Tough-charging Ryanair tries to be nicer
CEO Michael O’Leary, who once threatened to install pay toilets on planes, leads the warm and fuzzy charge in order to boost bookings on Europe’s biggest budget airline.
Northwest travel guides
Michael O’Leary swoops across the hardwood floor of the London Design Museum cafe, dancing between tables laden with Champagne flutes and beetroot carpaccio.
“Welcome to the new Ryanair!” the 53-year-old chief executive officer of Europe’s largest discount carrier whoops, greeting the throng of journalists curious to witness his magical metamorphosis from cattle herder to concierge. “If you think this is scary, imagine how I feel, standing here in an expensive London yuppie venue, feeding and watering you lot.”
The sleek setting on the banks of London’s Thames River is a world apart from provincial airports heaving with budget-minded Ryanair travelers numbed by a formula the airline has perfected over the years: minimalist service, curt staff and charges on everything from extra bags to printing a boarding pass at check- in (that’ll be 70 euros a page, please).
At the center of Ryanair Holdings Plc’s ethos stands O’Leary, a wiry Irishman who likes to claim that customers would “crawl across broken glass” for low fares. The concept of glamorous air travel is a romanticized image of a bygone era, he says, with low prices opening the skies to everyone, from drunken U.K. stag parties infiltrating Poland’s nightlife to migrant plumbers jetting the other way.
Then last year, cracks started appearing in O’Leary’s frugal fortress.
A wave of negative publicity washed over Ryanair in September when a man was charged 188 euros ($258) to switch flights after his wife and children died in a house fire. While Ryanair apologized (not without O’Leary pointing out that travelers regularly fabricate tragic stories to skirt rebooking charges), the plight of the grief-stricken customer stoked outrage at the perceived coldness of the business model.
“Maybe that was a cataclysmic moment,” said John Strickland, a London-based director at JLS Consulting Ltd. “They have such an established reputation of being rough and tough that people have that in their minds.”
Ryanair was still assured investors’ affection. The stock had gained 40 percent in the year through Aug. 30, a period when Air France-KLM Group, Europe’s biggest carrier, had lost 19 percent. While short of rival EasyJet Plc’s meteoric 61 percent gain, Ryanair remained a haven of stability in an industry with historically razor-thin margins.
Then on Sept. 4, Dublin-based Ryanair it said might miss its annual profit target, a rare blunder for O’Leary that caught markets off guard. Two months later, the carrier predicted its first profit drop in five years, causing the stock to plummet.
Suddenly, EasyJet, with its more business-friendly model, appeared to have the upper hand. O’Leary’s macho swagger, by contrast, sounded stilted and out of touch.
Behind the scenes, Ryanair had already begun plotting its transformation. Software programmers were busy streamlining a website notorious for its clunky booking process, and O’Leary stepped before his investors at the annual general meeting in September with an unusual message: the airline would eliminate irritants, soften its image, and be generally more responsive.
A free mobile-phone app and twitter feed followed, together with cuts to fees for luggage and the dreaded boarding-card printing. The airline appointed a new head of marketing in January, followed a month later by assigned seats, a paradigm shift for an airline previously synonymous with a panicked rush for preferred berths.
“The changes that they’ve announced will have an impact, providing it translates into a change in behavior and a change in service,” said Willie Walsh, CEO of British Airways parent International Consolidated Airlines Group SA and also Irish. “When you’re trying to change the culture of an organization, it does take time and it does take effort.”
The image revamp, coupled with new headquarters fitted with a cafe and a slide that would make Silicon Valley startups blush, comes as Ryanair looks to grow passenger numbers by more than a third to about 110 million people by 2019, while fending off Luton, England-based EasyJet and a new generation of leaner low-cost units at other European airlines.
Success will hinge on convincing previously hesitant customer groups — business passengers, people keen to fly to primary airports and older travelers — that the new warm and fuzzy Ryanair is more than just a publicity stunt.
Customers have welcomed changes announced so far, with traffic gaining month on month between November and February, O’Leary said at the Design Museum. Load factors for the same period are also up and forward bookings for May, June and July are about five percentage points ahead, he said. Ryanair has changed its ticket-selling model and now makes lower fares available five to six months out.
“This is working already,” said O’Leary, kicking off his Design Museum presentation with a picture of himself hugging a Golden Retriever puppy. “We have returned to being the fastest growing airline in Europe.”
The ramp-up is a marked shift for an executive who once prided himself on using press coverage of outlandish publicity stunts to grab passenger attention. Antics include threatening to make people pay to use bathrooms on-board, buying a taxi license plate to get to work faster, and a calendar featuring scantily clad female cabin crew.