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Copyright © 2018 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise. This
case was written by Professor Kannan Ramaswamy for the sole purpose of providing material for class discussion. It is not intended
to illustrate either effective or ineffective handling of a managerial situation. Any reproduction, in any form, of the material in
this case is prohibited unless permission is obtained from the copyright holder.
Kannan Ramaswamy
Ryanair: Can a Leopard Change Its Spots?
He disdains conventional thinking, believing that it is too often emotional instead of rational. His
way of looking at things is different from most people’s. He never bows to the wisdom of crowds, or
the demands of the mob or the media. The record shows that he is almost always right. This has given
him enormous self-confidence, which his enemies see as arrogance. Yet he has enough self-awareness
to realize that what he has always done is not what always should be done, and that there are times
when he has to shift course. He doesn’t care if he is criticized for changing his mind or his actions,
regarding that as irrelevant. He shifts with the shape of the airline industry’s paradigm.
Matt Cooper on Michael O’Leary, CEO of Ryanair1
There was much to be worried about at Ryanair headquarters as 2018 was winding to a close. Competitive rivalry
had increased dramatically with a growth of 8% in capacity added by low-cost carriers in Europe in 2017 alone.
This had already pushed prices downwards, and even Ryanair had to drop its prices by 3% in the first half of
2018.2 The company had just signed contracts with major labor unions across Europe and was girding itself for a
significant upswing in labor costs as a consequence. Increasing fuel prices were once again threatening to decimate
weaker carriers that were teetering on the edge of bankruptcy. Ryanair CEO Michael O’Leary’s employment
contract was set to expire in 2019, and the board wanted him to renew his commitment to staying on as CEO
for another five years. However, he had said that he preferred to look at a shorter time frame.
In 2013, the company had launched a radical makeover campaign. It unveiled a new approach, “Always
Getting Better,” and assured the travelling public that it intended to provide not just a low-cost air travel option
but also a quality flying experience for its customers. The company’s public relations approach had always been
a double-edged sword, both a means of gaining notoriety and recognition, while at the same time opening itself
to criticism for its apparent arrogance. O’Leary had recently observed, “The great thing about bad PR is that it
sells far more seats than good PR.”3 The makeover suggested that the expletive-filled O’Leary press conferences
were history and a softer, gentler Ryanair was going to emerge.
Was Ryanair at a crossroads? Were its hard-charging, brash, expansionary days of heady growth behind
it? Had Michael O’Leary lost his edge in keeping costs low? Was Ryanair past its peak? These were some of the
questions that dominated shareholders’ thoughts as they watched Ryanair shares drop by ~20% in 2018 (see
Exhibit 1 for Ryanair’s stock performance). What could Michael O’Leary do to revitalize the storied carrier that
had pretty much invented the world of low-cost aviation in Europe?
Ryanair: Founding and History
Ryanair was founded in 1985 by Tony Ryan, an Irish businessman who got his start with the Irish national flag
carrier, Aer Lingus. The company originally offered service between London, England, and Waterford, Ireland,
using a single aircraft capable of carrying 25 passengers. Although the company had managed to grow substantially
in its first three years, it witnessed significant competition from more established carriers and accumulated £20
million in losses and had to undergo significant restructuring in 1990. It was at that point that Michael O’Leary
was chosen to lead the company and give it its second real start in the business.
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O’Leary had attended one of the best schools in Ireland, Clongowes, and graduated with a degree in
economics from Trinity College in Dublin. After a brief stint with an accounting company, Stokes, Kennedy,
Crowley (later known as KPMG), he decided to follow his entrepreneurial dream and started acquiring local
newsagents. He made a major success of his first venture, a store in Dublin, using unconventional tactics that were
to become his trademark in later years. For instance, his store was among the only ones open on Christmas day
when customers were out looking for batteries for kids toys. O’Leary was glad to sell them at triple the normal
price. By age 27, he had bought and sold a line of newsagents for a tidy sum and signed up as a personal wealth
management advisor to Tony Ryan. During this period, he had the ability to work closely on Ryanair, albeit
without any formal role. This proved to be fortuitous because it gave him a sense of the business and that helped
him to crystallize his thinking about its future strategy. Reflecting on this period, he later observed, “I was all
about getting rid of the lunatics who are running the asylum and putting some order in it. I was doing a lot of
ripping and burning and slashing at the lower end, which you couldn’t have done if you were the CEO.”4 Soon
he was overseeing the re-launch of Ryanair and had formally signed an employment contract to take over as the
CEO of the company in 1994 after holding out for a few years while he tried to assess its future viability. The
contract offered O’Leary 25% of all profits exceeding £2m.5 He had once told a reporter, “I came into business
to make money; I make no apology for it. Why didn’t I go out and save the world? It didn’t pay well enough.”6
The initial experience with Ryanair helped sharpen O’Leary’s focus on the critical dimensions that he
would use to define strategy for the company. He was all for simplicity and wanted to provide a low-cost service
transportation that passengers could easily afford. The intent was not to compete head-to-head against the
established rivals such as BA and Aer Lingus but to widen the market by going after those customers, the leisure
travelers, who were relying on alternative means of transport. It was estimated that the majority of passengers
on the popular Dublin to London route, for example, preferred to take the ferry rather than fly because the air
fares were quite prohibitive. Leisure travelers had discretion over where they wanted to fly as well as over the
fare that they could afford. Since they were not on a strict time schedule, they favored lower travel costs over all
else. This group of potential passengers emerged as the primary focus in O’Leary’s mind. He strongly believed
that they would switch to Ryanair instead of taking the ferry, driving, or using the railway system, all options
that tended to take longer than flying. Having seen the challenges of catering to a business-class audience when
Ryanair, in its prior incarnation, had chosen to fly between Dublin and London, O’Leary was very clear that he
was not going to build a company that would cater to the specific demands of business travelers. The services
that were required for such a service, ranging from meals to assigned seats and other travel comforts, were usually
too expensive for a small carrier to bear. A simpler, low-cost focus built around individual, budget-conscious
travelers appeared to fit the bill a lot better.
