“Never let a good crisis go to waste” was the most famous phrase attributed to political activist Saul Alinsky. Michael O’Leary, respiratory activist, has just gone through his third crisis.
And as it should be, he didn’t let this go to waste either. Amid the deluge that has engulfed aviation during Covid and its aftermath, O’Leary and his burgeoning airline appear to have made it to the rooftop.
The accumulated air traffic damage worldwide will amount to around 200 billion euros. Ryanair lost 1,015 million euros in the first year of the crisis and 355 million euros in the second.
This week the airline reported its first post-crisis quarterly profit, a modest 110 million euros for the three months to June. Earnings for the summer months will certainly be larger, although O’Leary is reluctant to give even an estimate before the airline returns to loss-making mode for the winter.
The number may sound big, but it’s aviation handout, enough to buy the front half of a Boeing 737 (up to row 16, if you will). Ryanair has just bought 73 Boeing 737 max aircraft, so at this level of profitability that leaves another 72.5.
But it’s black in the industry’s red sea, and our favorite love-hate relationship proudly stands behind it. Michael O’Leary has reclaimed his throne as King of the Skies.
When asked about his generous salary (€975,000 in wages and bonuses according to the latest figures), O’Leary once gave me a comparison to the manager of the English Premier League club he supports. Manchester City’s Pep Guardiola reportedly makes more in two weeks than O’Leary does in a year. And unlike his rich peers, O’Leary has resisted the temptation to seek tax exile status.
How much longer will Guardiola be in charge of Gorteen? He first told me he would be leaving the post “within two years” in 2002.
Since then, a generation of leaders has passed while O’Leary stayed there. Every few years, he rekindles the notion that he might retire, and no doubt enjoys the wild speculation that ensues.
Even the jockey on the horse that adorns the wall above his desk at Ryanair’s Swords HQ seems to have fallen out of favor since the photo was mounted.
Letting go of the dressing room will be just as difficult for the Ryanair boss as it is for any of the sporting executives he likes to make comparisons to.
Unlike airlines run by pilots or flight enthusiasts whom O’Leary calls “aerosexuals,” he is an accountant at heart.
And he stays. His idea of happiness is controlling his spreadsheets and dancing his 571 planes through 3,000 flights a day. He has a work ethic like Boxer the Horse in George Orwell’s animal farm.
Out of sight, O’Leary’s accounting changed the way we think about airfare.
Ryanair’s earnings briefings this week indicated that the average fare fell 6 per cent to €34 compared to the same period in 2019. But the average fare in 2019 was also down 6 percent, so what’s up?
The answer is side income.
You can no longer travel with Ryanair without checked bags these days unless you purchase priority boarding, if only to get your 10kg bag on board. Declining average prices are good for web searches. Ryanair has shown that the average fare can continue to decrease as the corresponding average total passenger revenue increases, currently €56 and growing.
O’Leary’s smart Covid strategy was to keep planes certified and pilots licensed. That has paid off in recent weeks as competing airlines canceled flights and lost baggage, causing huge damage to their reputations.
Across Europe, Ryanair is the airline that has come closest to its schedule. While Easyjet canceled 14 per cent of its schedule, KLM 11 per cent, BA and Lufthansa 10 per cent each and Air France 7 per cent, Ryanair stayed in the air and enjoyed a reputation for greater reliability during the holiday season.
Air traffic control strikes in France and cabin crew strikes in Belgium (but not elsewhere) have affected the summer schedule. Highly publicized cabin crew strikes in five southern countries halted some flights, none destined for Ireland.
Aviation union politics is not for the faint of heart. Ryanair has proven particularly imperfect at mastering them. It launched the first round of negotiations after its typically unpredictable and sudden decision in 2017 to recognize unions.
The move was designed to quell potential unrest in southern Europe and to tap into the heavily unionized and labor regulated markets such as France, Germany and the Scandinavian countries. Looking back, Ryanair quietly admits that some of the union deals it signed in 2018/19 were a bit hasty and weren’t always signed with the right people. Five years later, the airline is working on a new round of post-Covid agreements with the largest pilots’ union and the largest cabin crew union in the countries where it has bases.
There have been a few surprises in the new post-pandemic negotiation season. Last but not least, in May the landmark deal was signed with the Comisiones Obreras in Spain (reputed to be the toughest of aviation unions; a frequent question after celebrating a collective agreement in Madrid is “but what will the Obreras think?”).
Somehow, strike threats from two rival Obrera unions, led by the formidable Lidia Arasanz and Monique Duthiers, followed. The pattern of agreements and threats of strikes in Spain was similar in Italy, France and Portugal.
In almost all of these cases, the announcement of the strikes was a bigger event than the strikes themselves. It helped that the larger unions had signed the accords, while smaller unions were the ones complaining.
Ryanair used the previous two recessions to fetch better fares as it hunted for Boeing planes in Seattle. It then collected the bounty in passenger counts.
In the three years after 9/11, Ryanair’s passenger numbers tripled from 5.3 million passengers a year to 15.8 million, overtaking Aer Lingus for the first time.
During the four years of the 2009-12 global economic crisis, Ryanair grew from the fourth to second largest airline in Europe as passenger numbers rose from 57.5 million to 76.5 million, overtaking BA/Iberia and then Air France/KLM.
When Covid struck in March 2020, it was king of Europe, ahead of the combined Lufthansa group of 11 airlines in four countries, with passenger numbers of 152.4 million.
The recent crisis has extended this lead. Monthly passenger numbers for April, May and June this year were the highest in the airline’s history, beating the record set in 2019. More importantly, the margin of increase itself is increasing, 6.5 percent in April, then 9.2 percent in May and 12 percent in May June.
These monthly passenger numbers now show Ryanair as the second most popular airline in the world, behind the US Southwest (where O’Leary first learned his motto of sweating the assets as a young executive).
Ryanair is now ahead of the three American and two admittedly Covid-restricted Chinese carriers that normally compete with the airline in the top seven.
The last crisis of 2009 made Ryanair number two in Europe. Covid has made the airline number two in the world (albeit temporarily).
Who knows what the next crisis will bring? We can be sure that Michael O’Leary, the king of the skies, can’t wait.
https://www.independent.ie/life/how-ryanair-boss-michael-oleary-regained-his-throne-as-king-of-the-skies-41875519.html How Ryanair boss Michael O’Leary reclaims his throne as king of the skies