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Cheap Air Travel is Over, Eye Watering CEO Bonus Stays

Cheap Air Travel is Over, Eye Watering CEO Bonus Stays

By Mike Hamilton

Much has been said about Ryanair CEO Michael O’Leary and his brazen attitude towards customers and staff, regularly sacrificing the interests of both in the relentless pursuit of profit. The no frills concept of cheap airline travel is taken to the extreme under his regime where the smallest of comforts is an extra €2and don’t forget to buy your scratch cards.

One of the effects of the Covid-19 pandemic has been grounding the entire fleet of aircraft across the majority of providers with no certainty as to when they can recommence operations. O’Leary hasn’t let the fact that Ryanair is no different put him off though. In his usual brash manor, he publicly announced he would be running almost 1,000 flights a day, 40%, from 1stJuly and restoring 70-80% of routes by September.

Throwing caution to the wind he is quite happy to put the safety of staff and passengers at risk in order to resume profit making. This is on top of his rant against the governments social distancing guidance which he described as “nonsense”.

This is all quite effective as in PR terms column inches, good or bad, is free advertising. It also puts pressure on the government to either start lifting restrictions or cough up large sums of cash to keep the industry afloat. While also creating a narrative that people have been locked up and are dying (most literally) to jet off on holidays as soon as possible. When this is repeated often enough, people start to believe that’s what they actually want and making O’Leary into some sort of hero supposedly speaking up for ordinary people. If it works, great, profit making can resume and if it doesn’t he can blame the government for their “draconian” measures and rinse and repeat the above strategy.

Of course, a 99,000,000 bonus scheme is quite an incentive on top of a salary of €3.38 million or €9,260 a day. The 99m euro bonus was just about approved by 50.5% of shareholders in 2019 among an unprecedented backlash. Despite this it scraped through as it was pointed out that it could potentially double their own share value if the associated targets were met. With O’Leary being a shareholder worth €865m its time to put the pencil and paper down and bring in those famous tax efficiency consultants that are so loved throughout the land, O’Leary himself previously being one.

The company which brings in an annual revenue of €7.6 billion has a problem though. Not just its renegade CEO, its lack of customer service or its horrendous industrial relations but its business model itself. Low fares are not just achieved by staff productivity, standardisation of aircraft, bulk buying spares or using secondary airports. It relies on state aid from governments and local authorities through direct payments or tax exemptions. Airports funded by municipal and regional taxpayers provide so many subsidies and free services that the net cash flow is usually all in Ryanair’s direction.

Some airports can barely afford these subventions. At Bergerac Ryanair gained €2.3 million worth of subsidy from an airport which itself needed annual local government subsidies of €500,000 to stave off bankruptcy. Angoulême Airport paid Ryanair €1 million but it was hit by a final hour demand for a further €175,000. The alternative to paying up was an overnight pull-out. Other European airports have reported similar tactics as Ryanair seeks not just to continue subsidies but to increase them.

When Manchester Airport’s subsidised arrangements ended, its chief executive said he would not “prostitute” himself any further. O’Leary immediately decamped to nearby Leeds-Bradford, where subsidies were available. Shannon airport discovered to its cost that even when they offered a pay-per-passenger deal Ryanair failed to deliver. They promised they would bring in 2 million passengers who would spend money in the airport shops, restaurants and bars. No further contracts were offered as only Ryanair benefit to the cost of the airport and the taxpayer who fund them.

Efforts to limit subsidy shopping by Ryanair were dealt a blow in 2008 when Ryanair won an appeal against an EU Commission decision that the generous subsidies it enjoyed at Charleroi were illegal. The airline insists that this means all its other subsidised services are, by default, also legal, but Commission insiders advise caution. They suggest that the Charleroi decision was thrown out for serious procedural errors not the righteousness of Ryanair’s subsidy demands.

With Ryanair now cutting 3,000 of its 20,000 jobs the time has come to look at alternatives. The era of cheap air travel is over. Its model of low cost, high demand has proved to be unsustainable and costly to everyone except its CEO and shareholders. What passengers save in air fares they pay out in baggage charges or onboard food and drinks. The threat to the planet is urgently needing addressed and the less jet engine produced carbon the better. It’s time to stop propping up capitalism and nationalise, nationalise, nationalise.

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