Ryanair's O'Leary Ponders One-Euro Toilets, Standing Passengers

By: Felix Gillette

September 2 (Bloomberg)--“Why does every plane have two pilots?” asks Michael O’Leary, chief executive officer of Ryanair Holdings Plc, the largest low-cost airline in Europe. Wearing sneakers, jeans, and an off-the-rack short-sleeved shirt, O’Leary is pontificating in his office at the company’s headquarters on the outskirts of Dublin Airport.

“Really, you only need one pilot,” he tells Bloomberg Businessweek in the Sept. 6 edition. “Let’s take out the second pilot. Let the bloody computer fly it.” What happens if the pilot has a heart attack? One member of the cabin crew on all Ryanair flights would be trained to land a plane. “If the pilot has an emergency, he rings the bell, he calls her in,” O’Leary says. “She could take over.”

From time to time, O’Leary, 49, lets loose with a statement like this -- a provocative idea about how he would like to make air travel cheaper by doing something that sounds nutty. Dismissing his comments as the calculated ravings of a headline hound would miss an opportunity to peer into the airline industry’s psyche, which is usually hidden behind smiling, innocuous faces.

Pay Toilets

At moments like these -- or later, when O’Leary explains how he’d like to introduce standing cabins and pay toilets on all his flights -- he gives voice to the industry’s most primal survival instincts. He is the id of the airline business.

If times were lush, rival airline executives could afford to ignore him. In recent years, with much of the global industry struggling to survive, O’Leary’s subversive vision looks like a viable alternative to the status quo, which is threatened by obsolescence, attrition, and consolidation. He says what the others are thinking, and, more often than not, doing.

These days, any commercial flight may leave you with the impression that airlines consider you cattle. Only O’Leary will call you a cow, lick his chops, and explain how he plans to carve you up for dinner. His 17 years at the helm of Ryanair have been one long feast.

During an era in which the bulk of the commercial airline industry has lurched from one crisis to another -- from the attacks of Sept. 11 to the April explosion of the Eyjafjallajokull volcano in Iceland to the ongoing global recession - Ryanair has grown from a tiny regional airline into a legitimate powerhouse with 7,000 employees, flying 1,100 routes to 155 airports in 26 countries.

7 Million Passengers

In July, Ryanair became the first airline in Europe to carry more than 7 million passengers in one month. The company has a market cap of $7.2 billion, dwarfing competitor easyJet Plc’s $2.3 billion and Ireland’s legacy airline Aer Lingus’s $612 million. Ryanair falls short of Southwest Airlines Co’s $8.29 billion market cap and Delta Air Lines Inc.’s $8.22 billion. During the past decade, at a time when the global airline industry collectively lost almost $50 billion, Ryanair turned net profits in 9 out of the 10 years -- most recently earning $431 million in the fiscal year ended in March.

None of this guarantees that any of O’Leary’s wilder fantasies will ever be realized, only that his ideas will shape air travel for years. Beneath his success as a CEO is a radical reassessment of the nature of the commercial air traveler -- a reclassification that has gained momentum over the years, evolving from fringe hypothesis to near-universal theorem.

Discomfort, Indignity

At the heart of the O’Leary philosophy is the idea that commercial air passengers are not delicate creatures whose repeat business depends on free pillows, blankets, and tea. Rather, they are hardy beasts -- parsimonious when buying a ticket, profligate once in the air -- willing to endure discomfort and indignity just so long as they get to their destination cheaply and with their suitcases.

The question hanging over the airline business and passengers alike is not whether the O’Leary Way will be further adopted by airlines scrambling for survival -- it is how far and fast his paradigm will spread.

In July 2002, passengers in England were boarding a Ryanair flight bound for Dublin when the pilot announced that the baggage handlers loading the plane were short-staffed. A major delay was imminent, the pilot said, unless people volunteered to move luggage. Soon after, a handful of passengers stepped out on the tarmac to heave bags onto the plane.

‘Useless Transaction’

Someday, O’Leary would like to see this on all Ryanair flights. “Airports are ludicrously complicated places only because we have this utterly useless transaction of taking your bag from you upon departure, just so we can give it back to you at arrival,” he says. “Get rid of all that crap. You take your own bag with you. You bring it down. You put it on.”

O’Leary says he believes that the way airports are designed to handle baggage is a cumbersome vestige of a bygone era, dating to the years between world wars when the only people flying were the likes of the Vanderbilts and Roosevelts.

“They were switching out of the presidential suite on the cruise ships, where they had a whole team of flunkies with white gloves who carried their bags, and onto Pan Am, where they expected the same thing. Well, sorry. It’s 2010. Carry your own bag.” O’Leary brags that Ryanair was the first airline to charge for luggage: “For a small little Mickey Mouse Irish airline, the whole industry around the world now watches what we do.”

Flying Free

O’Leary has a dream: that someday all passengers will fly for free on Ryanair and that all of the company’s income will come from ancillary revenue, such as baggage fees, in-flight sales, and commissions on travel insurance, hotels, and car rentals sold through the carrier’s website.

