From the arena@fromthearena1
For 28 years, Michael O'Leary ran Ryanair like a man who couldn't stand his own customers. People kept flying because the tickets were so cheap. Then in 2014 he tried being nice to them. Profits jumped 37 percent. The share price jumped 55.
He told the whole story in a one-hour lecture at the Royal College of Surgeons in Dublin in late 2015. It's the Carmichael Lecture, watch the full thing if you can, because there is more useful business teaching in that hour than in most full MBAs. On the third rewatch, these are the parts that stuck with me the most.
The single biggest secret of Ryanair has nothing to do with marketing. It is a 25-minute turnaround. Once a Ryanair plane lands, the crew has it cleaned, refueled, reboarded, and back in the air in 25 minutes. Aer Lingus needs about an hour to do the same thing. After three flights in a day, Ryanair has banked two hours, which is enough time to fit in two extra flights. Every single Ryanair plane flies more flights per day than every single Aer Lingus plane. That gap is where the entire profit margin of European cheap flying comes from. Long flights to other continents don't work the same way. A faster turnaround at JFK doesn't let you squeeze another flight to America into the day, so the saved time gets wasted. This is why O'Leary thinks Ryanair will never fly across the Atlantic but will dominate short flights inside Europe for decades.
The second thing he learned was that you can get unlimited free press by saying the opposite of whatever business school is teaching that year. Ryanair had no advertising budget through the 80s and 90s. So O'Leary went on television and said things like, "customers are always right? No, they're always wrong." And, "people are your most important asset? No, they're your biggest expense." Every interview produced more coverage than a paid campaign would have. The peak came in 2009 when The Sun newspaper asked if Ryanair would allow porn on the in-flight wifi. He said yes. Within 24 hours the website got 28 times its normal traffic, and bookings quadrupled for three days straight.
The third lesson is the one he was slowest to learn, and it is the most painful. The shift to being polite to customers was led by his own staff. He was the bottleneck. A Dublin Airport survey found that when Ryanair gate agents pulled passengers out of the queue to size-check their carry-on bags, 77 percent of those bags ended up fitting just fine. His own gate agents had invented rules like "the bag must fit comfortably in the sizer" so they could reject bags that technically fit. Staff were exhausted from being forced into pointless fights with customers. They wanted permission to stop. Once O'Leary gave it, they started bringing him most of the new ideas.
Lesson four is about admitting you were wrong, and treating that as a press strategy. After the change, O'Leary toured Ireland, the UK, and Germany telling journalists he had been wrong about customer service for 25 years. The coverage was endless because almost no executive ever does this in public. Owning a mistake loud enough becomes its own news cycle.
Lesson five is the one I think every government should tape to the wall. Ireland brought in a tax on flights during the 2009 recession. It raised about 26 million euros a year. Visitor numbers fell from 30 million to 20 million over three years. The state lost roughly 250 million euros a year in sales tax it would have collected from the visitors who never came. So Ireland was earning a tenth of what it was losing. Once Michael Noonan repealed the tax in 2014, tourism boomed and Ryanair alone accounted for 74 percent of the new traffic to and from the island. The lesson goes way beyond Ireland. Tax visitors once they're inside your country. Don't tax them at the airport, because at the airport they'll just pick somewhere else to fly.
The sixth lesson is the strangest one. The average Ryanair fare is about 35 euros. O'Leary's actual long-term goal is for the ticket to be free, paid for entirely by side revenue from bag fees, snacks, wifi, and on-board gambling. The cheaper the ticket, the more passengers fly. The more passengers fly, the more side money he makes. That side money lets him cut the ticket again next year. The wheel only turns one direction, and the gap between Ryanair and every other European airline gets wider every year.
Lesson seven is about why public services keep failing. The Irish health service has a politics problem. Whenever the unions are unhappy, they bypass management and go straight to the Minister for Health, who has no real power to push back. American federal workers lost the right to strike in 1947, and the United States has functioning public services almost in spite of itself as a result. No government anywhere can run a real operation while its workforce can paralyze that operation on demand. The same logic explains almost every broken public bureaucracy.
The eighth lesson is a pushback against doomsday thinking. O'Leary was openly skeptical of people warning that the world was running out of oil, and skeptical of climate-change politics. His reasoning was simple and pragmatic. People are extraordinarily good at working around shortages of energy and raw materials. He tells a story he half-remembers about General Motors commissioning a study in the early 1900s that concluded car demand would top out at 900,000 cars worldwide because there were not enough chauffeurs to drive them. Henry Ford solved that within a few years by making cars cheap enough for owners to drive themselves. Markets find new oil whenever the price climbs high enough to make new drilling profitable. American oil producers came online with new techniques, flooded the market, and replaced OPEC, the alliance of oil-exporting countries, as the force that sets global oil prices. Whatever the next bottleneck is, somebody will route around it. The trick is to never bet against human ingenuity over a long enough time horizon.
The ninth lesson is about how leaders rot. O'Leary refuses awards, honorary doctorates, and invitations to the dinner circuit. His reasoning is that the moment you start believing you are irreplaceable, you stop listening to the people who actually run the business. Customers write to him every day complaining about Ryanair. Those daily complaints are the only thing keeping the company grounded.
The deepest lesson in the talk is the one he drops almost in passing. He spent four years studying business at Trinity College in Dublin. At no point during those four years did anybody suggest that being nice to customers might be part of a winning strategy. The single most profitable change he ever made to Ryanair was something his entire formal education had trained him not to consider.
