Ryanair: How The Bad Guy Won

A cheap flight… that ends up feeling expensive. This episode: how Ryanair and Michael O'Leary perfected drip pricing and made billions doing it. Removing olives, lukewarm off-brand soft drinks, expensive wheelchair hire… and the hardest two truths and a lie segment yet. 0:00 Intro 5:05 Two Truths & A Lie 7:10 The Industry That Counts Olives 11:00 Enter The Accountant 16:10 The Southwest Effect 21:55 O'Leary Takes The Controls 28:02 Since When Is A Wheelchair A Frill? 35:52 The Charge Sheet - And Why It Works 41:05 The Point Hosted on Acast. See acast.com/privacy for more information.

• 0:00Speaker 00

  Last episode, I told you to stow your tray table and fasten your seatbelt because we're heading somewhere stupid. Well, here we are, the stupid place. It's the world of super low cost airfares and drip pricing. And there's a champion, Irish airline, Ryanair. That's the business we're going to start off talking about. But as usual, we're going to end up talking about why a messed up economic system works on us. Welcome to How We Got Here. I'm Chris Cole and I'm joined as always by my excellent producer, Rob. Hello.

• 0:33Speaker 01

  Hello, Chris. How are we?

• 0:35Speaker 00

  I'm good. We're talking about super low cost airfares and drip pricing. I mean, have you ever been in that zone before?

• 0:40Speaker 01

  I have been in that zone before. Let me take you back to 2017. The Socceroos, Australia, were playing Honduras to qualify for the World Cup. It's a World Cup year, so it's a whole new story. Traveled up to Sydney to watch the game and certain low cost budget airline, which I won't name.

• 0:57Speaker 00

  Feel free to.

• 0:58Speaker 01

  Jetstar. We had booked the last plane out that night from Sydney. Now, for our international viewers, the current Sydney airport has a curfew on it because in the middle of the city and I think it's like 11 o'clock, the last flight can go out or 10 minutes or something. Anyway, the flight got cancelled. So what happens? You're stuck. They wouldn't set it up for a hotel. They wouldn't refund us and we slept the night in the airport. But the important thing was the Socceroos won.

• 1:26Speaker 00

  Oh, the Socceroos won. It was worth it, but you had to sleep in the airport.

• 1:29Speaker 01

  Yeah.

• 1:30Speaker 00

  Mate, this episode is going to bring back all kinds of memories to you.

• 1:33Speaker 01

  Yes.

• 1:34Speaker 00

  This is, this is the situation. This is the common and familiar situation.

• 1:37Speaker 01

  Yes.

• 1:38Speaker 00

  Look, I mean, a lot of people are familiar with this sort of world, but for absolute clarity, the reason we talk about super low cost airfares is because they're amazing at drip pricing. And drip pricing is where you think you're paying a low price, but then, you know, drip, drip, drip. Between starting the purchase and completing it, a bunch of little costs creep in. Service fees, payment fees, handling fees, processing fees, loading charges, optional stuff, doesn't really feel that optional. I mean, there's a long, long list of stuff. It's all around us all the time and it's incredibly frustrating and incredibly lucrative. And yeah, elements of drip pricing have always been around, but now it's a scalpel. It's a precision tool for separating people from more money than they bargain for by using behavioural psychology.

• 2:25Speaker 00

  And Ryanair is on the poster for it. I don't even think they'd mind me saying that. I mean, it's all pretty out in the open. And there's two ways to tell this story. The easy way is here's the villain, Michael O'Leary, the CEO of Ryanair. Here's his airline and here's the charge sheet. And don't worry, we're absolutely going to do the charge sheet because it is one of the most ridiculous set of dick moves I've ever seen. Like Rob, leaving someone in a wheelchair at the bottom of a set of stairs for a long time. I mean,

• 2:59Speaker 01

  It's almost more than a dick move.

• 3:00Speaker 00

  It's, it is. And we're going to get to that. And there's a lot of more than a dick moves in all this. But I mean, I think that is the easy way to tell the version of that story. And I think it kind of misses the point. Because the second way to tell the story is that this is a business that has been testing where the limits are for years, kind of experimenting. And so now we have a better idea of where those limits are. And even more importantly, where they aren't. And that is a much more interesting story to me. The results of those experiments. What can you get away with? And the answer for Ryanair is a lot. And on that note, Rob, I'm looking forward to getting into our two truths and a lie

• 3:45Speaker 00

  after a very short break.

• 3:48Speaker 00

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• 5:11Speaker 01

  Look, as the Vice President of the Two Truths Party, I'm happy that we've been reinstated for another term.

• 5:17Speaker 00

  I think so. Yeah, there was a little bit of to-ing and fro-ing, but you know, the YouTube comments at least are saying it's okay, we should keep doing this.

• 5:23Speaker 01

  Great.

• 5:24Speaker 00

  I will be honest though, this particular one was quite hard to write because almost, almost everything this airline has ever done kind of sounds made up. But here we go. Three facts, two of them are real, one of them is a lie. You have a guess now and then you see if you change your mind by the end. Fact one, Ryanair cut ice from its drinks. Ice is a frill, no more ice for you.

• 5:46Speaker 01

  Okay.

• 5:47Speaker 00

  Seems reasonable.

• 5:48Speaker 01

  Yep.