It’s a distant dream. Ancillary sales make up only 20 percent of the airline’s revenue. The litany of people and institutions he believes are standing between him and his dream includes trade unions, who drive up costs; politicians, who favor state-run airlines; and regulators, who prevent him from enacting efficiencies such as flying short flights with one pilot.

“If you don’t approach air travel with a radical point of view, then you get in the same bloody mindset as all the other morons in this industry: This is the way it has always been, and this is the way it has to be,” says O’Leary. “So nothing changes.”

Cheap Fares

In exchange for cheap fares, he says, passengers will put up with just about anything. On Ryanair, that can include high luggage fees; relentless in-flight sales pitches for smokeless cigarettes and scratch-off lottery games; minimal customer service; bad, expensive food; cramped seats; and flights to secondary city airports that are sometimes hours from the actual city. A $34 one-way ticket from Dublin to Frankfurt, for instance, will actually take you to an airport in Hahn, Germany, which is nearly two hours by bus from Frankfurt proper.

Eventually, O’Leary would like to get rid of two of the three toilets on all short flights, which would allow Ryanair to pack in more passengers at lower fares. He would charge passengers one euro to use the remaining toilet. “In many ways, travel is pleasant and enriching,” O’Leary says, leaning back in his chair. “It’s just that the physical process of getting from point A to point B shouldn’t be pleasant, nor enriching. It should be quick, efficient, affordable, and safe.”

Standing Seats

He puts his feet up on the table and gestures at his sparse office, which doubles as the staff meeting room. Hanging on the wall is a 2010 Ryanair charity calendar, featuring the airline’s flight attendants in bikinis. Otherwise, the CEO’s office could pass for a facility in an office park in New Jersey. The drab, 15,000-square-foot space, O’Leary says proudly, is “probably the smallest headquarters of any airline in the world.”

While the idea of sprucing up his work environment is repugnant to him, he’d like to renovate all 250 of Ryanair’s Boeing 737s. Earlier this summer, he announced that he was planning to replace the last 10 rows of seats on his aircraft with 15 rows of upright “standing seats” -- vertical benches with shoulder harnesses and arm rests -- which would allow him to pack 30 more passengers onto each plane.

The idea of vertical seats has been a third rail in commercial air travel since 2006, when The New York Times published a controversial front-page story about how aircraft manufacturers were considering using the contraptions. After publication, executives at Airbus played down their reported interest. “Our passengers and customers want more and more comfort,” an Airbus spokeswoman told CNN at the time.

Ancillary Revenue

Afterwards, the Times printed a lengthy correction, and in the interceding years passengers proceeded to do the opposite of what Airbus predicted, ceding more and more traditional comforts to airlines looking to boost their ancillary revenue.

O’Leary now says that after taking a look at the drawings, he has decided vertical seats won’t save enough room. Instead, he has a better idea -- replace the last 10 rows with a standing cabin, outfitted with various handrails, much like a New York City subway car, only without the benches and the panhandlers. The increased capacity, he says, would lower fares by 20 percent to 25 percent.

“In no plane ever operated by Ryanair will it be all standing. You will always have the choice of paying for a seat,” he says. “The argument against it is that if there’s ever a crash, people will be injured. If there’s ever a crash, the people in the sit-down seats will be injured, too.”

‘Enforcement Action’

O’Leary downplays the threat that turbulence would presumably pose for standing passengers. “Yes, somebody could get injured,” he says. “I don’t say that lightly. But we’d do exactly what we do in every other case: ‘Ladies and gentlemen’ -- BING, BONG -- ‘we’re going to have some slight turbulence. Hold on to the rail tightly.’”

“He insults the dignity of the flying public every time he opens his mouth,” says Kate Hanni, the founder of FlyersRights.org, a nonprofit passenger advocacy group. Hanni says that this past May, spurred by O’Leary’s comments about pay toilets, she raised the issue during a meeting with the U.S. Transportation Dept. DOT officials told her they had verbal commitments in place from all the major U.S. aircraft manufacturers that they will never have pay toilets, she says.

“We would pursue enforcement action against carriers as an unfair practice if they imposed a fee for using on-board toilets,” says Bill Mosley, a spokesman for the DOT. Hanni says she will press officials for similar assurances against standing-room cabins.

Solo Pilots

As for the solo pilot idea, Patrick Smith, a longtime pilot and essayist, calls the notion “beyond preposterous.” Smith says that O’Leary is stoking the common misconception that planes more or less fly themselves. “Even in routine operations, it’s important to have a second person there,” he says.

“What we don’t want is to have Ryanair’s wild and foolish ideas trickle into the U.S.,” says Hanni. “What we’ve seen is that passengers freak out for a few minutes, and then they become resigned.”

