Daniel Balthazar: Our next speaker brings a distinctive approach to culture. Michael O'Leary is the group CEO of Ryanair and previously served as CEO of the airline. He transformed a struggling airline through a low-cost model. Today, it is Europe's largest and one of the most profitable airlines. His approach: a relentless focus on cost and execution. The result: a culture of extreme efficiency and an airline that has made travel affordable for millions. Daniel Balthazar, co-chief investment officer of Active Strategies, will explore how he did this. Please welcome Michael and Daniel.

Michael O'Leary: Morning.

Daniel Balthazar: Morning. Michael, warm welcome to our conference.

Michael O'Leary: Thank you very much. Great pleasure to be here.

Daniel Balthazar: We met in this office a couple of years ago for an investor meeting.

Michael O'Leary: We did.

Daniel Balthazar: After that, I received a letter from you thanking me for the meeting, which made me feel really, really special. Never happened to me in my 25 years of doing this. What does that tell me about you and Ryanair?

Michael O'Leary: Well, firstly, it tells me you didn't buy enough of our stock after that meeting, which is why I had to do the follow-up letter to encourage you to buy more. Um, and, and we have a cost focus as well. We like to buy low.

Daniel Balthazar: No, you there's never been a better opportunity. Stock is down about 25%.

Michael O'Leary: Just don't tell anybody because we're buying it as fast as we can at the moment, and I don't want to be competing with anybody else in the room.

How does that translate into how 25,000 people behave every single day? I get very nervous at these culture simulacra meetings and da da da. I am skeptical when we do all the cultural stuff. I respect David but you know I don't want to be running a company that survives 300 years and for 55 generations. We want to make money for the next 5-10 years. Uh and if we do that there's a reasonable prospect we'll survive 15-20 years. But ultimately somebody's going to come along and reinvent the wheel. I don't think Nokia failed by the way because you know the man the management were arrogant or there was a culture of fear in Nokia. Nokia failed because fundamentally the iPhone came along and totally transformed the technology and that beevils all of us. What keeps me awake at night? Star Trek. Uh because it doesn't matter how bloody cheap my fairs are going to be. And when it comes to flying in Europe, no one's going to beat Ryan Price ever. But somebody sometime is going to invent some way of beaming people across Europe. Uh although the European Commission will probably find some way to tax it uh for some environmental cause but ultimately we will get uh the technology or some sort of transform of technology will come along and it doesn't matter how good our culture was or how good our cost base was. We're going to get blown out of the water until that time comes. Our culture is uh we kind of we do not and I I kind of shout and rant and rave at everybody. We're not interested in explaining our culture. Our culture is we want to deliver the lowest fair most on time flights and we'll do it by having the lowest cost bar nobody in the industry and we will keep transforming our cost base. We lead the airline industry across the world. We were the first people to uh buy get rid of travel agents. You know, when the internet came along because we'd been paying 20% for distribution for, you know, 15 years in an industry that had a 1% margin. Why the hell were you paying 20% to mom and pop travel agents? Internet came along, we were out the door, banned the travel agents that were gone. Um, we were the first people 15 years ago to charge for bags. And as you know, as it says in the good Bible, Moses came down from the mountaintop and the fourth commandment is thou shalt be entitled to bring free bags on board aircraft forever more. Um, but by charging for bags, we went from 80% of passengers on our flights uh bringing a bag on a a stay duration of one and a of 2.5 days to 20% of passengers today now bring a bag in which means not alone have we gotten rid of huge amounts of labor at our airports. And again, I slightly disagree with David. I want to treat people well, but ultimately I want to get rid of as many people as I can within the business. Uh, but and the ones who remain I'll treat well. Um, pilots, for example, you know, are egregiously expensive employees. By law, they can't fly more than 800 hours a year, which is 18 hours a week, which I think is ridiculously unproductive. And for that, I pay them about a quarter million uh each. So, but technology will in time come along. you know, if the US military can fly drones or fly you know aircraft across pilots will ultimately get competed out of the system. I want to treat my pilots very well. I want to treat my camera crew very well, but at the back I also want to find some way of finding a technology that'll replace them all. And then the cost of flying across Europe, even with the European eur EU's environmental taxes and ridiculous regulation will become even cheaper than it ever has before. So our focus and our culture is all about make it cheap, make it on time. After that, go away. You're not getting anything else. And then be viciously obsessively focused on how do we make it cheaper, cheaper, cheaper by constantly reinvesting the reinventing the system and fundamentally changing customer behavior. Charging for bags was one of the greatest initiatives we've ever come up with. And not because and everybody's obsessed with, oh, I we just want the money. I would happily give away the money ultimately to shareholders, but give away the money if I can get rid of the last 20% of bags. I would have no uh check-in staff. I'd have no baggage handling staff. I'd have no lost baggage staff. The aircraft fly about 3% lighter, which reduces my fuel consumption. My fuel bills about 5 billion a year. Uh, so the hidden benefits of getting rid of checked in bloody bags is that we're consuming less fuel. And with jet oil today at about $157 a barrel, anything I can do to get out that kind of those kind of costs, we will do. And that's why we are the most profitable airline in the world. We are certainly the biggest international airline in the world. And yet we plan to grow in size from 200 million passengers last year to 300 million passengers in the next 8 years by ordering 300 by order taking delivery of 300 new aircraft which from Boeing the Max 10 aircraft which are 20% bigger in terms of seats but they burn 20% less fuel per seat. I am going to transform my economics for the next uh 10 years with this new technology. Uh, and but and they'll be flown by the same two pilots, the same four or five cabin crew. Uh, which should make us hugely lower cost, widen the price advantage I have over every other airline in Europe, and I'm going to blow them all up and own the industry until somebody in a back bedroom somewhere invents some way of beaming people across Europe, and then I'm screwed.

