Europe: March 2006 Archives

Refreshingly honest is the only way to describe Aer Arann chairman Padraig O'Ceidigh. "What you see is what you get with us," he says, addressing the Airline Business/UATP Airline Distribution conference here in Dublin yesterday (29 March). What you do get is one of Europe's fastest growing regional airlines which O'Ceidigh's team has turned around from a small Irish island-hopper back in 1994 to a business than will turn revenues of some Euro100 million this year.

And there are no flash powerpoints or consultant plans to woo the audience on Aer Arann's great strategy to achieve this feat. "Our model was put together on the back of an envelope," he said. "If you'd told me 10 years ago we are going to have an airline that is European regional airline of the year I would have said we're not going to get there. But we have done it, one step at a time. One of the key fundamentals I had was to keep it as simple as we possibly could."

The transformation has been achieved largely by going from being totally dependent on selling its tickets via the Aer Lingus distribution system to direct sales. It was a move forced on it after the market crisis following 9/11. "In 2001 I realised all our cash is with Aer Lingus - it's not with us." In a downturn that spelt bad news for Aer Arann. "You've got a problem when suppliers start looking for upfront cash and your cash is with another carrier."

"We'd hit a wall, our money was being drained from us. We decided on a radical change - to be standalone. It was a big risk but we made a bold call and decided to be a point-to-point regional airline." It has not been an easy ride, said O'Ceidigh. For two years he didn't take any salary out of the company.

But the leap of faith has worked. Aer Arann now sells 92% of its tickets directly, compared to 15% four years ago. It sold just 8,000 seats on its old interline arrangements last year. With its fleet of 12 ATR turboprops it carried 1 million passengers in 2005. This will rise to some 1.3 million passengers this year, he said.

Aer Arann's achievement is all the more impressive because it has taken place in the backyard of two of the industry's most competitive carriers: Aer Lingus and Ryanair. So what of the future: "All I can tell you is we're going to do our best," said O'Ceidigh.

With all the recent hullabaloo about Ryanair, following a UK television programme in mid-February about safety lapses, there can only be one way to find out the real truth behind what really goes on during a flight with the Irish low-fares giant - try it yourself.

That's what I have just done for the first time as I travelled over to Dublin this afternoon to attend the Airline Business/UATP Airline Distribution conference. I must say I am disappointed, for Ryanair's product and service did just about exactly what it claims on the tin (to paraphrase a UK commercial for Do-It-Yourself products).

It was cheap: the London Gatwick-Dublin return cost a mere ｣57.10, with only ｣23 of that attributable to the actual airfare. Some ｣30 of taxes gobbled up most of my money.

It was on-time to the minute. In fact, I timed the turnaround at Gatwick, which was an impressive 31 minutes from the Boeing 737 stopping at the gate to the departure for Dublin. It only took this long because of refuelling, we passengers were all settled and ready well before.

There were no-frills, but that is to be expected with Ryanair.

And on the safety and security side it all seemed to go like clockwork. All passports were checked properly, all procedures were followed to the letter.

My only gripe is that it was almost a non-experience. The staff could have been robots they were so disinterested and perfunctory about their task. This is the one area that Ryanair could do better - some simple warmth, a smile, some interest in the customer costs nothing and generates plenty of brand loyalty.

But I did get value for money didn't I, so I can hardly complain. Which is just what a Ryanair executive would say.

I've got another flight on thursday with Ryanair when I go home. I suspect the truth will be much the same. We'll see.

It is perhaps rather appropriate that chief financial officers (CFO) are generally pretty somber chaps. I mean who wants a bean-counter that's cracking the funnies when there's the fuel hedging programme or the latest yield figures to discuss?
So, the assembled German media (plus the odd interloper from the airline press corps) were initially baffled and then pleased to hear the personal observations of Dr Karl-Ludwig Kley (seen left at the press conference with Wolfgang Mayrhuber), CFO of Frankfurt-based Deutsche Lufthansa AG, at the aviation giant's annual press conference on Thursday 23 March. The normally dour Kley (although I am told he has a wicked sense of humour when off-duty) allowed himself this liberty as, after all, he is leaving. "I have mixed feelings standing here," he said wistfully, addressing the packed house of reporters. "A little bit of me will remain here at Lufthansa."

He didn't elaborate which bit, but certainly not his ambition, which is hopefully going to be satisfied with the deputy chief executive's job (and perhaps later the top job) at German pharmaceutical conglomerate Merck.
"Lufthansa is a fantastic company, it has fantastic products…and a management team that is the envy of others," grinned Kley, who has been with the carrier over eight years. That team has stuck it out through thick and thin. "The executive board has always held together and never had any disagreements on strategic matters," he said. What never? Come on.
But being the CFO of Lufthansa is naturally a 24-hour job. "I can't remember any day when I was able to sit back and relax - in particular the past 12 months has been very challenging." As I consult the 141-page annual the small matter of a pay check for Euro 475,000 ($570,000) and last year's bonus of Euro 385,500 is his not ungenerous yearly compensation for all this hard work.
Kley, who is being replaced as CFO by insider and rising star Stephan Gemkow (latterly of Lufthansa Cargo's executive board and seen below), says the company has "reached new heights and will continue to climb".

Somewhat needlessly he added: "I will remain a customer of yours," with a nod to his soon-to-be-former boss and executive board chairman Wolfgang Mayrhuber. Well that was nice to hear, and I imagine Merck has a nice juicy corporate deal with Lufthansa too so that Kley can still enjoy plenty of upgrades to first class.
Mayrhuber was taking this all very well. I mean who likes their CFO to hand in his cards just a few weeks before the main financial event in the calendar? But Mr Mayrhuber is nothing if not an absolute gentleman and a professional. "Dr Kley was a very spontaneous and imaginative colleague…we could rely on him…and his work has always been excellent," he said, paying tribute to his outgoing finance guru.
Now, what else? Oh yes, a little about that work. In 2005, Lufthansa Group revenue rose by 6.5%, operating profits grew by 50.7% and net profits climbed by 12.1%. But that's another story.

Ryanair boss Michael O'Leary was a happy man on Friday 16th March (quite appropriately St Patrick's Day) as his horse War of Attrition won the prestigious Cheltenham Gold Cup in one of the UK's richest races.

O'Leary says he was given the horse by his brother Eddie four years ago and it has gradually been improving since then, culminating in its scorching performance in the Gold Cup. A delighted O'Leary also commented on the horse's apt moniker 'War of Attrition': "He's well-named - like his owner, always causing trouble!"

The Cheltenham Racing Festival, which takes place over four days in the south-west of England, will prove to be a winner for O'Leary in another way for his airline will have carried hundreds of Irish racing fans over the Irish Sea to the meeting. It is no surprise to see Ryanair dedicating a special page on its website for racegoers.