• 5:49Speaker 00

  Maybe that's the easy one to disregard, maybe not. It's a warm-up.

• 5:52Speaker 01

  I mean, if the Simpsons is anything to go by, ice is really hard to obtain.

• 5:55Speaker 00

  Yes.

• 5:57Speaker 00

  Yes, it is.

• 5:58Speaker 01

  Yeah.

• 5:58Speaker 00

  Some people are going to know that's a deep reference and I like it. Fact two, Michael O'Leary, the boss of Ryanair, once registered his personal Mercedes as a licensed taxi so that he could legally drive in Dublin's bus lane and skip the traffic. That's fact two.

• 6:12Speaker 01

  That's just smart.

• 6:14Speaker 00

  I mean, that's genius, if it's true.

• 6:15Speaker 01

  If it's true.

• 6:16Speaker 00

  Fact three, Ryanair once ran an online poll asking the public whether it should charge overweight passengers a fat tax, which would be a surcharge by the kilo. The vote came back yes, and for six months, passengers over a certain weight paid the surcharge, the fat tax. True or false?

• 6:36Speaker 01

  That's hard. Look, I'm gonna go with the third one. Like, I feel like I've heard this being spoken about a lot, but I don't know if any airline would actually alienate that many people by doing it. But then again, I don't know, but I'm gonna say that that's the lie, number three.

• 6:49Speaker 00

  But you know what I mean about this being kind of a hard one, right?

• 6:51Speaker 01

  Yeah.

• 6:51Speaker 00

  Like, they're all feasible. You, you know enough about these low-cost airfares. They all seem like they could happen.

• 6:57Speaker 01

  Yep.

• 6:58Speaker 00

  Yeah, well, one of them's not entirely true or not true to hint there.

• 7:02Speaker 01

  Mm-hmm.

• 7:02Speaker 00

  Um, keep them in your mind because we will definitely come back to it. To understand Ryanair, I think you have to understand the industry that it was born into. And airline businesses are kind of insane. They're obsessed with costs. Everything you can think of is judged in terms of weight and fuel. The margins are terrible. The fixed costs are high and subject to risk like oil prices and refining costs. Regulation and scrutiny is intense. Labor costs are relatively high and they're spread across various government areas. Customer demand is seasonal, difficult to predict, and safety risks are huge. It's gross. This is not a good business to try to make money in, Rob.

• 7:42Speaker 01

  Do any of them make money? Like, it seems like it's pretty hard.

• 7:45Speaker 00

  And even profitable? Yeah, well, it's a good question. McKinsey wrote about this about a year ago and they said only about forty-one percent of airlines cover their costs, which they said is good. Like, that's up from previous research.

• 7:59Speaker 01

  Wow.

• 7:59Speaker 00

  I mean, it's, it's an absolute shocker. Like, it's, it's kind of the worst, which makes it interesting that there are kind of quite a few of these airlines around. I mean, a lot of them are subsidized.

• 8:10Speaker 01

  Hmm.

• 8:11Speaker 00

  But the ones who do well, I mean, they're ruthless, cutthroat. I mean, here in Australia, we had four domestic carriers, but in twenty twenty-four, two of them went bust. Wasn't that long ago? We probably remember, Bonza and Rex.

• 8:24Speaker 01

  Yep, I remember those.

• 8:25Speaker 00

  They were doing, you know, regional trips. They were kind of trying to put pressure on the big guys. Now they're gone, we're back to Qantas and Virgin. I mean, other countries have similar concentration of carriers. But it's safe to say it is a complete nightmare of an industry to make money in. And so the ones that do well kind of end up being dicks.

• 8:48Speaker 00

  And it helps to think of airlines in that light because when you do, the weird and the stingy things that they do start making a bit more sense. Here's a story that illustrates the point. In 1987, American Airlines removed one olive from the salads that it served in first class. One olive. They did this because they had a report in their hand that showed 72% of the passengers weren't eating it anyway. I don't know how they got that data, somebody scraping it into the bin, must have been keeping a, you know, a sheet.

• 9:22Speaker 01

  Had a jar maybe.

• 9:24Speaker 00

  Maybe they had a discard jar and it was getting fuller and fuller. Anyway, they figured out that 72% weren't eating the olive. So they took it out and American Airlines saved around 40,000 US dollars a year. And this is in 87, so.

• 9:38Speaker 01

  It's a lot of money.

• 9:39Speaker 00

  Look, it's not nothing. It's over 117,000 US dollars now when you adjust it for inflation. And Rob, you know, have a guess how the CEO of American Airlines responded.

• 9:49Speaker 01

  I'm going to say they loved it.

• 9:50Speaker 00

  They loved it. He loved it. I mean, this is the, the best thing that a CEO can hear is we can do something easy and it's going to save us a bit of money.

• 9:59Speaker 01

  Great.

• 10:00Speaker 00

  So it sounded kind of the starting gun on a whole new chapter for commercial airlines. Because up until now, I mean, flying was, it was exclusive. It was fancy. People kind of got dressed up. But then here we are in the late eighties and cost cutting started changing things forever. And this olive arguably started the whole thing. American Airlines CEO is a man named Robert Crandall. He created a reward system for staff who came up with savings like that. He gave them television sets, fur coats, cash bonuses, kind of made it into a game with prizes.