Excellent. You operate in a hypercompetitive industry.

Are you competitive industry? Hyper competitive? Is it Europe? No, they're all useless. Government-owned, heavily regulated, hugely government subsidized. All the legacies are running around at the moment trying to get bailouts. God bless the Republicans in the United States. They're now about to bail out two of the most bankrupt airlines, Spirit and JetBlue, who should have been allowed to go to the wall many years ago. So, no, it's not a hyperco competitive industry. It's a very badly regulated industry. uh it is government-owned which is why it it is inefficient uh hugely expensive and inefficient in Europe. So all I have to be is modestly competitive to be better than the rest of the competition in Europe but that's not setting the bar very high.

Amazing.

Most people though most employees they don't like an over focus on cost. How do you keep them motivated?

Fear, terror, stalking the corridors late at night. Um we don't I mean you know the great thing about Rhiner is we've been doing it this way for 30 years. So you know we hire about 50 graduates every year. Um we hire people who want to work hard. We try to set an example there. It is a very slim kind of man. There is only three layers of management between somebody on the front line and me. Um and therefore we keep it very flat. But the advantage we have is we're a single you know we're a one goof kind of operation. It's only an airline. All we have to sell is a seat. So we don't need complexity. We avoid M&A. We don't get involved in, you know, buying hotels or buying airports or buying whatever else it is. We buy aircraft hopefully at times of distress when Boeing or Airbus needs orders and then all we do is sell seats all day long. So we don't need a lot of complicated management and then but we are very good because I think we have a very flat management structure. We're very good at pouncing on new initiatives as they come along. And the great advantage of being the great strength of Ryan Air is we're not very much beloved. We finished last in almost every passenger survey. We have never won there's a there's an award in Ireland for the Irish Travel Agents Association uh which there's only two airlines in Ireland. Airlingers have won those awards which is the ex state airline. He lingers have won the travel agent airline of the year award for 30 years in a row. I have promised that we will I will quit if we ever win that award. Um, so, but the advantage of this, sorry I just the advantage of not being overly sensitive about my reputation or our image or being culturally popular is we're ruthlessly low cost and that gives us huge freedom to chase those kind of costsaving measures or to reinvent the way we uh the way we drive the airlines and then ultimately all the other morons will follow us along. I mean, the American airlines have just discovered charging for bags 15-20 years after we started doing it. Now they're trying to make it do it as a way of gen gaining revenue whereas we did it not as a way of generating revenue but as a way of eliminating cost.

