Does Ryanair’s Michael O’Leary deserve that €100m bonus?

If all goes well, Ryanair boss Michael O’Leary could snag a €100 million bonus in 2024. And while I can’t quite believe I’m saying this, on balance I think he deserves it.

While he’s built Europe’s biggest airline based on passengers carried, and democratised travel by making flights much cheaper, his attitude to customers, employees and the environment has in the past ranged from dismissive to demeaning. Moreover, I’m generally opposed to big rewards going to executives simply for doing their jobs.

It’s been another eventful year for Ryanair and its chief provocateur. The company ordered 300 Boeing 737 Max 10 jets to further its goal of increasing the number of passengers it carries annually by almost 80 per cent, to 300 million in the coming decade. As usual, O’Leary was rarely out of the headlines, whether for castigating French air traffic control staff for always being on strike or getting a cream cake in the face from climate protesters in Brussels. (“Delicious!” he said.)

Even if Ryanair doesn’t quite reach the profit threshold, O’Leary could bag his bonus anyway next year

Thanks to our collective post-Covid wanderlust, the budget carrier is on track to achieve a record annual profit, allowing it to pay a regular dividend for the first time. It’s also in touching distance of the €2.2 billion of net earnings that O’Leary needs to deliver to secure his giant payout.

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Even if Ryanair doesn’t quite reach the profit threshold, O’Leary could bag his bonus anyway next year. Ryanair is the second-best performer on the 28-member Bloomberg World Airlines Index this year after LatAm Airlines, up 53 per cent to put its shares not far below the €21 hurdle that would also allow his share options to vest. (He’ll need to remain a Ryanair employee until 2028 to receive the money and the final amount depends on what happens to the stock.)

To be clear, I don’t think anyone deserves an outsize bonus for meeting arbitrary financial goals. This type of pay plan can end up rewarding managers for events beyond their control, such as the capacity constraints that have boosted European airfares this year. O’Leary owns 4 per cent of Ryanair already and thus has all the motivation he needs. Nor does he need more money to fund his horse racing and livestock pursuits — his Ryanair stake is worth about €800 million.

Still, you’ll struggle to find a manager who has had more of an impact on ordinary people’s lives over the past three decades than O’Leary, who was appointed Ryanair chief executive in 1994.

Indeed, he’s arguably been one of the most successful European bosses of modern times, having transformed flying in the same way Inditex founder Amancio Ortega democratised fashion with Zara.

I feel deeply uncomfortable writing those words. After all, Ryanair’s success is partly built on being needlessly unpleasant to customers, extracting fees for stuff that should be free, flying passengers to airports miles away from where they needed to get to and burning planet-heating hydrocarbons.

O’Leary declined to be interviewed for this article.

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He pinched the low-cost, no-frills airline model from the late Southwest co-founder Herb Kelleher, whom the young Irish tax accountant visited in Dallas in 1992 to find a way for Ryanair to make money. Until then, O’Leary thought the best way to fix Tony Ryan’s fledging airline was to shut it down. A booze-fuelled dinner with Kelleher convinced him otherwise.

In execution terms, O’Leary has been astonishingly effective. Ryanair was able to increase the number of daily flights by turning planes around faster and by ruthlessly cutting costs it filled up cabins with passengers keen on its lower fares. Most of its planes arrive punctually and it has an excellent safety record.

While he doesn’t suffer fools gladly, O’Leary also knows how to turn on the charm, and his humorous, straight-talking patter is refreshing at a time when many chief executives are too afraid to say what they mean. Outrageous provocations — such as floating the idea of charging to use cabin toilets, taxing overweight passengers or making customers stand on board — have provided Ryanair with gallons of free publicity over the years (none of these suggestions were implemented, of course).

To be sure, there have been plenty of screw-ups along the way, such as a pilot-rostering crisis and fraught labour relations

Even frequent targets of O’Leary’s ire have reason to admire his achievements. Rivals have embraced many of Ryanair’s annoying charging practices and he’s done more for Brussels bureaucrats’ goal of European Union integration than practically anyone — before Ryanair, the idea of ordinary folks flitting around the continent for work, leisure or visiting family was unthinkably expensive.

To be sure, there have been plenty of screw-ups along the way, such as a pilot-rostering crisis and fraught labour relations. It took O’Leary far too long to recognise that being nicer to customers — rather than hauling them out of a queue to ensure their cabin bag wasn’t a centimetre too tall — might help Ryanair to grow faster.

For now, though, the company is mostly sitting pretty. Ryanair didn’t ask taxpayers for a bailout during the pandemic and is now one of the few European airlines to have comfortably exceeded pre-Covid capacity levels.

Ryanair’s fleet is almost entirely supplied by Boeing, meaning it isn’t troubled by the engine troubles affecting Airbus A320neo jets.

These capacity constraints meant Ryanair was able to hike average fares by 24 per cent to €58 in the six months through September 30th, with the airline earning an additional €24 of ancillary revenue per passenger for things like speedy boarding and seat selection.

Though O’Leary has acknowledged that the era of ultra low-cost flying is over, most of the time Ryanair still offers one of the cheapest available tickets.

Ryanair’s absolute emissions have continued to grow as it keeps adding more flights. For some people, this alone discredits everything Ryanair has achieved

There is one large fly in the ointment: Ryanair’s pollution record. For years, O’Leary called climate change “rubbish” or complained airlines were disproportionately criticised because they only account for about 2 per cent of global emissions.

Lately, he’s embraced the ESG [environmental, social and governance] crowd, dubbing Ryanair “Europe’s greenest airline” due to its new fuel-efficient planes and ability to pack more passengers into its single-class jets than rivals with capacious business cabins.

This conveniently ignores the fact that Ryanair’s absolute emissions have continued to grow as it keeps adding more flights. For some people, this alone discredits everything Ryanair has achieved.

But the almost 170 million passengers who flew Ryanair last year clearly think otherwise. O’Leary might be offensive; but a big bonus for a 30-year tenure that transformed European travel and society isn’t. --Bloomberg