basement carriers have also learnt the value of a charismatic CEO who knows how to play the feisty underdog. The genial Stelios Haji-Ioannou of easyJet likes to feature himself in his company’s ads. He gathers feedback firsthand from customers when he flies back to Britain from his home on the Riviera.
O’Leary certainly knows the value of splashy publicity. In the aftermath of the September 11 attacks, his company gave away 300,000 free seats in a spectacular gesture intended to boost consumer confidence. But O’Leary’s trump card may lie in his training as an accountant. Investors can be sure that those big gestures were carefully costed. Ryanair’s tie-in with Hertz might ensure some return even on free seats. O’Leary is a workaholic with a moneyman’s abhorrence of waste. (That applies to time as well as money: he won’t read e-mail, “the world’s greatest collector of garbage.”) Price comes first. That’s why Ryanair has stuck to using cheaper secondary airports that may be half an hour or more from the destination city. “They go for the lowest possible costs at all times,” says James Forbes, an aviation-industry analyst at Goodbody, a Dublin stockbrokerage. “Every year they start with a blank sheet of paper and see how far they can push costs down.”
By contrast, Stelios is using his brand to plunge into other ventures, from car rentals to Internet cafes. What’s more, he’s pitching for the business market by adding flights from major national airports. EasyJet is flourishing but in the long-term the divergence from the pure budget model could prove dangerous. Says Fariba Alamdari, an aviation-industry expert at Cranfield University in Britain: “If anything happens to low-cost airlines, Ryanair will be the last to suffer. O’Leary has remained totally focused on what the business is all about; he’s just stuck to the knitting.” In the turbulent business environment of 2002, even optimists will have to put economy first.