The Rebirth of Ryanair
“Our customer service is about the most well-defined in the world,” he explained once. “We guarantee
to give you the lowest fare. You get a safe flight. You get a normally on-time flight. That’s the package.
We don’t and won’t give you anything more on top. We care for our customers in the most fundamental
way possible: we don’t screw them every time we fly them. I have no time for certain large airlines
that say they care and then screw you for six or seven hundred quid every time you fly.7
The broad details of O’Leary’s strategy clicked into place after a meeting with Herb Kelleher, the founder of
Southwest Airlines in the United States. O’Leary was impressed with its obsession with keeping costs low by
constantly reinventing its practices that often challenged received wisdom in the industry. The larger-than-life
personality of Kelleher, his general irreverence for industry traditions, and his quick wit had also made a strong
impression. When he arrived back in Ireland, O’Leary decided to adopt the Southwest model as the basic
framework to craft the strategy for Ryanair.
It was apparent to O’Leary that Ryanair had to reinvent itself to survive. Although it was out of bankruptcy
and had been generating positive cash flows, it was not yet wired to grow. O’Leary set about recasting the company
as if it were his own. By the time he took over as CEO, he knew almost all the names of the 500 employees of
the company and encouraged everyone to address him by his first name. He dined in the staff canteen, played
soccer, helped the baggage handlers load bags on planes, worked very long hours, and drove an old Honda
Prelude, collectively defining him as an approachable leader.8 Yet, he could be fiercely competitive and aggressive
when it came to business.
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His first major decision was to replace the Ryanair fleet, one that had a substantial variety of smaller aircraft,
with Boeing 737-200s. He purchased six used planes, each with a capacity to carry 130 passengers. He had heard
that Britannia, a UK charter, was returning the aircraft so he decided to make a lowball pitch to Boeing. “We
showed up like poor Irish peasants that we are and thankfully Boeing had no home for them, so we got them”.9
In subsequent orders with Boeing, Ryanair made very deliberate cost-conscious choices about the interiors of
the aircraft. They were spartan in design with no reclining seats, no window blinds, and headrest covers. They
also did not include fold-out food service trays or seat pockets.
Right from the start, O’Leary was bent on upending industry practices. Barely thirty days into his role
as CEO, he announced a low-fare philosophy which allowed passengers to buy the cheapest tickets one day in
advance of the flight as opposed to the standard 14-day advance purchase that the industry had adopted. He
also did away with the Saturday-night-stay requirement to qualify for the lowest return fare, a standard that had
been in place among industry peers for well over a decade. However, lower fares were only part of the revival.
The relentless focus on costs was the other.
Every single source of cost was carefully examined. If money had to be spent, it was ensured that the
benefits would be commensurate, and O’Leary took it upon himself to be the final arbiter of any deals that had
to be struck with external providers. The choice of destinations was a crucial one because airport operations was
a significant source of costs for airline companies. Taking a page from the Southwest playbook, O’Leary decided
to fly to less-crowded secondary airports that were in close proximity to population centers. Secondary airports
were either past their prime or located in places that were far away from metropolitan centers. However, they
did represent a good value for Ryanair because its traveling public did not mind the additional inconvenience
of ground transportation. In many cases, Ryanair and the local airport had signed agreements with bus and taxi
operators to provide a seamless service to incoming passengers so that they could get to their final destinations
fairly easily.
With an eye towards expanding the route network, O’Leary made a pitch to several secondary airports
seeking good deals that would allow him to bring his flights to those destinations. For example, Prestwick, in
Scotland, offered to waive all landing charges for the first year ~£650,000 and £800,000 in the second year. The
airport had not had a scheduled airline service for a fairly long period of time and was keen to generate revenues
through ancillary sales. Although the deal seemed too generous according to analysts at the time, O’Leary insisted
that it had to be a win-win for both parties because he wanted to ensure the continued viability of the airport,
without which a scheduled service would not be functional. His intent was to get them to invest in the deal but
then quickly build up the facilities required to support a high-volume, low-cost operation. Fortuitous timing
allowed the company to strike a similar deal with Stansted in London. Originally built as an airfield for the
United States Air Force, the airport had been upgraded as a potential third option that included Heathrow and
Gatwick to manage projected passenger traffic growth numbers. However, when the British Airports Authority
(BAA) announced that it was capping flights to the other two airports to channel traffic into Stansted, the carriers
revolted. BAA had to reverse course and this left Stansted with few growth options. Ryanair was able to strike a
very good deal that included a significant discount from the standard tariffs for its operations, and a substantial
bonus for every new destination it added from Stansted. Although it was not disclosed publicly, peer companies
estimated that Ryanair was paying about £1 per passenger versus the standard tariff of £6 that the other airlines
were paying.10 Deals such as this ensured that Ryanair enjoyed pride of place at these airports and could use them
to build more expansive networks.
