The airline that brought Aer Lingus down to earth takes off

THE "Eureka!" moment, goes the legend, was provided by Liam Lonergan, owner of Club Travel and shortlived managing director of…

THE "Eureka!" moment, goes the legend, was provided by Liam Lonergan, owner of Club Travel and shortlived managing director of the fledgling airline.

"Luton," he said to Tony Ryan. Cheap, accessible, free of government protocols. And Ryanair took flight. So, unhappily, did Lonergan, after only seven months. Unwilling, it is whispered, to shoulder a share of the hefty debt accrued before his arrival. But if Luton was indeed his legacy, then he might evince a wintry smile this week as the brash little bird flaps its £300 million wings and hovers enticingly above the Dublin and New York stock exchanges.

"Eureka", however, might not be the first word that springs to Mr Lonergan's mind as he ponders the news of his latter day counterpart's £17 million bonus payments over the past three years.

For Luton was the key. Before Luton the airline was a joke. In 1985, the year it was founded, it was operating an 18 seat Banderainte turbo prop out of Waterford to Catwick, but only when the cloud base at Waterford obliged by staying above 800 feet. Occasionally it failed to take off at all. Too often passengers found themselves disembarking in Cork or Dublin.

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The very week that Mr Lonergan resigned, the Department of Communications sanctioned a licence for Ryanair to operate a scheduled service from Dublin to Luton. Six months later the route was up and running, its fares the stuff of Irish dreams, with unrestricted return tickets selling for a risible £94.99. (A curiously unrounded figure, influenced, it is said, by Arthur Walls and his pricing policies at Clery's department store).

This was about the same as a foot passenger had to pay for the privilege of a 12 to 14 hour vomitous seacrossing (both ways) between Dublin and Holyhead. Or less than half of what Aer Lingus was demanding from a passenger hoping to fly to say, Birmingham, even with a month's notice.

After Luton the skies over Ireland would never be the same. Regular air travel would no longer be the preserve of the wealthy jetsetter or the pampered business traveller. After Luton, an exasperated Irish public began to get the message that the mystique surrounding air travel was a poor excuse for sky high fares. Stripped of its frills, stepping on a plane was no more glamorous than hopping on a bus.

A colleague sums up the Ryanair effect: An elderly man and two sons on boarding at Luton were asked for their boarding passes. "It's just to see what seat number you'll be in," explained the flight attendant. "Ah don't worry about that, miss, said the old man, who had only ever known the boat, "sure the boys and me will sit at the bar."

Suddenly, Aer Lingus and British Airways, which hitherto had operated a cosy cartel, felt impelled to apply to the Department of Transport to be allowed to offer lower fares, citing cheaper fuel costs, of all things, as the driving factor behind their request. The effect was dramatic.

IN the 10 years before Ryanair's arrival, air traffic between London and Dublin had remained static at around 800,000 passengers a year. Only four years later this figure had more than trebled to 2.6 million. The Ryanair Generation was born.

In the UK the airline targeted the ethnic pool in the five counties around Luton and north London. A survey later revealed that 20 per cent of this market had heard of Ryanair from the pulpit on a Sunday. By 1988 something called the Ryanair Syndrome was being touted. This, explained Arthur Walls, then chairman of the airline, described Ryanair's contribution to the Irish economy, a new way of thinking, no less.

Briefly, it entailed identifying the market, drawing up a business plan, then the important bit: "Go out and bully, cajole, bluff or outsmart the begrudgers who have status quo as a motto. ..

There were no prizes for guessing who or what represented the "status quo", as Ryanair and Aer Lingus engaged in turf wars that cost millions in advertising, coupled with a fierce, persistent downward pressure on fares.

Then there was the Ryanair Effect, i.e. "Ryanair's history of generating significant growth in annual passenger traffic on the new routes it has entered since 1991," according to its own flotation prospectus. But it might as easily describe the haemorrhage, human and financial, that lurked behind the hype. The swashbuckling, go for it airline of the people marketing style drew in the public as coconspirators in its pioneering days.

Its sparky advertising, with lines like "the airline that has nothing going for it", fostered the romantic image of a lean, feisty, little David up against a monolithic Goliath. The Goliath being the "fat, inefficient and complacent" Aer Lingus, "doing all it could to stifle competition from the newcomer", to quote the words of the Air Transport Users Committee.

A nation unaccustomed to the concept of worker participation was further charmed to hear that Ryanair had "donated" 10p shares, 10 per cent of its paid up share capital, to its employees, enabling it to coin irresistible advertising slogans such as: "Of course, we'll take care of you. We own the company." (They were subsequently bought back by the company at 10p each.)

But with the vast bulk of the ownership officially in the hands of the Ryan brothers, there was nothing romantic about the business. It was a hard nosed enterprise, fired with the zeal of the pioneer and fuelled with a calculator microchip.

Though Tony Ryan always denied that he controlled the company, a denial roundly disputed in the High Court by Eugene O'Neill (Liam Lonergan's replacement, who would himself be dismissed in 1988), the association with the man who ruled the vast GPA empire from the banks of the Shannon with Aer Lingus as a partner lent a seemingly invincible aura to the infant airline.

In fact there were times when it survived by a thread, at one stage coming within hours of collapse, according to an industry source. By 1991 losses had accrued at a headspinning rate to over £20 million. The Ryan family was obliged to inject £26 million to keep it aloft.

