The reinvention of Ryanair over the last two years has been remarkable. And the fact that it has happened with one-time low-cost enfant terrible Michael O’Leary at the helm has been all the more astonishing.
But should we really be surprised? O’Leary is nothing if he’s not a pragmatist. So while he’s clearly still uncomfortable having to ooze charm – witness his pain in front of a group of travel management gurus, which he described as one of the most depressing days of his life (see Airline Business's June 2015 issue or here) – O’Leary knows what’s good for the business.
And business is what it’s all about. The old Ryanair made no attempt to encourage corporate types, but O’Leary had seen the success that hybrids like Vueling were having, and he’s watched the transformation of EasyJet under Carolyn McCall.
That’s not to say there was anything too wrong with the old model. The business has generated in excess of $5 billion in net profit over the last decade. How many European legacy carriers can say that?
And there’s something to be said for lowering customers’ expectations. If a passenger loses a suitcase on British Airways, they’ll be straight on the phone or email to complain. But on Ryanair, the expectation was that checked luggage would go AWOL, and it then probably didn’t. Great service! What’s all the fuss about?
But O’Leary recognised that there’s only so much money to be made tapping the leisure market. And having steered Ryanair profitably for such a long period, he acted quickly to re-invigorate it with the new strategy.
Business passengers, who often travel out of season and are prepared to pay more, want some of the benefits that Ryanair didn’t offer – allocated seats and multi-channel distribution being two of the key ones. And that’s something O’Leary has addressed.
EasyJet proved that the “jump to the dark side” was doable, so O’Leary thought “I’ll have some of that”.
But the Irishman’s low-cost mantra hasn’t changed and he admits to being embarrassed by the shiny new headquarters the airline has moved into in Dublin, after years operating from a shabby – and not very chic – office near the airport. But it did the job.
Legend has it that once on a rare visit to the airline’s training centre, as he walked through the door he challenged the P&L of the coffee machine. Rest assured that machine is no longer a cost centre.
And his ruthless passenger policies, which have generated countless column inches over the years, have benefited Europe’s entire airline industry. Ryanair has essentially operated a boot camp for passengers, drumming home good discipline around carry-on luggage and self-processing.
But there were other business reasons why a more customer-friendly attitude was needed. Last year, Ryanair made much of its “BBB+” rating from Standard & Poor’s, making it “the highest-rated airline in the world”. But while recognising its “significantly lower cost than its peers”, S&P cautioned that Ryanair’s “reputation of less-friendly customer service” could “slow down passenger volume growth”.
Despite the move upmarket towards the space occupied by EasyJet and others, Ryanair will remain a step apart from rivals. Even McCall concedes that her rival is ahead on cost because of its focus on secondary and tertiary airports and the policy of self-employed crew.
And O’Leary? Despite a decade of teasing that he was close to calling it a day, he is showing no signs that he’s tiring of tackling the big challenges. After 20 years at the helm, in 2014 O’Leary signed up for another five, by which time he expects the airline to be carrying over 120 million passengers. As he told Flightglobal at the Paris air show two years ago: “I’ve four young kids and I sure as hell don’t want to spend any more time at home!”
Source: Airline Business
