Michael O’Leary: Flying high in the battle for Europe’s skies

Ryanair executive on industry’s future, Brexit and ‘Irish success story’

Ryanair chief executive Michael O’Leary: “We are growing from 130 million passengers to 200 million passengers a year. Even if we wanted to put up prices we can’t.” Photograph: Yves Herman/Reuters

Ryanair chief executive Michael O’Leary: “We are growing from 130 million passengers to 200 million passengers a year. Even if we wanted to put up prices we can’t.” Photograph: Yves Herman/Reuters

 

It was the Irish who opened up Europe’s skies, Ryanair chief executive Michael O’Leary says.

He holds Peter Sutherland, the Irishman who was European commissioner for competition between 1985 and 1989, responsible for creating the air travel regime that boosted competition and made flying cheaper for everyone.

“Peter Sutherland drove all of this in the face of massive opposition from the German and French flag carriers, who did everything in their power to stop him. It’s very much an Irish success story in Europe,” he says.

O’Leary believes the benefits to Ireland speak for themselves.

“It broke up the flag-carrying monopolies and ushered in competition,” he says.

“If you go back to 1987, 3.5 million people used Dublin Airport. This year it will be 30 million. Aer Lingus carried two million, now they carry more than 10 million at very much lower fares.”

Most of all, he acknowledges that Ryanair would be unlikely to exist without it. Europe’s open skies regime allows an airline registered in one member state to operate freely throughout the bloc.

So Ryanair, an Irish company, can for example fly between Germany and Spain and the UK and Belgium. This allowed it to expand across the continent, a process it began in the 1990s, shortly after Sutherland’s intervention.

“In 1987 Ryanair had no passengers,” O’Leary says. “This year we will have 130 million. We’re an Irish airline but we are the world’s biggest international airline by passenger numbers.” (US airline South West has more passengers, but its business is virtually all domestic).

Flag-carriers

While Ryanair has grown, so have a few of its rivals, particularly the flag-carriers that O’Leary so frequently has in his sights. Air France and its Dutch equivalent, KLM, merged in 2004 while German carrier Lufthansa has mopped up smaller competitors in Switzerland and Austria. In 2015, International Airlines Group (IAG), which already owned British Airways, and Spanish operators Iberia and Veuling, bought Ryanair’s oldest rival, Aer Lingus.

O’Leary predicts that this trend will continue and he does not necessarily believe that it will be good news for consumers. He points out that trends in Europe tend to follow what happens in the US, where four players, United, Delta, American Airlines and South West, now dominate the skies.

“We’re an Irish airline but we are the world’s biggest international airline by passenger numbers,” says Ryanair’s chief executive Michael O’Leary. Photograph: Ints Kalnins/Reuters
“We’re an Irish airline but we are the world’s biggest international airline by passenger numbers,” says Ryanair’s chief executive Michael O’Leary. Photograph: Ints Kalnins/Reuters

He thinks that the bigger players will swallow up the smaller operators and even argues that Ryanair’s biggest low-cost rival, Easyjet, will fall victim to the trend.

“Easyjet are not able to compete with us,” he says. “I think that it’s more likely that they will be bought, they will be part of the consolidation. You will have three big legacy carriers and us, the monstrous low-cost point-to-point operator.”

We are the ones who campaigned for Lisbon II, we are the ones who campaigned for Maastricht II

While those who favour this consolidation argue it will be good for consumers, O’Leary predicts that the likes of Air France KLM, Lufthansa and IAG “will not be able to help themselves” and are likely to try and charge more for flights.

So does this mean the end of the competition and low fares that deregulation helped to create?

“We are growing from 130 million passengers to 200 million passengers a year,” O’Leary says. “Even if we wanted to put up prices we can’t, so we will keep them all honest for the next eight to 10 years anyway.”

EU’s bureaucracy

Despite being a fan of Ryanair’s aviation policies, Brussels has regularly clashed with O’Leary over various issues, and he has never been backward about criticising the EU’s bureaucracy. Nevertheless, he argues that his and his company’s position on the single market has always been consistent.

“We are the ones who campaigned for Lisbon II, we are the ones who campaigned for Maastricht II,” he says. Last year, Ryanair campaigned against Brexit, which its chief executive recently predicted would be the greatest economic suicide note in history.

However, a majority of UK citizens voted to leave the union last year, a move that O’Leary warns could throw the open skies treaty that underpins deregulated air travel into chaos.

British people will not be too happy when they have to drive to Scotland or the Lake District for their holidays

He has warned several times that a hard Brexit with no deal will mean no flights between the UK and Europe for several months after March 2019, when the country is due to leave the union. O’Leary repeated this prediction to the European Parliament’s transport committee earlier this month.

European airlines such as Air France KLM and Lufthansa will be happy to allow this to happen, he says. Britain accounts for about 6 per cent of their business, but they will benefit as passengers transferring to long-haul flights will have to go through European hubs such as Paris and Frankfurt rather than Heathrow.

If the worst happens, he warns that Britons will get a land when they discover that Brexit means they cannot fly to Spain for their holidays. “Ordinary British people will not be too happy when they find out that they have to drive to Scotland or the Lake District for their holidays,” he says.

Begin planning

He has been calling for the EU and UK to get to grips with this quickly, as airlines will have to begin planning for 2019 next year. O’Leary has already said that if there is no sign of a deal by the end of next year, Ryanair will have to consider whether it should stop selling flights to and from the UK at that point.

Ryanair chief executive Michael O’Leary: “We need to deregulate air traffic control. And there has been no deregulation of airports, airport monopolies have not been broken up.” Photograph: Stefan Rousseau/PA Wire
Ryanair chief executive Michael O’Leary: “We need to deregulate air traffic control. And there has been no deregulation of airports, airport monopolies have not been broken up.” Photograph: Stefan Rousseau/PA Wire

In the meantime, he believes that airports and air traffic control should also be opened up to competition. He complains that while airlines have been cutting their fares, airports have been increasing their charges. At the same time, regular strikes by air traffic controllers can halt travel across Europe.

Ryanair and a recently formed lobby group of which it is a leading member, Airlines for Europe (A4E), have been pushing for new rules governing industrial air traffic control disputes that will leave striking as the last possible option.

French air traffic controllers are a particular bugbear for the Ryanair boss. They have responsibility for a large swathe of air space. When they stop work, craft are not only prevented from landing and taking off in France, but they are also prevented from flying through its airspace.

“You have 3,000 French air traffic controllers who can shut down travel in Europe,” he says. O’Leary believes that liberalisation is the answer. If the French controllers are not working, he argues that those in other EU states should be allowed to take over responsibility for the country’s airspace and that new technology makes this possible.

“We need to deregulate air traffic control. And there has been no deregulation of airports, airport monopolies have not been broken up,” he says. “The problem is, we do not have a Peter Sutherland any more, there is nobody there with the will or the bottle to break up the airport or air traffic control monopolies.”

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