• 10:41Speaker 00

  And as you'd expect, word got out, other airlines started copying it almost immediately. And there was one guy who was particularly interested in this kind of no frills approach. Naturally, he was an accountant. Michael O'Leary did not grow up dreaming of aeroplanes or being a pilot. He made that abundantly clear on multiple occasions. He actually didn't really like the things that much. He was a KPMG auditor, but he hated it. So one day, when he was assigned to do some work for Irish business legend Tony Ryan, he immediately set about trying to jump ship and work for him directly. And it worked. That's what happened.

• 11:25Speaker 00

  Tony Ryan had already made a fortune in aviation, but he was doing it by buying commercial planes and then leasing them to airlines, which is kind of the complete opposite of a low cost airline business when you think about it. I mean, it's high cost, low volume, high margin. But anyway, he decided what he wanted to do was plough all the money he had made into an airline of his own. So he whacked Ryanair on the side of some of these planes. And in 1985, off he went.

• 11:57Speaker 01

  So Ryanair is just, that's his name.

• 11:59Speaker 00

  It's just his name.

• 12:00Speaker 01

  Doesn't stand for anything.

• 12:01Speaker 00

  Nah, it's, and there was a bit of this going on back in the day, in the 60s, 70s and 80s. I mean, Anset Australia, of course, that was Reg Anset.

• 12:09Speaker 01

  Yep.

• 12:10Speaker 00

  You've got Braniff International, Laker Airways, Wheeler Airlines. Just dudes naming airlines after themselves, which, you know, would you do that?

• 12:20Speaker 01

  Yeah.

• 12:20Speaker 00

  If you were starting one, would it be Crawford Airlines?

• 12:22Speaker 01

  I think so. Air Rob, I don't know. I'm trying to think what sounds better.

• 12:26Speaker 00

  Rob Air. I always found it, this is an aside, but I always found Qatar Airways funny. Because if you flipped it, you'd just say Air Qatar.

• 12:33Speaker 01

  Oh.

• 12:34Speaker 00

  I thought.

• 12:35Speaker 01

  That's a missed opportunity.

• 12:36Speaker 00

  I thought it was right there.

• 12:37Speaker 01

  That's a missed opportunity.

• 12:39Speaker 00

  We should be in this business.

• 12:40Speaker 01

  Yeah.

• 12:40Speaker 00

  Except it's a horrible business.

• 12:42Speaker 01

  Let's lease some aeroplanes.

• 12:44Speaker 00

  Yeah, exactly. I mean, most of those ones I listed are no longer around, but Ryanair obviously is. And that is just the guy's name, Ryanair. Ryanair, it started small, but things really kicked off in 1986, when it launched a Dublin to London route and undercut British Airways and Aer Lingus prices by 50%, which is, you know, that's a serious move and it did make a splash. The problem is the price wasn't enough to cover the high cost of running an airline. So Tony Ryan and his airline were losing money pretty much straight away.

• 13:17Speaker 00

  By 1988, the problem was obvious because they carried 322,000 passengers that year, but they lost £7 million. So it's not great. And this is where Michael O'Leary comes trotting into the story. Remember, he's an accountant, young financial fixer for Tony Ryan. He was only 26 and Tony made him the CFO of the airline. And this, I mean, it could be my favorite part of this whole story because O'Leary looks at the books for the first time, really properly. And he says to Tony Ryan, mate, you should shut this thing down. It's not worth it. This is a terrible airline.

• 13:58Speaker 01

  Have you thought about buses?

• 14:00Speaker 00

  Have you thought about anything else?

• 14:01Speaker 01

  Yeah.

• 14:01Speaker 00

  This is not working for you. Tony Ryan looks him dead in the eye and says, I'll give you a cut of the profits. Once it hits a certain level of profitability, you're just going to start getting huge bonuses if you pull it off. And O'Leary just goes, all right.

• 14:17Speaker 01

  Let's do it.

• 14:18Speaker 00

  That's the correct carrot to dangle.

• 14:20Speaker 01

  Yes.

• 14:20Speaker 00

  Turns out.

• 14:21Speaker 01

  Challenge accepted.

• 14:21Speaker 00

  Challenge accepted. So now, O'Leary is immediately on a mission to cut costs and lift revenue. And he's got, he's got his own personal reasons now to do that. He doesn't really care about the airline at all. It's really just a vehicle to get paid and prove that he's a bit of a young gun in general. And his instruction to everyone can be summed up by what he said to the catering department. It became kind of legendary. He said, quote, "Cut the [bleep] out of it."

• 14:53Speaker 01

  It's honest by putting it?

• 14:54Speaker 00

  You might need to get the beeper button ready on this episode because there's a bit of this blue language coming from Michael O'Leary.

• 15:00Speaker 01

  Sorry, kids in cars?

• 15:01Speaker 00

  Yes. Well, that'll be beeped.

• 15:03Speaker 01

  Yeah.

• 15:04Speaker 00

  All the staff, I mean, they're kind of stunned at how quickly this is all happening. Or, you know, righto, ooh, this is how we're doing things now. And of course, it didn't take long for people to start hating Michael O'Leary for this, but he does not care. He's off and running now. And he implements his own strategy. He developed the routes that Ryanair already had instead of chasing shiny new ones. He cut pay, he cut staff. I mean, he was verbally abusive. His attacks became known as hate beams, which is, it's a fun way of talking about getting humiliated by a boss.

