Playing to the cheap seats

““Outspoken” and “controversial” are some of the kinder descriptions of Michael O’Leary over the years. Lately the boss of Ryanair has retreated somewhat from the spotlight. But as Elon Musk recently discovered, he is still up for a fight. After the world’s richest man called him an “idiot” for not installing his Starlink satellite Wi-Fi on the low-cost carrier’s planes, Mr O’Leary returned the insult, launched a “big idiot” sale and thanked Mr Musk, who threatened to buy Ryanair in retaliation, for “a bumper week of free PR”. Mr Musk, who is not a citizen of the EU, cannot buy the Irish airline. But if he could, it would be an excellent investment.

 

Over the past 30 years Mr O’Leary has built Ryanair from a tiny, barely profitable airline into one of the world’s most successful carriers. It is by far Europe’s largest, with a fleet of over 640 planes and a fifth of the continent’s capacity. In its latest quarterly results on January 26th it said that it expects to have carried 208m passengers in its financial year ending in April—roughly double EasyJet’s figure and triple that of Wizz Air, its main low-cost competitors. Its net margin is around 15%, compared with a worldwide average of just 4%. Since the beginning of 2023 its shares have risen by 130%, far outpacing the global industry (see chart).

 

Like Mr Musk, who didn’t invent the electric car but revolutionised the way it is made, Mr O’Leary borrowed the low-cost model from America’s Southwest Airlines but perfected it to keep fares as low as possible. It is not just that Ryanair treats passengers as self-loading cargo. It uses cheaper, less popular airports, operates a single type of plane (the Boeing 737) to keep maintenance and pilot-training costs down, and keeps those planes full and flying for as much time as it can. It is this “laser-like focus on costs” that is the basis of its success, notes Keith McMullan of Aviation Strategy, a consultancy.

 

Unlike Mr Musk, who is distracted from carmaking by autonomous taxis and humanoid robots, among other things, Mr O’Leary has stuck closely to his formula. European aviation has a “deserved” reputation for being “value destructive”, notes Bernstein, a broker. Ryanair stands apart. Mr Musk sought to disparage Mr O’Leary by labelling him an “accountant”. But the Irishman’s bean-counting past has helped his airline thrive in an industry with more than its fair share of “dreamers”, says Andrew Charlton of Aviation Advocacy, another consultancy.

 

For his part, Mr O’Leary has declared that he is “not an aerosexual” seduced by the supposed glamour of the industry, adding that he does not particularly like planes. Indeed, Ryanair is deeply conservative. It sells one product: a seat on a plane. Although it now serves parts of the Middle East and North Africa, half its seats still depart from three countries—Britain, Italy and Spain. Passengers not only do not get Wi-Fi, but must also do without phone charging or seats that recline. And yet it also remains nimble, despite its size. Planes are swiftly reallocated to routes where returns are highest, fostering competition among the airports it serves or that wish to attract it. Capacity at several regional airports in Spain will be slashed this year in a disagreement over rising fees.

 

The low-cost airline has also been quick to take advantage of weakened competition. The collapse in 2021 of Alitalia, Italy’s national carrier, has allowed Ryanair to take a 40% share of the domestic market. It also moved in smartly to Sweden and Denmark to exploit the post-pandemic weakness of sas, a Scandinavian rival. “If a competitor is bleeding, stick the knife in,” is the Ryanair way, according to Alex Irving of Bernstein.

 

Scale gives Ryanair clout with suppliers. A healthy balance-sheet—it has some €1bn ($1.2bn) in cash and hopes to be debt-free by May—has helped it weather storms. Keeping most of its pilots and staff during the pandemic while others laid people off enabled it to rapidly take advantage of the rebound in air travel. Its financial strength has helped it buy planes on the cheap, including at times when Boeing was desperate for orders.

 

These days Mr O’Leary is less inclined to seek publicity by, say, dressing as a leprechaun or claiming that he wants to introduce standing tickets and charge for using the plane’s toilet. But his confrontational ways have served Ryanair’s shareholders well. He has engaged in wars of words with his pilots over pay and conditions; fought court battles with online travel agents to keep ticket sales on Ryanair’s own website; and engaged in regular diatribes against European politicians, including recently accusing them of “mad, illegal” proposals to make carry-on luggage free.

 

Ryanair’s remarkable ascent shows no sign of stopping. A giant order for up to 300 larger, more fuel-efficient versions of Boeing’s 737 max, which should start to arrive in 2027, will further reduce costs and propel the airline towards its goal of shifting 300m passengers a year by 2034. Mr O’Leary recently said that he might remain boss until the mid-2030s. In the meantime, it is unlikely that Mr Musk, or anyone else, will unseat him.” [1]

 

1. Playing to the cheap seats. The Economist; London Vol. 458, Iss. 9484,  (Jan 31, 2026): 58, 59.