Meanwhile, the non unionised workforce was either being pruned drastically, manoeuvred into more concessions or forced to take massive pay cuts. Flight attendants already offering groundbreaking flexibility were put on average basic pay of £5,000 to £6,000 and worked a system under which two thirds of their income depended on the number of flights worked and the level of duty free sales. Pilots, threatened with 30 redundancies, were confronted with salary cuts of up to 37 per cent, about £6,000 a year, and uprooting to regional airports without any dislocation allowances.

Just to point up the topsy turvy nature of the aviation industry: within a few days of this report Eugene O'Neill's replacement, P.J. McGoldrick, was calling a press conference to announce that Ryanair was on the road to recovery and was introducing new services to London Stansted.

But by the end of the year, the bloodletting which had seen more than 15 senior company figures walk out the gates in a few years, culminated in McGoldrick's own departure to set up his own airline. Of the original senior management team, only the two Ryan brothers remained. Nothing romantic about that. But it weathered the storm.

BY THE time Michael O'Leary was promoted to chief executive in 1993, at the same time helping out with the baggage handling at weekends and taking to more casual workwear, the company was back in modest profit and the CEO along with the Ryans was in line for his historic bonuses. His model is the small US airline, Southwest, and its "Kelleher culture", inculcated by its chief executive, Herb Kelleher.

Anything goes on Southwest, apparently, as long as passengers can be amused and entertained, with rap music, fancy dress and announcements along the lines of "there are 50 ways to leave your lover, but only six exits from this aircraft". A touch of that rubs off on Ryanair, although not, alas, in the air.

But so frequent are the staff barbecues and parties that one employee says it's a bit like Latin America in there. On a day when staff were encouraged to come to work in fancy dress, Michael O'Leary arrived primped up as a schoolgirl. Personnel staff take pictures, with the result that the corridors are plastered with photographs of these fun days out.

Ryanair, a young, dynamic company and a fun place to work, is the message. "It is a fast paced environment and we do have to work very hard for our money," says one flight attendant on around £18,000 a year. "It's a case of the more you work, the more you earn. It's a fair bit more than I'd be getting with Aer Lingus and I'm happy with that.

Another, however, talks of the relentless drive over the years to work longer and harder "for the good of the company, always `for the good of the company', even down to cleaning the plane ourselves between flights, only to discover now that they've been making huge money all that time and on the blood and sweat of the staff".

Whether or not Herb Kelleher would approve of a system where a Coke is removed from a passenger who finds he hasn't the change to pay for it is moot. Probably the culture of watching the pennies is what leads to £17 million bonuses. But while baggage handlers are said to be enraged at news of the executive directors' bonuses, cabin crew seem to be taking a more balanced view.

"I feel Michael O'Leary earned it. He's been there a long time and has done a lot. My problem with him is that he doesn't seem to know when enough is enough, but overall, I know that without him. Ryanair probably wouldn't be here and I wouldn't have a job," says one.

It's small bonanza time for Ryanair staff as the company gears up for flotation. Cabin crew, for example, will get a bonus of £2,500 each, either to cash in (but not tax free) or to invest in company shares. They also have the option on a further £2,500 worth of shares if they can assemble the money. "I've nothing to lose by investing the bonus payment," says one, "and I think I'll take up the option as well".

But the same flight attendant also talks of a "deepseated fear element" within the company that precludes even the mention of a trade union of unreasonable, non negotiable deductions from their dutyfree commissions, which is after all a part of their salary; and of a sense that anyone with a reasonable gripe is met with the attitude "If you don't like it, you know where the door is.

Meanwhile, cabin crews are monitoring with interest reports that more than 20 recent baggage handling recruits immediately joined a union. And outside, among the travel agents who facilitate 75 per cent of Ryanair's ticket sales, there is also a palpable frustration with the sudden reduction in ticket commissions from 9 to 7 1/2 per cent."

"A 17 per cent drop in commission for us, and a £17 million bonus for them," says P.J. Brennan, of Portlaoise Travel, who is also ITAA president, acidly. Rumours of quiet concessions to the larger travel agents are not helping matters, although the real fear is that if Ryanair wins the battle, Aer Lingus will as before move in on its coat tails and start demanding savings of its own.

But Ryanair steams on, no longer the romantic little David figure, but with the public still firmly on side, lashing out £50 for a return trip to Paris, forget the frills and hope your Granny can negotiate the trek to the plane without a wheelchair.

While steam pours from travel agents' ears and they place plaintive advertisements headlined: "Remember when Ryanair was finding its feet?" and illustrated by an aggressive little plane resembling Jaws, the airline comes up with a characteristically cheeky riposte. A cuddly, smiling little plane floats above the question: "Remember when fares were sky high?"

The problem for the agents is: we do remember. And it still hurts business people in particular, as Joan Scales, chairwoman of the Irish Institute of Travel Management, points out. Want to travel to Newcastle? That will be £256, thank you, with Aer Lingus and you can take it or leave it because there is no Ryanair on the route. Need to travel to London on Monday and can only stay the day? That will be £270 if you travel Aer Lingus. And then there's Ryanair for £109.

The brash little bird is here to stay.

Kathy Sheridan

Kathy Sheridan

Kathy Sheridan, a contributor to The Irish Times, writes a weekly opinion column