Wooing the Customer
Our strategy is low fares, high capacity at busy times, flexible tickets. There are only three layers of
management. No secrets. No dogma.11
While most European airlines were wooing customers through slick adverts and frequent flier programs, Ryanair
was decidedly different. It did not have a large advertising budget and tended to conserve scarce resources by
drafting ads in-house. Many of the initial ads were comparative and focused on fares that Ryanair offered versus
what the peers were charging. Others were memorable for their irreverence that often bordered on the offensive.
For example, there was one that showed the Pope whispering the “fourth secret of Fatima” to Mother Teresa
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where he tells her that Ryanair fares are the lowest. That advert apparently cost the company £400 and had been
viewed by many millions of viewers across the globe because it had been reprinted extensively just to illustrate the
audacity of the company. The sparse advertising budget was complemented by attention-grabbing publicity stunts
engineered by O’Leary himself. In one such stunt, he marched a group of employees dressed in battle fatigues
commandeering a tank towards easyJet’s Luton airport offices ostensibly to liberate travelers from the high fares
that easyJet was charging. The event included its own march song, “I’ve been told and it’s no lie, easyJet fares are
way too high.”12 These stunts complemented O’Leary’s persona of frugality and earthiness because he appeared to
fight for the underprivileged who did not have economic means. The New York Times wrote, “He stays in budget
hotels. He always flies Ryanair, startling fellow passengers by taking their tickets at the gate and by boarding the
plane last…does not sit in an executive lounge, has no Blackberry, and does not use email because, he says, ‘I
couldn’t be bothered with all the crud, and the crap, and the rubbish that gets sent to you on emails.’ ”13
In another radical departure from industry practice, Ryanair withdrew from marketing its flights through
travel agents because it had to pay them a 9% commission. When its telephone reservations system was routinely
overloaded, Caroline Green, who headed Ryanair Direct, the direct-to-consumer arm of the company, saw the
need for an online system and sought to build one on the cheap. She enlisted the help of Eddie Wilson, Director
of Personnel, who brought in a 17-year-old secondary school student and a 22-year-old dentistry student who had
spent some time over a summer at the U.S. computer maker Gateway. They were given a contract for £15,500 to
build the reservations systems for the company, a task that was priced at £3.5 million by internet specialists.14 For
the first time, Ryanair introduced real-time demand-based pricing for all its flights. Fares were priced on the basis
of the number of seats that had been sold and, as a consequence, the cheaper seats sold out quickly. Customers
had to make a reservation and provide a credit card payment to secure the ticket at the time of booking. This,
too, was a new way of doing things because many airlines allowed passengers to pay for their tickets at the airline
counters at the airport when they arrived for their flights. If the passenger was unable to travel on the ticketed
fight, no refunds were provided. Once the website took root among potential travelers, Ryanair offered a range
of additional services such as hotel rooms, car rentals, and travel insurance that customers could purchase. The
direct-to-customer sales channel saved an estimated £10 million in costs and, once it was up and running, Ryanair
dropped out of the Galileo system, an international booking network that sold roughly 40% of all Ryanair seats.
Flight and Ground Operations
O’Leary had sold off much of the old fleet and replaced it with Boeing 737 aircraft. The standardized fleet
provided economies of scale in a variety of areas that allowed Ryanair to rein in costs quite effectively. He often
prided himself on the low prices that Ryanair paid Boeing for its fleet because it always bought planes when the
economy was weak, such as during the global economic decline in 2009. The standardized fleet allowed for higher
efficiencies in maintenance, spares inventories, and training of mechanics. It was a key determinant of the shorter
turnaround times that Ryanair was able to accomplish (~25 minutes between landing and takeoffs v. 50 minutes
for most rivals). The ground and in-flight operations were another rich vein for cost reductions. A substantial
proportion of the ground crew worked for contracted service providers, providing an additional source of cost
reduction. Ryanair did not use aerobridges to board its aircraft, instead using rollup stairs to board passengers
both through the front and the back of the plane. This saved time and expense. It did not offer preassigned seats
either. The company also offered its planes’ exteriors as advertising space for companies that wanted to use it for
advertising. Categorized as a reverse cost, this approach allowed advertisers to paint Ryanair planes with their own
marketing message for a fee. Companies such as Jaguar, Guinness, and Eircell, to name a few, had leased Ryanair
planes to carry their advertising. The seatbacks and doors on the overhead baggage compartments also carried
advertising slogans for companies. The configuration of its Boeing 737s offered 189 seats versus peer companies
that were designed for 109 since they included a business-class cabin.
Food and beverages were available to passengers for a fee. Ryanair had contracted with catering companies
such as Gate Gourmet to provision its flights. These companies were expected to bid for Ryanair business and
had to pay a fee for the privilege up front and also share a portion of its food and beverage sales revenues with
the carrier. In return, Ryanair offered a wealth of data on demand patterns that catering companies could use
to predict sales per flight and reduce food waste accordingly. This was industry-leading practice at the time. By
doing away with the traditional industry practice of serving free food and drinks to all passengers, Ryanair was
able to shrink the size of its in-flight pantry to accommodate more seats and also stock a lot more duty-free
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goods for sale on its flights. Cabin crew were incentivized to generate ancillary revenues and were given specific
targets that they had to meet.
O’Leary set off shock-waves fairly early when he decided to cut pilot salaries by 30%, a move that sowed
bitterness for decades to come. The intent was to shift from a culture of entitlement to one of performance.