• 15:40Speaker 01

  It's like a Pokemon move.

• 15:42Speaker 00

  It does, doesn't it?

• 15:43Speaker 01

  Super effective.

• 15:44Speaker 00

  Yeah, I mean, you wouldn't want to be on the receiving end.

• 15:47Speaker 01

  No.

• 15:47Speaker 00

  But a hate beam became how he went about his, his working life.

• 15:51Speaker 01

  Yep.

• 15:52Speaker 00

  And it worked. You got handed to him on that front. By 1991, Ryanair turned its first profit. Wasn't much, about a hundred thousand pounds, but things were going in the right direction. And then inspiration really struck.

• 16:09Speaker 00

  The hero of all of these airline executives is this guy called Herb Kelleher. He ran Southwest Airlines in Texas for about 40 years. And Southwest is the gold standard because it made a profit for 47 years in a row. And as mentioned, I mean, these airline businesses are tricky. It was the original low cost carrier. And what it had done was strip flying right back to bare bones. It used one single type of aircraft, which meant that training and maintenance were pretty simple. It preferred smaller, cheaper airports that had lower costs and fees.

• 16:50Speaker 00

  It had absolutely no fancy meals, no first class, but their first tickets sold for 20 US dollars. And this is the important part. Southwest wasn't trying to steal customers from other airlines. It was trying to bring in new people, the ones previously priced out of air travel. I mean, they were actually going for interstate bus companies or rental car companies. Or, you know, just trying to get people to travel who had never really thought about it before. New market. And it totally worked and it had a profound effect.

• 17:29Speaker 00

  When Southwest started flying between Buffalo in New York and Baltimore, overall ticket prices on that route fell about 60%, and the number of people flying tripled. It became known as the Southwest Effect. It now refers to such a fundamental change in pricing that something becomes a volume industry. But I mean, it's really just a way of talking about business disruption. It's a change so deep that competitors can't keep doing the same thing anymore, and it forces a shift, whether it's a shift because of what consumers want, Rob, or because it's something that other businesses just, you know, we can't compete if we're going to be doing this.

• 18:14Speaker 01

  Here's a question for you. So this change, obviously, budget airlines versus ones that provide a little bit more comfort. How far does the travel need to be for the comfort to matter more to you than the price? Because, look, as Australians, if we're travelling overseas to somewhere that's not New Zealand, we're used to travelling five, six, 10, 12, 24 hours to get somewhere. You're like, well, if I'm going to be in this plane a long time, I want to be comfortable. But if you're only flying an hour to Adelaide or to Sydney, or if you're in parts of Europe or America and you're only going to one city, it's like, well, cost probably matters more. It's like, where's that line?

• 18:49Speaker 00

  It's such a good point. It's such a good question too, because I think that is kind of the core of a lot of this. Whether it's Ryanair in Europe, or whether it's Buffalo to Baltimore, we're talking really short flights, and that is crucial to the whole policy of this. It's why people actually sit there and question, you know, do I need much legroom? Do I need to have, you know, a headrest?

• 19:10Speaker 01

  Yeah.

• 19:10Speaker 00

  The conversations that started happening later about whether or not you should be charging to use the toilet, or whether a standing seat on a plane, which is a contradiction of terms, but a standing-only aeroplane is laughable or not. I mean, it depends on the price, doesn't it?

• 19:24Speaker 01

  Yeah.

• 19:24Speaker 00

  And this Southwest Effect, what it's creating, it's inviting people to come on for the first time who'd never be able to afford it before. But it's also giving people this calculation to make in their mind, precisely the one that you just talked about, which is, I mean, it's only an hour. I can be uncomfortable for an hour.

• 19:41Speaker 01

  Yeah.

• 19:41Speaker 00

  I can give myself three hours either side in case it's running early or late.

• 19:44Speaker 01

  Yeah.

• 19:45Speaker 00

  I mean, this is the whole thing. This is changing the entire industry.

• 19:48Speaker 01

  Yeah. But then if you're going international, you're flying from, say, Melbourne to Singapore, for example, it's like, yeah, I need the legroom. I need a hot meal. I need to probably be able to sleep on the plane, potentially have a TV screen that I can watch something.

• 20:01Speaker 00

  Totally.

• 20:01Speaker 01

  To get me through.

• 20:02Speaker 00

  Yeah. But again, it does come down to dollars. I mean, I'm, my family's going to be flying to Bali in a couple of months and, you know, we'll go the cheaper one, I guess.

• 20:12Speaker 01

  Yep.

• 20:13Speaker 00

  Maybe it's seven hours or six hours. It won't be as comfortable.

• 20:17Speaker 01

  Just raw dog it, you'll be fine.

• 20:20Speaker 00

  Oh, the kids won't be raw dogging it. They'll want tablets for sure.

• 20:23Speaker 01

  They'll have gone nuts.

• 20:24Speaker 00

  I mean, basically, what happened was O'Leary was watching all this Southwest stuff going down, and he became obsessed, kind of for life. I mean, he personally idolized Herb Kelleher. In fact, this is a quote from Michael O'Leary in the book No Frills by Simon Calder. There we go. How important is Herb Kelleher? Herb Kelleher is like God. It's a big quote. He also called him, quote, "the original genius, the Thomas Edison of low-cost air travel." I mean, that's, that's idolizing someone.

