Plenty of firepower and he's not afraid to use it

Ryanair has pleased investors this week by bringing in profits of €227 million, slightly better than expectations, but has again warned that the going will be tough for the rest of this year. It is braced for a "bloodbath" with airfares set to keep tumbling as carriers in Europe fight a fierce battle to win key territories. Siobhán Creaton, Finance Correspondent reports

Chief executive Michael O'Leary says the Irish airline has plenty of ammunition left in its arsenal and will not be afraid to use it to win this war and expects the casualties to mount over the next 12-18 months.

"There will only be one or possibly two large low-fares airlines in Europe and we are determined that the biggest and lowest-cost of these carriers will be Ryanair," he has pledged.

Ryanair and Mr O'Leary have been on a permanent war footing for almost two decades and there are few signs of battle fatigue. Indeed Mr O'Leary seems to be always spoiling for a fight with a politician, a rival, a customer or an airport. This week he was squaring up to the Taoiseach, Mr Ahern, publicly lampooning him for his Government's failure to build a second terminal at Dublin Airport.

The man he has dubbed "Dithering Bertie" was clearly annoyed by his latest tactics and flatly warned that he wouldn't be "bullied" by the Ryanair boss. He also reminded the truculent chief executive that Ryanair would have closed in 1989 had the Government not thrown it a lifeline.

Ryanair was established in 1985 as a small air taxi service, flying passengers between Waterford airport and Gatwick. A year later it got a licence that would allow it to muscle in on the main Dublin to London, route going up against Aer Lingus.

Ryanair founder Dr Tony Ryan had a long-held ambition to set up an Irish airline. In 1980 he wanted to set up "a cheap, no-frills" airline called Irelandia that would fly from Shannon Airport to New York for £99 one way and for £29 to London but the Government turned the proposal down.

He later tried to buy a licence from struggling Irish cargo operator Aer Turas but, when news of his interest filtered across to Aer Lingus, the national airline decided to buy it.

Dr Ryan had made a fortune from Guinness Peat Aviation, the aircraft leasing company he founded and which was part-owned by Aer Lingus. To avoid any conflict of interest, he put £1 million into the new airline that would be owned by his three sons, Cathal, Declan and Shane.

He wanted to call it Trans Tipperary but his friend Christy Ryan who applied for the airline's licence wanted to call it after himself. They eventually agreed that Ryan was a good name for an airline and Ryanair was born. Staff at the airline quickly realised that while Tony Ryan didn't have a shareholding in Ryanair, he was its driving force. They called him "the man from Del Monte" - likening him to the fruit-company boss who was never seen but had the final say on everything.

After four years in business Ryanair was a money pit. It had accumulated huge losses and was crisis-ridden. Mr O'Leary, who was the Ryan family's financial watchdog at Ryanair, advised his mentor to shut it down in the belief that it would never make money.

He had set the wheels in motion to shut it down and was amongst the delegation that informed the Government of Ryanair's imminent closure with the loss of 600 jobs.

They said Ryanair would be grounded within a fortnight.

Dr Ryan was crucial when it came to convincing the Government to keep Ireland's second airline alive, suggesting it should support a two-airline policy, similar to the policy embraced in Canada.

Just days before its threatened closure, the then Minister for Transport, Mr Séamus Brennan, persuaded the Cabinet to back Ryanair's rescue plan that included ordering Aer Lingus off the Dublin to Stansted route and awarding it exclusively to Ryanair.

The Minister, who has returned to that portfolio, said he felt that Ryanair had been given a very hard time since it went into business, particularly as the Department would automatically consult with Aer Lingus about any new routes that Ryanair would propose.

"I was advised to be very cautious. I was reminded that, on one level, as the owner of Aer Lingus, I should be pleased that Ryanair was going bust, but I can't say for sure the officials advised against helping the airline," he explained in an interview.

Mr Brennan said he had taken the decision on purely national grounds.

"I believed there should be a second airline that should be supported and that we should give it a chance. I took the view that two airlines would mean more people travelling. I don't claim any particular forward vision at that time except a gut feeling that competition was the way forward. I just wanted Aer Lingus to move over a bit. It did save Ryanair and didn't damage Aer Lingus at that time," the Minister said.

Another of the combatants that Mr O'Leary and Ryanair continues to do battle with, Aer Rianta, also played its part in saving the airline at that time.

Some sources have suggested that Aer Rianta wrote off Ryanair's debt of more than £1 million related to unpaid landing charges and fees at Dublin Airport. The State-owned airport operator also began to supply Ryanair with duty free products for sale on board its aircraft on very generous terms that effectively left it out of pocket.

There are many people at Aer Rianta who remember the significant role it played in saving Ryanair during those dark days. Equally, they know Ryanair will never acknowledge this.

Ryanair battled on from those days with Mr O'Leary leading the charge. Some who know him say much of this has been achieved as a result of his bullying and aggressive management style. The Taoiseach and other politicians should brace themselves for further assaults.

Ryanair: How a small Irish airline conquered Europe, by Siobhán Creaton, is published by Aurum Press