Ryanair methodically shifted from a base salary focus to more of a variable compensation approach that allowed
it to link rewards to metrics that drove superior results. The overall compensation for employees was about
30% higher than for peers at BA according to the Financial Times. However, it did come with a lot of rules
and high expectations. The base (fixed) salary for both cabin crew and pilots was, at times, set below prevailing
market rates. The upside was in the variable pay that incentivized the sort of behavior that saved the company
money. Metrics such as on-time arrival and departure, number of hours flown, and fuel consumption were
critical determinants for pilots’ incentives, while cabin crew were incentivized to maximize in-flight revenues by
selling more duty-free products and assisting with cabin preparations between landings and take-offs. While the
low-cost carriers did indeed tend to maximize the utilization of its staff, Ryanair was way above the norm. For
example, its pilots reportedly flew about 95% of the legally allowed maximum limits, while other carriers, such
as BA, were closer to 70%. Pilots, as well as cabin crew, had to pay for their own identification cards, uniforms,
and training. Employees were generally schooled with the same expectations that Ryanair communicated to its
customers—nothing comes free and there is no entitlement. This was institutionalized by strange rules like the
no cellphone rule which disallowed employees from charging their phones at work.
Although Ryanair had built its original business model on the successful operations of Southwest Airlines
in the United States, O’Leary had transformed the model to develop the first of a new breed of low-cost carriers
that soon came to cloud the skies across Europe. He had systematically eliminated any vestige of excess cost by
questioning every single activity that the airline undertook. Assets and activities were streamlined such that only
those that were crucial to the business were developed. Services that most airlines viewed as fundamental, such
as free meals, drinks, snacks, preassigned seating, and reservations flexibility, were completely eliminated. Even
the validity of choosing to fly to metro centers was turned on its head when Ryanair deliberately chose to use a
network of point-to-point flights to secondary airports instead of hub-and-spoke systems built around major city
hubs that its peers had created. The emphasis on customer service was reduced drastically, mirrored by the fact
that the company employed barely a handful of customer service employees to support the millions of passengers
it carried on its planes each year. Given its focus on point-to-point service, Ryanair did not have to be concerned
with onward connections for its passengers, a critical feature for hub-and-spoke airlines that often caused flight
delays. Interline baggage transfer was yet another passenger convenience that was not offered. Despite all the
cuts that were embodied in the new business model it had refined, Ryanair had also enhanced value for a fairly
specific group of fliers, the discretionary traveler who traveled on a limited budget. It was betting that this group
was indeed large enough to sustain the company. In enhancing the Southwest model, Ryanair had strung together
a series of firsts along the way. It had innovated new processes ranging from online ticketing, yield management,
real-time demand pricing, boarding, baggage handling, to automating customer services. In many instances, these
innovations transferred tasks that were traditionally performed by airline employees to customers in exchange
for lower fares. By 2013, Ryanair had become one of the largest airlines in the world, carrying over 79 million
passengers, employing 9,394 people. It also prided itself on an almost unbroken record of positive earnings, no
small feat in a fiercely competitive business. Exhibit 2 provides a snapshot of Ryanair operating performance.
Despite its business success, the dark side of the company had become etched in the minds of travelers
everywhere, and its negative image had indeed gone global. The stories of poor customer treatment had become
legend. Disabled passengers were forced to pay for wheelchair assistance at airports; substantial fees were levied
on even the most minor transgressions of rules, such as failure to print a boarding card before arriving at the
airport. There were entire websites dedicated to travel mishaps and customer service nightmares endured by
Ryanair passengers. O’Leary did not make things easier for the company because he seemed to cherish deriding
customers who were sometimes caught running afoul of arcane rules that his company had established.
The Makeover of Ryanair: Always Getting Better
I am very happy to take the blame or responsibility if we have a macho or abrupt culture. Some of
that may well be my own personal character deformities…..We have to improve significantly the
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aspects of our customer service that irritate people. They irritate us as well. Some of our policies
are implemented with a degree of robustness that isn’t warranted.15
The industry landscape was changing, and some of the founding principles that had defined the rise of the
low-cost carriers were morphing. Features such as unallocated seating, flying to secondary and tertiary airports,
standardized fares, and reservations systems access had all begun to change dramatically. Competitive intensity
was on the rise and the battle for revenues was getting fierce. For example, easyJet, Ryanair’s arch rival, reported
a higher profit per seat than what Ryanair was able to muster. It delivered higher revenues per seat, higher
passenger capacity growth, and better operating margins (Exhibit 3 provides comparisons in costs across peer
airlines). easyJet had deployed a very different version of low-cost ever since founding. It had concentrated on
metropolitan centers in Europe, using a network of airports that were relatively easy to access. It had originally
relied on a single aircraft fleet using Boeing 737 aircraft; it had switched to a dual fleet by adding Airbus planes
to the mix, and later converted its fleet to solely Airbus planes. Over the years, it had built an image of efficiency
combined with a culture that was professional and polite, attributes that allowed it to attract business travelers
as well. Although Ryanair was still the largest low-cost player in the business (see Exhibit 4 for market share
data), it was clear that things had to change. It had been voted as the worst of the top 100 British Brands by the
British magazine Which?