It's fascinating because most of the CEOs we talk to they talk about more customer centricity keep the customer heck put the customer in the center of everything. Yet you're doing the opposite but win.

But that's because we have an enormous price advantage over everybody else. customers ultimately in every survey. Oh, I wish they were nicer. I want a refund of a non-refund. What part of no refund don't you understand? I don't care if your granny died or you know your cat was ill and you couldn't travel on the day. It was a non-refundable fair. Now I want you to fly because I can sell you about €6 of ancillary revenues on board my aircraft. But I'm 216 million and we appear occasionally we it happens even to us. We occasionally mismanage situations. We get a huge amount of adverse publicity and what I notice every time we get a lot of adverse publicity is bookings go up. Elon Musk who I have never met uh never had any interaction with it. We had this issue. We were trying to put Wi-Fi on board our aircraft uh at the start of the year. I think Wi-Fi free Wi-Fi on board aircraft is coming. The problem at the moment is technology doesn't yet exist. We have to put a couple of dimples on the outside of the aircraft. It would be about a 2% fuel drag and my fuel bill is 5 billion a year. or 2% fuel drag is something of the order about a hundred million and I'm not paying 100 million to put free Wi-Fi on board for my passengers. Uh Starlink which is a terrific technology. I have no issue with the staring technology. Starling believe passengers will pay you12 you know and it'll pay for itself. Uh clearly they've never met any ran air passengers. Um because that by the time we've gone up and down the cabin selling them teas, coffee, scratch cards and anything else we can kind of think to sell them. we don't have time to be running up and down taking one euro transactions any so I happen to say look Stern is great but you know the system doesn't work uh we're not taking a fuel penalty of 100 million a year because that would be you know 50 cents on every ticket and he uh someone told Elon Musk that I'd slagged off Starling so he popped up something on his internet feed going who is this wanker in Ryanire who's this Ryanire gobshite he's clearly an idiot he knows nothing about flying so I pop back who is this Egypt in uh Twitter running that cesspace that is Twitter having a pop off me. I'm correct. It does have a fuel drag. Uh he says it doesn't have a fuel drag. And then he says, "I know nothing about avionics," which is probably true. I know very little about avionics, but he knows nothing about flying lowcost airlines either. He then ran a poll on his Twitter ex I don't have a Twitter site, by the way. Thankfully, I have better things to do with my life, but he ran a poll at his 1.5. Should I buy Ryan Air? We politely pointed out you're American, therefore you can't buy a Ryionaire. We're European and you have to be more than 50%. You won't. And next thing it exploded during the second week of January, which is one of the quietest weeks for bookings in uh in Europe. And my bookings just took off. Next thing we're running around, how do we manif how do we manif? So, we ran a big idiot seat sale. We got AI to come up with some ads of me smacking him over the head with some and him choking me da da da. And we manufactured about $30 million of free publicity. I was holding a press conference in Dublin back in January to do my kind of usual this summer. We'll do 25 droos. They took the press conference live on Sky CBC went live to this Egypt in Dublin talking desperately trying to make some news about how Elon Musk is wrong. We got about 30 million free publicity out of it and bookings for about 6 weeks went up by about 3 percentage points.

Did you send him a thank you letter?

Pardon me.

Did you send Elon Musk a thank you?

No, actually we sent him a free voucher for a free Ryan flight round to the Twitter the Twitter offices in Dublin. and got a photograph of me handing in the free ride voucher. He hasn't claimed it yet, but I hope he will at some point in time in the not too distant future. So, one of the other things we do is we will jump on any bit of cheap publicity we can uh because cheap publicity uh in our business where you have such a price advantage drives enormous sales and enormous bookings. And so as long as it doesn't revolve around safety, if you know, and I remember Trump getting elected the first time said if he murdered somebody on Fifth Avenue that he'd still get elected. And we were thinking, well, maybe if we murdered somebody on Fifth Avenue, would it drive bookings up on Ryan Air? We thought, no, that was probably pushing the envelope a little bit too far. But other than that, if it doesn't involve safety, we're up for any bit of cheap publicity we can get.

Okay, so to summarize, a cost focus, free marketing, and an incredible sense of humor definitely created a winning culture. Thank you very much, Michael. Please join me with a huge round. Thank you very much.