• 20:59Speaker 01

  Wow.

• 21:00Speaker 00

  For sure. Apparently, he idolized him so much, in fact, that years later, when Ryanair floated, he offered Kelleher 5% equity and a seat on the board for free, which Kelleher declined because he said he didn't want to be distracted, which, I mean, this is a pretty weird part of the story, actually, because, I mean, surely you just take it and then don't do anything.

• 21:21Speaker 01

  Yeah. Like, how much do you think this would have been worth today?

• 21:25Speaker 00

  About one and a half billion dollars. Whoa. I mean, it's a big miss.

• 21:29Speaker 01

  That's a huge miss.

• 21:30Speaker 00

  Shankking from Herb.

• 21:31Speaker 01

  He could start his own airline.

• 21:32Speaker 00

  He could have started many more airlines and.

• 21:35Speaker 01

  Lost it all.

• 21:36Speaker 00

  Charged bugger all for tickets. The lesson that O'Leary learned was that you don't have to be better than the competition. You just have to be cheaper. I mean, that's it. And that changed the whole world.

• 21:52Speaker 00

  In 1994, Michael O'Leary became CEO of Ryanair. And this is where the cost cutting goes from sensible to legendary or completely horrifying, depending on who you ask and what your perspective is. Some of it was just, some of it was just petty, really. He banned cover sheets on faxes. He reportedly told flight attendants to buy their own pens. Some of it was smart, like straight out of the southwest playbook, like switching the whole airline to a single type of plane so that crew members could work on any aircraft. And then, I mean, things do keep improving. Cheap fares were filling the planes. Ryanair had this promotion called Happy Days.

• 22:36Speaker 00

  Twenty nine pound flights and seats were really filling up. Then, O'Leary takes off his cost cutting hat and he puts on his sales hat. He sets about getting the passengers to pay him all the money they've saved in other ways. It was kind of an open playbook of keep costs low and just sell, sell, sell. He cut ice completely out of the business and O'Leary reckoned he saved about forty thousand bucks a year by not needing to buy it or keep it cold. You might remember this from the two truths and a lie section, Rob. Those are the eagle, eagle ears. Well, that one's true.

• 23:16Speaker 01

  Giving it away.

• 23:16Speaker 00

  Yeah, well, that was another comment on YouTube is just you should flag it when you hit it.

• 23:21Speaker 01

  Okay.

• 23:21Speaker 00

  I think that's fair enough.

• 23:22Speaker 01

  Yeah.

• 23:23Speaker 00

  You don't want to have to remember too much.

• 23:24Speaker 01

  I mean, cutting ice out isn't, isn't the worst thing in the world because there are a lot of places around the world that you travel to, at least it's in Australia. And they say, don't drink the water. And the way they get you is you go, oh, I'll get this cocktail or drink whatever at a bar and they put ice in it, not realising that you're now drinking potentially dirty water.

• 23:39Speaker 00

  And you're halfway through it and you're like, oh no, now I'm doing the thing I said I wouldn't do.

• 23:41Speaker 01

  Exactly. And then tomorrow morning, well, you regret it.

• 23:44Speaker 00

  Yeah, well, I think a lot of us have been there. I mean, I think the other thing to say is that not only we're not getting ice, but you weren't getting like Coca-Cola. It was Saint Bernard Cola or Saint Bernard Cola.

• 23:58Speaker 01

  Whoa, whoa, whoa, whoa, whoa. Hey, whoa, whoa, don't disrespect Saint Bernard Cola here. Come on. Iconic brand.

• 24:03Speaker 00

  I'll be honest, I was not familiar. I'm sure it tastes okay. It's a brown drink and it's served at full price and it's lukewarm.

• 24:14Speaker 01

  I mean, I just Googled St Bernard cola and all I've got is pictures of dogs. So it can't be that big.

• 24:18Speaker 00

  Maybe it was pretty short-lived.

• 24:20Speaker 01

  And here's a picture of a St Bernard and a Coca Cola sign.

• 24:22Speaker 00

  Yep, well, that is possibly an indicator that it wasn't a big deal. And Ryanair got it on the cheap because the other one, and sticking with soft drinks here, is an Irish company called Finch's, which gave Ryanair free orange and lemon drinks and tried, I mean, it was basically just trying to get some brand awareness. They wanted Ryanair to give these drinks away to passengers for free.

• 24:45Speaker 00

  But not only did Michael O'Leary charge full price, but he also got Finch's to pay for the cups, which is just, I mean, it's so petty. But he was a penny pincher. I mean, there are millions of examples of how Ryanair figured out how to charge you more than you expected to pay, or skimped on something and charged full price for something. Like, I mean, if you didn't show up for a flight, you were entitled to a small refund of airport taxes, which you had already paid. So what Ryanair did was that introduced a fee to process the refund. I mean, they're just, at this point, they're just filling every single gap with a fee. You see what's happening?