O’Leary unveiled a dramatic plan to change the course of Ryanair at the annual shareholders meeting in
September 2013. Titled “Always Getting Better,” the change program called for a revamped reservations website
that promised to make booking tickets a lot easier and seamless, a generous baggage allowance with the explicit
promise to not penalize passengers for minor violations, and allocated seating with the option to choose seats for a
fee. A softening of O’Leary’s brusque public persona also appeared to be underway with pictures of him cuddling
a puppy. These were indeed tectonic changes when viewed through the prism of Ryanair’s history because O’Leary
seemed to have conceded that his approach of focusing on costs to the exclusion of everything else did not fit the
times Ryanair found itself in. The British rival easyJet had indeed demonstrated that it was possible to deliver
low fares without the aggressive culture, petty rules, and poor customer focus. O’Leary commended his rival and
observed, “easyJet has wiped the floor with us, with the website and modest customer [service] improvements.
We can learn from the bits they have done well.”16 Analysts were unsure about both the scope of the changes
that were promised and the ability of Ryanair to truly transform its culture. For example, Stephen Furlong, an
analyst at the Irish stockbroking firm Goodbody, remarked, “They aren’t changing their fundamental business
model, but this is significant. There is clearly low-hanging fruit because of perceptions in some markets…they
seem to have decided to put some time and energy into improving things around the edges.”17
O’Leary showed a remarkable ability to turn around almost 180 degrees in some very visible ways. Gone
was his distaste for preassigned seats, global reservations systems and travel agents, primary airports, customer
comforts, business class, and frequent flier programs. A complete volte face had begun. He had, however, not lost
his sense of clarity and proved to be unwavering in his quest for profitable revenues. In discussing the changes
that were underway, O’Leary remarked, “Hell has frozen over. Ryanair is doing television advertising, distributing
through travel agents, and being nice to customers. For twenty-odd years, our focus has been to stack the product
high and sell it cheap. We’re still going to do that, but we’re going to let the customer relax in the process. Just
imagine how many more people we’re going to carry and how much more money we’re going to make when we
give customers more of what they want.”18
Large-scale change had to begin with people in key positions with the ability to influence organizational
culture. Towards this end, Howard Millar, the CFO of the company and 23-year Ryanair veteran, stepped down
from the company. He did not see any reason to stay because he felt that he did not have a reasonable shot at
the top job, although he was Deputy CEO. Michael Cawley, the other Deputy CEO, also a Ryanair veteran
of 17 years, responsible for its commercial strategy encompassing routes, airports, fares, and load factors, also
stepped down and assumed a position on Ryanair’s Board of Directors. Within a year, almost the entire senior
management team of the company was reconstituted, mostly through promotions from within the company.
Given the hands-on style of leadership that defined O’Leary’s style, he had quite a good sense of each of the
executives who were promoted. All of them had, indeed, caught his attention in some positive manner over the
long arc of his leadership tenure. The internal group was complemented by two key hires from outside Ryanair.
Kenny Jacobs and John Hurley were hired to fill key roles in marketing/communications and information
technology, respectively.
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John Hurley started to bring Ryanair out of the middle ages of technology by introducing the company
to data mining and analytics. This took a lot of effort because Ryanair had historically skimped on spending for
technology and, as a result, it had a lot of catching up to do. Hurley observed, “We had been taking a siesta for
fourteen years. We didn’t just miss the first wave [of digital], we missed the second wave, and probably in the
middle of the third wave. We are now a technology company and all we want to do for customer experience
moving forward is maintain the price, improve the choice and the digital experience.”19 O’Leary authorized the
creation of Ryanair Labs with an investment of €20 million and a workforce of 250 professionals, vested with
redeveloping Ryanair’s technology in-house. The days of creating websites using high school help were over. Hurley
believed that the competition for Ryanair would be the likes of Amazon and Google because he conceptualized
Ryanair as being in the platform business with an airline added on. With higher levels of personalization more
easily accessible, Ryanair launched My Ryanair Club, an approximation of a frequent flier program that offered
free flights and other rewards to loyal customers. It was a startling change of direction, indeed.
Kenny Jacobs, the new marketing chief, and O’Leary started promoting Ryanair as the Amazon of air travel.
Although Ryanair had provided a whole host of value-added services such as hotel bookings and rental cars
almost since its inception, the intent under the new plan was to focus a lot more on broadening the offerings
beyond the commoditized air travel component of the package. It capitalized its investments in technology by
recruiting hotel and resort owners to use the Ryanair site to provide seamless hotel bookings for fliers. Takers
included some five-star luxury properties. In typical Ryanair fashion, the site provided price comparisons for
all additional services. Both Jacobs and O’Leary believed that Ryanair was a challenger brand, much like Aldi
in retail groceries, H&M in fashion, and Ikea in home furniture. “They started off absolutely focused on low
cost and then on top of low cost they added more choice and then they improved their service. That’s a similar
journey that the Ryanair brand will go on,” according to Jacobs.20 The company had set itself a bold target to
grow ancillary services to between 20% and 30% of overall revenues by 2020.
The charm offensive encompassed the launch of programs targeting families and business travelers. Business
travelers were provided more leeway to change travel plans with minimal fees, a more generous baggage allowance,
and the promise of personalized service should the traveler enroll in My Ryanair Club, a frequent flier program.
