Ryan Air share price soars as its leader ‘gets cuddly’

Ryan Air and Easy Jet are considered innovative and successful low-cost airlines. This week, [July 28th 2015] commentators were quick to point to the excellent financial results and growth figures from Ryan Air, and to compare them with the relatively modest progress made by Easy Jet over the same period

Ryan Air and Easy Jet are of similar scale, and are regional rather than global players. Each is widely regarded as concentrating on a low-cost strategy, Ryan Air fiercely so. Both aspire to the achievements of the celebrated Southwest Airlines.

However, comparisons between the two European carriers and their leaders should be made with care.

Until recently, Ryan Air was less convincing in its claims to be similar to Southwest. In part, this was because of the strategy of its flamboyant CEO Michael O’ Leary who gleefully exploited his image as a costs-before-everything scallywag, reveling in customer discomforts. He claimed that negative news stories resulted in greater passenger numbers. Southwest saw customer satisfaction as central to its business model.

It pays to be nice

In 2013, O’Leary appeared to have accepted that a new leadership approach was needed. He admitted that his belief that ‘all publicity is good publicity’ had been at least somewhat misguided. In future, his staff would be encouraged to develop more customer-friendly practices.

As the new financial figures emerged, The Irish Examiner [Tuesday, July 28, 2015] noted of the Irish airline:

It pays to be nice. That maxim is partly responsible for Ryanair’s whopping profit of €245 million in the first quarter of the airline’s financial year. Having undergone a road to Damascus conversion to Mr Nice Guy from being a confrontational figure, the low fares airline boss Michael O’Leary cites “enhanced customer experience” as one of the key ingredients of the 25% profit leap.

With passenger numbers up by 16% to 28m, it is a performance any airline would envy. While the new “friendly” brand of customer relations is undoubtedly an important ingredient, it is only part of the story. Its [continued] low-fare policy is the real key to this high-flying story.

Easy Jet was closer to Southwest

Easy Jet had been progressing well under tough trading conditions under its less flamboyant leader Caroline McCall. Around the time O’Leary was ‘turning cuddly’, McCall was making it clear that she rejected comparisons with Ryan Air.

She was speaking on a round of the broadcast media [Nov 19th 2013]. Her explanation was that the company had retained its budget value for money while enhancing its customer-friendly reputation and attracting business traffic (although she did not use the old term ‘business class’).

EasyJet’s success early was due to the problems of the ‘legacy lines’ which have reduced routes, allowing its rivals to fill the gaps.
The interviewer wanted her to ‘compare and contrast’ with ‘rival’ firm Ryanair. McCall firmly but non-aggressively rejected the implication. She did not see Ryanair as the most direct market competitor. These are the ‘legacy’ national airlines (British Airways as was; Lufthansa) as they compete on “the routes people like to travel on.” A remark aimed at the tortuous journeys needed for holiday makers attracted by Ryan Air’s low price deals.

McCall appears to have a tougher set of problems internally than O’ Leary

Her major and highly active major shareholder is EasyJet founder Sir Stelios Haji-Ioannou. Sir Stelios is particularly critical of excessive executive remuneration packages, although McCann has fought her corner well.

Leadership workshop discussion

Based on reported evidence, how would you describe the leadership styles of Michael O Leary and Caroline McCall?

What dilemmas might be facing the leaders?

What evidence is there of culture changes taking place in the two organisations?

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