O’Leary was born in March 1961, the second oldest of six siblings. His father was an entrepreneur who had a series of ventures, including a textile business, a meat rendering plant, and a rabbit-breeding operation. Although his family was well- off --O’Leary attended Clongowes Wood, the same prestigious Irish boarding school that once graduated James Joyce --they never flew anywhere.

‘Losing my Virginity’

Until the mid-1980s when Ryanair came along, Aer Lingus, Ireland’s national airline, had a near monopoly on flights out of Dublin, and prices were high. Like most upper-middle-class families at the time, when the O’Learys traveled overseas, they did so by ferry. Looking back, he can’t remember when he first got on an airplane. “Obviously, it wasn’t that fantastic an experience. It wasn’t like losing my virginity.”

After graduating from Trinity College Dublin with a business degree, O’Leary worked for several years as a tax accountant at a large firm. He left to start a newsstand chain that, according to the biography “Michael O’Leary: A Life in Full Flight,” by Alan Ruddock, netted the entrepreneur a couple hundred thousand Irish pounds in two years.

In 1987 he took a job as a financial assistant to Tony Ryan, an entrepreneur who had made a fortune in aircraft leasing and who had recently started an airline, based at Dublin Airport. (Ryan died in 2007.) O’Leary agreed to work for no base salary and a significant percentage of Ryanair’s earnings, should the airline’s meager fortunes ever improve. The deal eventually made him one of Ireland’s wealthiest men. He currently holds 55 million Ryanair shares valued as of Sept. 1 at $5.05 each. For the first several years of its existence, Ryanair struggled. Several times, O’Leary recommended that it be shut down.

Flamboyant Executives

Until 1994, when he became CEO, O’Leary was fairly conventional. He avoided the limelight. He wore blazers. He was largely unknown, even to the Dublin press. After stepping into the top job, he realized that a low profile was bad for business. He saw how other flamboyant airline executives saved advertising money by generating loads of free publicity. Herb Kelleher embodied the fun-loving experience that he was selling with Southwest; Richard Branson channeled a sense of adventure, which he used to market Virgin Atlantic Airways Ltd. O’Leary chose to embody the role of a cheap, no-nonsense, slightly unpleasant Everyman, which he would exploit to sell a cheap, slightly unpleasant flying experience to the Everyman.

Obnoxious Stunts

He ditched his tax accountant wardrobe and started showing up for work in jeans. At Ryanair headquarters, he cultivated a reputation for penuriousness, banning cover sheets on faxes and requiring employees to buy their own pens.

O’Leary worked hard to become known as the most unpleasant man in Ireland. He pulled off obnoxious stunts, including dressing up as the Pope to launch a route to Rome and riding a tank into an airport outside London. He took out advertisements insulting high-ranking government officials, including a series of infamous ads in 2001 depicting Mary O’Rourke, then the nation’s top transportation official, first in a bubble bath (“Mary, Mary quite contrary,” read the ad, “How does your monopoly grow? It doesn’t”) and later as a cowgirl, under the headline, “Welcome to Dublin Airport. This is a stickup!”

During interviews and radio appearances, he further insulted public figures, once calling Ireland’s former Taoiseach (the equivalent of Prime Minister) Bertie Ahern, a “useless wastrel.”

Customer Service

In his spare time, O’Leary breeds racehorses and cattle on his estate outside Dublin, where he lives with his wife and two children. He is a keen student of animal genetics and disposition. He would never mistake, say, a Beefmaster for a Belgian Blue. Yet O’Leary says that for decades, airlines have been mixing up their breeds of passengers -- treating cheap budget travelers as though they were corporate tycoons, handling them with a level of courtesy they neither receive anywhere else in their lives nor truly expect.

Ryanair has become infamous for its customer service, which some would characterize as minimalist and others have described as hell. Complaints must be sent in by fax, not e-mail. Passengers have grappled with surprising surcharges for using such things as wheelchairs. Newspapers including The Guardian have created reader competitions dedicated to describing Ryanair horror stories.

Life After Ryanair

Yet more and more people are flying Ryanair -- which, in the end, might be the ultimate validation of O’Leary’s assessment of what travelers really want. “One of the great MBA-speak ideas is that the customer is always right,” he says. “The customer is usually wrong. The only time you hear from a customer is when they’re usually complaining because they want to break our rules. Why can’t I get a refund for my non- refundable ticket? Bugger off.”

Back in his office, O’Leary was growing impatient. The id of the airline industry is no fan of self-analysis. He’s hinted in the past of someday stepping down from the company, yet he says he has no plans for life after Ryanair. Political office is out of the question. “I’m unelectable,” he says. Writing a memoir is of no interest. “I don’t waste any time pulling wool out of my navel, analyzing my life,” he says.

O’Leary finds questions about legacy equally annoying. “I’m not in it for the pride of how I served mankind,” he says. “Would I like to see a statue made of me? Absolutely not.”

He did concede one point of pride. “We finally exposed the myth that air travel was some kind of a uniquely sexual experience,” he says. “It’s not. It’s just a commoditized way of getting from A to B.”