• 25:26Speaker 00

  The advertised fare is going down and down and down, but everything that used to be included is now expensive. The bag, the drink, the check-in, the seat, which now doesn't even have a pocket in the back of it because that means that somebody has to spend a few seconds cleaning it. I mean, this drip pricing, it becomes very pure and deliberate and out in the open. You strip the headline price to the bone, so it wins every comparison, then you charge for the rest, one drip at a time, once the customer is already on the hook. It's not illegal in the blanket sense because someone could still only pay for the airfare in theory.

• 26:10Speaker 00

  It's a huge breakthrough and this is how Ryanair conquered the skies of Europe with this system. But to increase that spend per passenger, Ryanair has done some truly messed up things. And that's after the break.

• 26:27Speaker 00

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• 27:58Speaker 00

  This next bit is pretty dark. To save money, Ryanair had gotten rid of air bridges, which is those covered walkways that connect the terminal to the door of the plane. Cheaper to just have people walking across the tarmac and up a set of steps. Thing is though, not everyone can walk up a set of steps. In 1999, a woman named Helen Newton, who has multiple sclerosis, said that Ryanair told her, and I'm quoting, "We don't cater for the disabled." She said they tried to charge her £8 for a wheelchair and that after a long wait, she was taken out onto the tarmac and just left there at the bottom of the aircraft steps. And she had a 16-month-old baby with her.

• 28:40Speaker 01

  Whoa.

• 28:42Speaker 00

  I mean, that would be so incredibly distressing.

• 28:45Speaker 01

  I feel like that's, I mean, at least in Australia, I thought there are some kind of discrimination laws against stuff like this. Now, I obviously can't speak for this part of the world.

• 28:53Speaker 00

  There are discrimination laws and we're getting to that. I mean, but just purely the fact that this happened, I mean, can you imagine?

• 29:00Speaker 01

  Surely somebody works who has a bit of a conscience.

• 29:02Speaker 00

  Well, that's the thing, isn't it?

• 29:03Speaker 01

  Like, this is the thing, like, let's say we both work for Ryanair in whatever, when we were in 1999.

• 29:08Speaker 00

  Hmm.

• 29:09Speaker 01

  And the manager's like, you have to charge them for this. Like, surely there's someone there who would have been like, we can't be doing this.

• 29:13Speaker 00

  So this, I think, is the consequence of having a business whose identity is being a bit of a dick right from the top down. Is that there is no sense of, you know, personal ideals anymore. You're just kind of, you're just part of this, this machine of, of charging people for anything. And they're not really caring about the consequences too much. I mean, it is one of those really rare businesses that seems to not care about customers and kind of even have contempt for them. I mean, I think it's fascinating because so many businesses in so many different sectors are low costs, high volume.

• 29:50Speaker 01

  Yeah.

• 29:50Speaker 00

  And this is the only one I can think of where it kind of just has a middle finger up to customers at all times.

• 29:56Speaker 01

  Yeah.

• 29:56Speaker 00

  I mean, you could have a supermarket, you could have a retailer that is high volume, low cost, low margin. And they're still kind of at least putting on a facade of customer service.

• 30:05Speaker 01

  Hmm.

• 30:06Speaker 00

  Not here, though.

• 30:07Speaker 01

  Yeah, like, well, you need us if you want to get to this place, so.

• 30:10Speaker 00

  Totally. I mean, but here we are.

• 30:12Speaker 01

  What else are you gonna do? Pay more money? Okay.

• 30:14Speaker 00

  And this is the crazy thing. Like, we talk about Helen Newton's example, which, I mean, not only, I mean, that would have been just awful for her. But, I mean, there are a bunch of people on the plane who would have been looking out the window and seeing this happen. I mean, just horrific. The weirdest part of this is that it happened a few times. Another woman with MS, who was reportedly charged forty eight pounds to be taken to and from the plane in a wheelchair. And in today's money, I mean, that's about two hundred Australian dollars. And she said this, no other airline, this is a quote, no other airline charges for this. Ryanair told me it's because it's a no frills operation. Since when has a wheelchair been a frill?

• 30:55Speaker 00

  See how far they go to test the limits here? In 2002, a man with cerebral palsy was charged £36 for a wheelchair. He took the airline to court and in 2004, he won.

• 31:08Speaker 01

  Good.

• 31:09Speaker 00

  Ryanair paid a very small damages bill and just started adding a £50 fee on top of all airfares to cover some of the disability provisions that they were getting in trouble for not having.

• 31:22Speaker 01

  Wow.

• 31:23Speaker 00

  It's amazing.

• 31:24Speaker 01

  Ruthless.

• 31:24Speaker 00

  It is ruthless. It is amazing really to see the system when it's challenged and how it responds. I mean, if you overstep the mark, a slap on the wrist just isn't that bad. They were criticised, but again, they don't care, which becomes like their superpower. It's actually more interesting than that, I think, because Ryanair has used all kinds of criticism to their advantage over the years. Michael O'Leary, I mean, he has always known how to make the right kinds of noises in the public arena. He knew that if he got written up in a newspaper for appalling fees or screwing over his staff

• 32:07Speaker 00

  or customers, that he could spin it into a positive. He could say, yeah, we cut costs, we have terrible customer service and we can have low airfares because of that.

