Saturday profile on Michael O'Leary: How the man with chutzpah could well win battle

Published on Friday 5 December 2008 20:30

MAKING a second takeover attempt of a larger rival in as many years may appear cheeky to some, aggressive to others. But cheeky and aggressive is a good way to describe Ryanair's chief executive Michael O'Leary.

This week O'Leary made a 750 million (652m) bid for national carrier Aer Lingus. The approach was half the value of the bid he made in 2006, a deal that was rejected on the basis of European anti-competition laws.

But as the faltering global economy triggers failures and consolidations among airlines, O'Leary figured his offer might get a better hearing this time.

Aer Lingus also has its own troubles. Still 25 per cent owned by the Irish government – and 28 per cent owned by Ryanair – the troubled airline currently faces going 20n into the red this year and having to slash 1,500 jobs.

O'Leary argued Aer Lingus was an "isolated, uncompetitive, loss making EU flag carrier" and promised to slash prices and run new aircraft. In what would be a bold move into long haul for Ryanair, he also promised the Aer Lingus brand would be kept and not merged into arguably a more famous name.

"We would be the Sun to Aer Lingus' Times," he told reporters last week as he demanded meetings with the government and airline bosses in an effort to hammer out a deal – which the board of Aer Lingus has indignantly rejected.

In an industry that tends to attract colourful characters – think Branson, Haji-Ioannou (as in EasyJet founder Stelios) – O'Leary may be the most vibrant. Unafraid to tackle rivals, regulators and critics in the most uncompromising of terms, O'Leary – who is estimated to be worth some 400m – is both cheered on like an Irish folk hero and denigrated in equal measures.

But grudging or not, O'Leary has won respect having successfully pioneered the low-cost airline model in Europe – the no-frills carrier has become one of the most profitable since he became its chief executive in 1994.

The former accountant from Mullingar was handpicked by the airline's founder, Tony Ryan, as an adviser when he was only 26. He rapidly learned the tricks of the airline trade as well as adding a few of his own. O'Leary's policy of targetting alternative airports in more exotic locations became apparent soon after he took the top job – the same year Ryanair began flying from Prestwick to Dublin.

According to Prestwick managing director Mark Rodwell, the airport was then handling around 10,000 passengers a year.

"Ryanair is now responsible for more than two million passengers here, an increase of more than two-hundred-fold," says Rodwell.

O'Leary's penchant for using obscenities liberally and often dressing up – as a French maid, a school girl or the Pope – gets him all sorts of attention.

"Ryanair has a style that gets them noticed," says Gordon Dewar, BAA Scotland's managing director of Edinburgh airport. "I think both his cost negotiating and marketing strategies are at the end of a spectrum,, but a very effective spectrum in terms of getting visibility."

Nor does O'Leary hesitate in attacking BAA. Last September, he branded the airports group a monopoly and called for the sale of Stanstead and a Scottish airport as it showed "nothing but contempt" for customers. But, since Ryanair established a mini-hub at BAA-owned Edinburgh last year, it has become one of its most significant customers.

"In the short term, the best indicator of who is going to be growing is who has got planes arriving," says Dewar. "Ryanair has one of the strongest forward order books in the world at the moment."

How O'Leary became one of the world's leading buyers of aircraft is a telling example of his cheeky and aggressive style – as well as his fortunate timing.

Having chosen the Boeing 737-800 as the "next generation" plane, negotiations took place over the time of the 9/11 terrorist attacks, which caused demand for new planes to dry up overnight. O'Leary exploited his upper hand ruthlessly, even playing Boeing against its rival Airbus and negotiating prices down by half. As a result the airline now has 168 new ultra-efficient aircraft, with plans to have 195 flying by spring 2009.

The airline trumpets the conversion of what was formerly a ragbag fleet of owned and leased aircraft in O'Leary's own inimitable style, but not all think this strategy – which will cost the group well over 6 billion – is the best one. The faltering economy has taken its toll on Ryanair too – last month its half-year profits were 215m, 47 per cent down on the previous year.

In fact, some suggest the massive order book is the reason why O'Leary is so driven to take over Aer Lingus.

O'Leary has made his case for why he should be allowed to buy Aer Lingus, but he has yet to make a case for how taking it over will benefit Ryanair.

Tom Dalrymple, chairman of Edinburgh-based Flyglobespan, thinks the new takeover swoop may be an indication that the Ryanair business model is "creaking a bit".

"The main attraction of acquiring Aer Lingus could be the additional options that would give to their aircraft."