Families traveling with little children were offered an additional baggage allowance, as well as a range of travel
discounts and priority boarding. The company even promised passengers traveling with infants that the cabin
crew would be delighted to warm up baby bottles. It was indeed a radical transformation for a company that was
used to shaming its passengers into falling in line with its draconian rules. O’Leary observed, “It is a revolutionary
concept in the airline business that you can have low fares and this extraordinary customer service as well—one
where we love you, we take care of you. …We’ve been victims for about 25 years now of various consumer
surveys saying we are the most hated company, airline, god know what—remarkably if you look at the growth
in customers, the public doesn’t seem to be able to get enough of what we do.”21
In ensuring that the new transformation targets were being met, O’Leary routinely showed up on the front
lines to assess customer service for himself. After all, he had promised the traveling public that Ryanair staff would
smile and ask passengers about their in-flight experience, and he wasn’t leaving anything to chance. Gone were
the management staff reviews of ancillary revenues from excess baggage, and the number of passengers “caught”
with excess baggage. Instead, the meetings reviewed a new set of metrics that captured how helpful staff had
been to customers, and passenger experience ratings that were routinely gathered on each Ryanair flight. A new
team had been created to respond to passenger complaints in a timely fashion with metrics on complaints as well
as redress measures. O’Leary started publicly acknowledging the hard work that his employees were putting in,
and thanking them for a job well done. He was as visible as ever albeit less hands-on, leaving his z team (senior
management) to run the show.
Ryanair had also begun changing its infrastructure and route structure. Many of its new destinations were
now primary airports with an eye on business travel and convenience. Over half of all new capacity additions
would occur in primary airport locations. It had a new fleet of 200 Boeing 737s on order. The deal with Boeing
was rumored to have been an extremely beneficial one for Ryanair. O’Leary, in typical fashion, had exerted
tremendous pressure on Boeing, even publicly proclaiming that its design of the new aircraft looked really bad,
8 A09-18-0011
and saying that he was entertaining offers from Airbus. He even flew to China to hold talks with China’s new
aircraft manufacturer COMAC to see if they would be capable of meeting Ryanair’s needs. Once the deal was
signed with Boeing, O’Leary refused to provide even the barest of details about pricing, telling analysts that he
would not even share that with his priest. The 737 MAX 200 was labeled a game-changer by the industry since
it promised to deliver significant cost savings. It provided eight additional seats compared to its older version and
a 16% savings in fuel costs alone, equating to about 6% of total unit cost savings. The company which typically
had one of the youngest fleets in the world had also improved its interior cabin appointments and livery to give
it a more modern look. It had relented on its aversion to the hub-and-spoke system and had shifted to airside
transfers in Stansted, London, and El Prat, Barcelona, guaranteeing a passenger’s onward reservation in the process.
The transformation of Ryanair was well underway, and by early 2017 the company routinely carried well over
130 million passengers on an annualized basis. With load factors in excess of 95% (see Exhibit 5 for comparative
data on load factors across European rivals) and a consistently increasing revenue per seat, Ryanair’s new strategy
seemed to be working. Even Willie Walsh, CEO of IAG, the company that owned airlines such as Aer Lingus
and British Airways, told an interviewer, “ I have always been upfront in acknowledging what [O’Leary] has
achieved. I don’t agree with everything he has done, but you can’t take away the success the guy has had. More
than anyone else, he has transformed an industry. Even Herb Kelleher—and I know Herb very well—didn’t
transform the industry in the way Michael O’Leary has. What O’Leary has achieved is unique…You do have
to give them credit. I don’t think Michael has changed. He is still the same personality that he always was. But
without question, Ryanair has changed and that makes them in some areas a stronger competitor.”22 Exhibit 6
provides details of key milestones in the Always Getting Better program.
The More Things Change, the More They Stay the Same
Ryanair had a major problem on its hands in September 2017. The company had to confront the unpleasant
reality that a substantial proportion of its pilots had exercised their own holiday options, resulting in a shortage.
In turn, this resulted in cancellation of between 40 to 50 flights every day well into October. It was believed that
400,000 passengers were affected because of the cancellations, and it was estimated that the fiasco would cost
the company €25 million in fines and claims. The company announced that it would pay out between €240m
to €500m by way of compensation to passengers. However, O’Leary said, “We will not pay for flights on other
airlines. We cannot afford to pay the high costs of our competitors.”23 Competitors saw this as an early sign of
pilot unrest because their unionization demands had fallen on deaf ears. Norwegian, a competitor in Dublin,
announced, “We can confirm that 140 pilots have joined Norwegian from Ryanair this year. Pilot recruitment
is also underway for more pilots for our new Dublin base opening later this year.”24 In December that year,
German pilots struck work for a day, followed by pilots in three days of strikes by Portuguese cabin crew. Perhaps
it was the stress of the strikes and the reputational losses that the company was taking in the marketplace, but
the old O’Leary brashness resurfaced at a press conference when he responded to a question on pilots pay. He
said “I respect pilots,” he said. “If you sit in the cockpit of a plane flying four or five hundred miles an hour and
landing in 40ft or 50ft of visibility, you have total respect. That doesn’t mean they don’t get very well paid for
doing what is a very easy job. We are in an era now where the computer does most of the flying. They are very
skilled professionals. But are they hard-worked? No.”25. He subsequently issued a very rare apology to pilots for
the disrespect.