• 32:21Speaker 00

  In a way, he kind of becomes a caricature of himself, you know? In 1998, as mentioned, O'Leary stops buying pens for cabin crew and he told them to either buy their own or just steal them from hotels or wherever you could just pick one up. He says he did that and he's saying this publicly, Rob, but he's directing it to staff. It's all very out in the open, which is kind of like, why are you doing this? Is the sort of the initial feeling and then you arrive at the why.

• 32:50Speaker 01

  Hmm. It's not good culture.

• 32:52Speaker 00

  It's not good culture. It's kind of, it's a truly toxic culture.

• 32:58Speaker 01

  Hmm.

• 32:58Speaker 00

  But, you know, he's still chasing those bonuses. That's the whole point.

• 33:03Speaker 00

  Later, he banned staff from charging their phones at the company's offices, saying the saving per charge was 1.4%. I don't even know how he's working that out. And I don't even know 1.4% of what.

• 33:16Speaker 01

  I'm gonna call bullshit.

• 33:17Speaker 00

  Yeah.

• 33:18Speaker 01

  Bullshit.

• 33:18Speaker 00

  Can I charge my phone here? Imagine that. You say, actually, no, that's against policy.

• 33:22Speaker 01

  Sorry, Chris.

• 33:23Speaker 00

  Yeah, we can't be doing that.

• 33:25Speaker 01

  No.

• 33:26Speaker 00

  All this stuff fed massive amounts of sarcastic media coverage and punchlines on, you know, late night talk shows and stuff like that, which is kind of exactly what he wanted, because it was doing his advertising for him. Geez, they really are tight asses, no surprise. The airline is 10 euros. That is what O'Leary is hoping that you'll say. And it becomes the whole business identity and it remains that to this day. Just last week, I saw the following post on Ryanair's Facebook page. Quote, this is a Facebook post. If you want more legroom, buy your own plane.

• 34:05Speaker 00

  If your friends don't pay to sit next to you, get better friends. And the third one I saw, this is all in the one week, coming soon, stinky feet fee.

• 34:14Speaker 01

  Yeah.

• 34:15Speaker 00

  It's not great.

• 34:16Speaker 01

  Not a deal.

• 34:16Speaker 00

  I mean, that's, it's not good. It's not particularly good social media content, in my humble opinion.

• 34:20Speaker 01

  No.

• 34:20Speaker 00

  They've got several million followers and these posts, I think, had about 150 likes.

• 34:24Speaker 01

  Wow.

• 34:25Speaker 00

  But it's reinforcing this whole concept, this whole thing of being a tight ass and being really open and funny about it. The whole thing.

• 34:35Speaker 01

  It's just mean.

• 34:36Speaker 00

  It's mean. It's a bit lame, but there it is. That's the whole point. It kind of just reinforces that this is a business that doesn't really care about customer experience at all. And it goes right to the top. It's been written that Michael O'Leary is one of the few CEOs who had that contempt that we were talking about for the customers. He made outright sexist ads on multiple occasions. He registered his car as a taxi so that he could use it in bus lanes on the freeway in Dublin, which is another two truths and a lie moment.

• 35:08Speaker 01

  There you go.

• 35:09Speaker 00

  There, Rob. That, as an aside, that taxi actually does turn a profit, apparently.

• 35:14Speaker 01

  Wow.

• 35:15Speaker 00

  I know. Who'd have thought?

• 35:16Speaker 01

  Smart.

• 35:17Speaker 00

  He's not bad at business, this guy. In 1997, company documents show that Michael O'Leary earned a 9.8 million pound bonus. And that was 40% of the total wage bill for the company that year. Which is kind of crazy because he's unashamedly cutting staff numbers and wages while putting millions into his own bank account. And let's take another look at how he did it. Because it's absolutely fascinating when you have a good look at it. And it's kind of the whole point of this episode. Should we do the greatest hits?

• 35:51Speaker 01

  Let's do it.

• 35:51Speaker 00

  I think we should. Right, here we go. There was the three pound per minute fee for making a phone call from the plane. Three pounds per minute. There was the 28 pounds 50 fee to bring duty free on board. There was Ryanair's own currency conversion system, which charged you several pounds more than your bank would have. In 2011, Ryan, in 2011, Ryanair gave a sandwich to a guy who was having a heart attack, Rob. I don't know why. And then it tried to charge him for it.

• 36:23Speaker 01

  Wow.

• 36:25Speaker 00

  And he was like, he was getting better. He was like, no, I don't want to pay for that.

• 36:30Speaker 00

  Speaking of 2011, that year, an adult could buy a one-way Ryanair flight for nine pounds 99. But if you wanted to bring a baby, the infant's fare was 20 pounds. So the baby cost twice as much as an adult. Here's a good one. In 2015, a 19-year-old's ticket was booked under the wrong name, a nickname, Adam West. Ryanair wanted 220 pounds to correct the name. But this young guy, it worked out it was cheaper to legally change his name by deed poll to Adam West, get a new passport issued.

• 37:04Speaker 00

  Rather than do it Ryanair's way, and he did that because it was cheaper.

• 37:07Speaker 01

  Wow.

• 37:08Speaker 00

  Which is wild. And then there's my personal favorite, also in 2015. Um, a family of three, either deliberately or accidentally, didn't pay the allocated seating fee. So Ryanair tried to put the three-year-old kid at the, uh, at the opposite end of the plane than her parents. Um, the parents had to complain twice before the kid was eventually moved to somewhere where the parents could see her.

