Startups and Ryanair. Ryanair, really?

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I recently read Siobhán Creaton’s book on Ryanair. It was a great read. While Ryanair copied the operations aspect of South West Airlines, they didn’t copy their humanity and empathy. Ryanair and O’Leary bullied and harassed everyone. A very hateful company. Anti-union, anti-customer and literally told staff and customers to fuck off. As bad as Dunnes if you were a supplier too. South West were the most unionised, the most loved airline with happy staff and were still highly profitable. You can be a winner and be nice.

This is a good article from HBR called Building a Startup That Will Last and I’m going to summarise the article and compare it to Ryanair’s rise.

Point 1: Have a sense of purpose first and then profits will flow

Ryanair’s purpose was to be the biggest low fares airline (certainly not the most loved) and their drive was all about that. Michael O’Leary was Tony Ryan’s PA and was the bag man sent in to fix a badly in debt Ryanair. O’Leary actually suggested letting Ryanair die but Ryan pushed him to sort it and O’Leary got him to agree he’d get 25% of the profits if he did.

There seemed to be one question guiding O’Leary and Ryanair and that was “will this make us the biggest low fares airline?”. Other airlines mocked them for flying to airports in small towns that were basically sheds. Michael O’Leary’s attitude was that if they fly to an Airport 150 miles from Paris, people will fly with them if the price is low enough because a lot of their customers wanted to fly but couldn’t afford to. A whole new type of customer.

Point 2: Have a long-term vision. Plan the next steps after this step.

Europe’s biggest low fares airline was their goal after turning the business around. The next steps were that they built a playbook for an airport and a country and then replicated it. Screw airports, staff and suppliers, pick public fights that got you PR. Ryanair in Belgium, France, Germany, Italy etc. all followed this playbook. They then established hubs in these airports if they got even more concessions. It’s worth stating that Stansted was seen as a bit of a joke airport until Ryanair flew in 100s of 1000s of people. 1000s of jobs have been created all around these small airports because of Ryanair.

Point 3: Spot new opportunities based on data/experience, is there another customer need you could fulfil?

In 2020 Ryanair made €2 Billion (PDF LINK) from things like priority boarding, paying for drinks and food on board. Reserving seats. Scratch cards. Booking buses, trains, cars and hotels through them. As well as removing flight bookings (that cost them a fortune) from travel agencies, they started taking the ancillary products that travel agents sold.

Point 4: Scale up
Ryanair got the systems perfected and then added more airports and more planes. Ryanair makes money when planes are in the air so they got turnarounds down to 25 minutes and were able to do more flights per plane per day. Their profit margins were 23% when other airlines were 5%. The same planes across the fleet meant it was cheaper for training pilots and repair crews. Easier for parts etc. Boeing did a stress test on their finances and no matter the scenario, Ryanair never did worse than breaking even.

Part 5: Hold fast when the bumps happen.
Ryanair’s reaction to 9/11 was to reduce prices and increase flights. They flew their way out of the recession

Before 9/11 Ryanair cancelled an order with Boeing for new planes and put ads in Flight International looking to buy 50 7-14 year old 737s. They got 100 offers. When 9/11 happened they got 400 more offers from the ad. While they got cheap planes, they also used this as leverage for buying new planes from Boeing who were haemorrhaging money with canceled orders from everywhere. Ryanair had massive cash deposits and used that to get great deals. They knew they could weather this. Boeing allegedly gave them 30%-50% discounts to buy new planes. Much more recently they used the issues with the 737 MAX to get better deals from Boeing.

Even when they lose, they manage to win. Ryanair opened up a route to Hahn in Germany. Hahn was not Frankfurt but they called the route Frankfurt (Hahn). Lufthansa formally complained about saying they were flying from Frankfurt when Hahn was at least 120km away and Lufthansa’s complaint was upheld. This gobby startup/upstart created nonstop noise with their public fights about this that they were always in German media. They put “Auf wiedersehen Lufthansa” on their planes flying in and out of Hahn airport generating more complaints and more press coverage.

The book is worth reading and I’m sure some will admire O’Leary and you see so many (morons) say he should run the country. It would not be a good country to live in but he’d be super rich. What is good to take away from Ryanair is perfecting a system and then being highly disciplined about it.