Less than a year after the rostering debacle, Ryanair flew into a full-blown war with unions in Belgium,
Portugal, and Spain. It had to cancel 300 of its 2,400 daily flights as a consequence. The unions were protesting
against Ryanair’s refusal to hire local cabin crew under local laws. Cabin staff in Spain, for example, complained
that they were unable to obtain medical services in Spain despite the fact they were Spanish citizens since their
employer did not pay local social security taxes in Spain. They could not get mortgages either because their
payroll was managed in Ireland.26 The Irish pilots followed suit and struck work twice in July. Ryanair chose to
release pay details of its flight captains to the press claiming that its captains made 20% more than competitors,
roughly €200,000 per year, while their peers working for Ryanair in the UK earned €245,000.27 Not only was
Ryanair fighting a battle against legitimate employee demands to unionize, it was also finding it equally difficult
to negotiate with unions that it had already recognized. Brian Sutton, the general secretary of the British Airline
Pilots Association, remarked, “The basic problem is that, frankly, Ryanair is still coming to terms with what
dealing with trade unions is all about and they are struggling to adjust.”28
A09-18-0011 9
In October, a video surfaced showing a male passenger aboard a Ryanair flight from Barcelona to London
berating a female passenger, hurling racist epithets at her. Ryanair staff chose to relocate the female passenger but
did not offload the male for misbehavior and making unacceptable, threatening comments to others. The video
went viral and Ryanair’s response was to refer the complaint to police authorities in the UK. An apology to the
passenger was very late in coming. Complaints had also surfaced that Ryanair was using an algorithm to ensure
that passengers traveling as a family were purposely allocated seats away from each other so that they would be
more willing to pay extra for the ability to choose a better seat the next time around. There was much progress
to be made with the Always Getting Better campaign it seemed.
10 A09-18-0011
Endnotes
1 Cooper, M. 2018. Michael O’Leary: Turbulent Times for the Man Who Made Ryanair. Penguin Books. (p. 3).
2 Pratley, N. 2018. “Ryanair’s Investors Expect More than Belligerence from O’Leary.” The Guardian, October 22.
3 Bloomberg Daybreak: Europe. 2018. “Ryanair’s O’Leary Says Happy to Continue as CEO for 2 to 3 Years.” October 22.
https://www.bloomberg.com/news/videos/2018-10-22/ryanair-s-o-leary-says-happy-to-continue-as-ceo-for-2-to-3-years-
video.
4 Cooper, p. 91.
5 Hiscott, G. 2017. “ ‘I’d Have Murdered to Make Cash’: Secrets of Ryanair Boss Michael O’Leary’s Success as Budget
Airline Falters.” Daily Mirror, September 22.
6 Ibid.
7 Cooper, p. 13.
8 Creaton, S. 2007. Ryanair: The Full Story of the Controversial Low-Cost Airline. Aurum Press.
9 Gillian, J. 2017. “Getting Personal.” Airline Business. Vol. 33 (2). March. 34-37.
10 Creaton.
11 Cooper, p. 13.
12 Ibid.
13 Creaton, pp. 181/82.
15 Cooper, p. 40.
16 Thomas, N. 2013. “Ryanair’s Michael O’Leary: easyJet ‘wiped the floor with us’.” The Telegraph, Nov. 21.
17 Humphries, C. 2013. “Ryanair Unveils New Strategy: ‘Be Nice to Customers’.” Reuters Business News, September 20.
18 Cooper, p. 58.
19 Ibid. p. 217.
20 Ibid. p. 211.
21 Gee, R. 2016. “Ryanair Boss Says Combination of Low Fares and Customer Service Has Revolutionized Airline Industry.”
Marketing Week, May 23.
22 Cooper, p. 226.
23 Collinson, P. 2017. “Ryanair to Tell 400,000 Passengers of Cancelled Flights after Roster ‘Mess-up’.” The Guardian,
September 19.
24 Ibid.
25 Linehan, H. 2017. “Michael O’Leary on Pilots: ‘Very Well Paid for Doing a Very Easy Job’.” The Irish Times, Sept. 21.
26 Spero, J. 2018. “Ryanair Flies into a Summer Storm of Strikes and Cancellations.” Financial Times, July 23.
27 Herbert, S. 2018. “Ryanair Publishes Staff Payslips Amid Pilot Strikes.” The Telegraph, July 25.
28 Spero.
11 A09-18-0011
Exhibit 1. Stock Market Prices for Ryanair and Peers
Exhibit 2. Ryanair’s Operating Performance
Metric 2010 2011 2012 2013 2014 2015 2016 2017 2018
Average fare—€ 34.9 39.2 45.3 48.2 46.4 47.1 46.7 40.6 39.4
Ancillary revenue/pax € 10 11.1 11.7 13.4 15.3 15.4 14.7 14.9 15.5
Total revenue/pax € 44.9 50.3 57 61.6 61.7 62.5 61.4 55.5 54.9
Capacity (seats-m) 80.9 87.5 91.9 96.5 98.9 102.6 114.5 127 136.3
Passengers—m 66.5 72.1 75.8 79.3 81.7 90.5 106.4 119.8 130.3
Load factor % 82.2 82.4 82.5 82.1 82.6 88.3 92.9 94.3 95.6
Aircraft in fleet 232 272 294 305 297 308 341 383 431
Fuel unit cost/pax 13.4 17 21 23.8 24.6 22 19.5 16 14.6
Operating cost/pax ex-fuel 25 26 28 29 29 29 28 27 27
Revenues from fares €m 2325 2828 3439 3820 3790 4260 4967 4868 5134
Ancillary revenues €m 664 802 886 1064 1247 1394 1569 1780 2017
Total revenues 2988 3630 4325 4884 5037 5654 6536 6648 7151
Operating expenses ex-fuel €m 1692 1887 2113 2280 2365 2619 3004 3200 3581
Fuel costs €m 894 1227 1594 1886 2013 1992 2071 1913 1903
EBIT €m 390 486 698 723 658 1039 1775 1533 1669
Adj. EPS/share (diluted) ¢ 21.5 26.9 34 39.3 36.9 62.4 92.1 104.6 120.4
FCF €m -23 -40 724 706 537 905 631 476 761
FCF % of sales -1 -1 17 14 11 16 10 7 11
Source: Company reports and Davy Research, 2018.
A09-18-0011 12
Exhibit 3. Ryanair’s Operating Costs versus Its Rivals
Cost Item
Ryanair
€m
% of Total
Operating Cost
easyJet
€m
% of Total
Operating Cost
Differential
(RYA-EZY)
Fuel and oil 2388 37% 1221 23% 14%
Airport & route charges 1705 26% 2123 40% -14%
Staff costs 930 14% 742 14% 0%
Depreciation 636 10% 224 4% 6%
Maintenance 183 3% 308 6% -3%
Aircraft rentals 70 8% 127 2% 6%
Other expenses 530 1% 567 11% -10%
Total Operating Costs 6442 100% 5312 100%  
Per Passenger (all in €)
Fuel and oil 18.32 15.22 3.1
Airport & route charges 13.08 26.45 -13.37
Staff costs 7.13 9.24 -2.11
Depreciation 4.88 2.79 2.08
Maintenance 1.41 3.84 -2.43
Aircraft rentals 0.53 1.58 -1.04
Other expenses 4.06 7.06 3.00
Total Operating Costs 49.42   66.19   -6.47
Per Available Seat Kilometer
Fuel and oil 1.40 1.27 0.13
Airport & route charges 1.00 2.22 -1.22
Staff costs 0.55 0.77 -0.22
Depreciation 0.37 0.23 0.14
Maintenance 0.11 0.32 -0.21
Aircraft rentals 0.04 0.13 -0.09
Other expenses 0.31 0.59 -0.28
Total Operating Costs 3.78   5.55   -1.77
Source: Goodbody. 2018. Ryanair, 18 September.
Exhibit 4. Intra-European Market Share for Leading Airlines
Airline 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
IAG Group 4.3% 3.8% 6.9% 7.1% 9.3% 9.6% 11.6% 11.5% 11.1% 11.2%
Lufthansa 13.1% 13.5% 13.7% 13.9% 13.9% 13.7% 13.4% 13.7% 14.0% 14.7%
Air France KLM 9.5% 8.8% 8.5% 9.0% 9.7% 9.2% 8.8% 8.5% 8.5% 8.2%
easyJet 6.9% 7.5% 7.7% 8.2% 8.4% 8.5% 8.6% 8.7% 8.9% 9.6%
Ryanair 10.5% 11.0% 11.2% 11.9% 12.0% 11.9% 12.4% 13.2% 13.5% 13.8%
Share of Top Five 44.0% 45.0% 48.0% 50.0% 53.0% 53.0% 55.0% 56.0% 56.0% 58.0%
Exhibit 5. Load Factors Across European Airline Companies
Airline 2011 2012 2013 2014 2015 2016 2017
Ryanair 82.0% 82.0% 82.6% 88.3% 92.9% 94.3% 95.6%
easyJet 87.3% 88.7% 89.3% 90.6% 91.5% 91.6% 92.5%
Norwegian 79.3% 78.5% 78.3% 80.9% 86.2% 87.7% 87.5%
IAG 79.1% 80.3% 80.8% 80.4% 81.3% 82.8% 84.7%
Lufthansa 77.6% 78.8% 79.8% 80.1% 80.4% 79.1% 80.9%
Average 81.1% 81.7% 82.2% 84.1% 86.5% 87.1% 88.2%
A09-18-0011 13
Exhibit 6. Key Milestones—Always Getting Better Campaign
Year 1: March 2015 Target
• Introduce allocated seating for all passengers
• Launch new website and mobile app
• Lower baggage fees
• Increase cabin baggage allowance
• Allow grace period of 24-hours for minor booking
errors
• Launch dedicated group booking service
• Sign GDS (Global Distribution System) partners to
target travel agents and business passengers
• Introduce additional amenities for families traveling
with children
• Launch Business Plus for business travelers that includes
free airport check-in, fast-track security, priority board-
ing, and flexible tickets
Year 2: March 2016 Target
• Launch a fully updated Ryanair.com website with
value-added functionality
• Prepare and commit to a passenger charter
• Introduce Ryanair car rental services
• Upgrade interiors on the entire fleet of aircraft with
slimline seats that offer more leg room
• Wider range of offering on in-flight menus (for
purchase)
Year 3: March 2017 Target
• Introduce Leisure Plus bundle including reserved seats,
higher baggage allowance, and priority boarding for a
premium
• Improve functionality of mobile app to collect custom-
er feedback (Rate My Flight)
• Launch Ryanair Schools service dedicated to school
trips
Year 4: March 2018 Target
• Launch connecting flights within Europe and long-
haul flights through partnerships outside Europe
• Ryanair rooms launch
• Ryanair Holidays launch
Year 5: March 2019 Target
• Cheaper fare promise—passengers earn a credit of €5
if they find a cheaper fare elsewhere
• Provide more ground transport options
• Commitment to be the greenest airline in five years
• Launch exclusive travel guides and videos in seven
languages
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prohibited without permission.