• 37:31Speaker 01

  That's just.

• 37:32Speaker 00

  Isn't that wild?

• 37:32Speaker 01

  Criminal.

• 37:33Speaker 00

  It's just crazy. I mean, there's just absolutely no movement at all. The, the rules are the rules, the fees are the fees.

• 37:42Speaker 01

  It's soulless.

• 37:43Speaker 00

  It's amazing. I mean, you kind of.

• 37:45Speaker 01

  Absolutely soulless.

• 37:46Speaker 00

  Like, I'm laughing as I read these, but in those instances, you would be absolutely losing your mind.

• 37:51Speaker 01

  Yeah.

• 37:51Speaker 00

  About what to do if you're flying with a kid.

• 37:53Speaker 01

  Absolutely.

• 37:54Speaker 00

  Or if you're Adam West.

• 37:55Speaker 01

  Yeah, Batman. Yeah.

• 37:57Speaker 00

  Yeah, the Batman. The real question is why does this work? Why do we fall for it, even if we know that it's coming? Because it uses our brains against us. Michael O'Leary once said, quote, "If we can get the average spend per passenger high enough, we could afford to cut the fare to zero."

• 38:19Speaker 00

  It has never been about the ticket. That's just bait. It's always been about the other stuff. They call it the ancillary payments. But it's, you know, it's just the other stuff. The reason why the bait works comes down to how human beings handle numbers. There's a well-studied mental glitch that's called anchoring. When we look at a price, we grab on to the first big number we see, the fare, and we anchor to it. That becomes the price in our head. Then the fees come in, a bit here, a bit there, and we do not adjust properly. We do not add them up cleanly. And even when we've been screwed, we still hold on to that first price.

• 39:04Speaker 00

  I mean, if you snag a flight for $50 and by the time you pay it's $80, you're probably still gonna tell your friend that it was a $50 fare. That's anchoring.

• 39:15Speaker 00

  And then there's the funnel. You start with the fare, but on your way to checkout, there are little hurdles that make you think. The seat, the meal, the baggage allowance, all fees, payment fees. By the time you see the final damage at the checkout, you know, you're 20 minutes in, you're committed. You feel like you've cleared all these little hurdles now and you don't want to bail out. And that's the sunk cost fallacy. And it's the same psychology that keeps people sitting at the poker table. Both of these things, anchoring and sunk costs, they erode customer trust over time. They piss you off if the business does it too much. But businesses are allowed to utilise them pretty much all over the world.

• 39:59Speaker 00

  Regulators are pretty clear on this. As long as the fees are disclosed, as long as you can see them eventually, there is no legal problem.

• 40:09Speaker 00

  But we all understand these systems now. So why don't we just draw a line and say no? We could take our business to an honest business. And there's the problem. This system has seeped into pretty much everything. First, it's spread across the airline industry and it's spread in a fascinating way. Not really by other airlines copying Ryanair from a distance. I mean, it's spread because Ryanair's own people left and took the recipe with them. The man who ran Ryanair's operations went off and helped build Air Asia. Ryanair's sixth ever employee, who had started on the reservations desk, he went off and started Tiger Airways, where he helped set it up.

• 40:55Speaker 00

  Another Ryanair manager became the head of operations at India's first low-cost airline. And now, I mean, it's obviously gone far beyond aviation. Regulators, they look at this sort of stuff and they do occasionally have a win when something just kind of goes a bit too far. In 2011, the EU brought in rules forcing airlines to show unavoidable taxes and charges inside the headline price.

• 41:20Speaker 00

  Ryanair panicked and immediately got to work on some pretty dastardly workarounds, but the law was there from that point on. Here in Australia, the ACC took Jetstar and Virgin to court over drip pricing in 2015, and they won. And then it went after Qantas in 2025, pretty recently, over a system of selling tickets on flights that it had already cancelled. It was called the Ghost Flights scandal.

• 41:46Speaker 01

  Yes, I've heard of this.

• 41:48Speaker 00

  They got, they got fined a hundred million bucks.

• 41:50Speaker 01

  Wow.

• 41:51Speaker 00

  It was solid. I mean, it wasn't solid in, in terms of what Qantas makes in profit, but it was, it was meaningful in terms of the headlines and what it did. And that's really ultimately the goal of a, an organisation like the ACC. They can extract fines via the federal court, but really it's about the brand damage, I think. People got really annoyed at Qantas after that one.

• 42:11Speaker 01

  Yep.

• 42:13Speaker 00

  Stuff does happen here, and it happens all over the world. Canada went after Ticketmaster and the US brought in a law in 2025, forcing live event ticket companies and hotels to show their full price upfront. And this year, ticket reseller StubHub was made to refund 10 million US dollars to customers that it has drip priced. As for Ryanair, well, in 2025, a court in Belgium ruled that a whole string of its booking practices were illegal. The court in Spain ordered it to refund a woman who had been charged over five years for bringing a small bag onto a plane.

• 42:50Speaker 01

  What was in his bag?

• 42:51Speaker 00

  I don't know. Five years is a very long time, Ryanair. I mean, I say all this because I think it's easy to get really disheartened and just say, this is the economy we live in now. But I think it's important to say, if you're lucky enough to live in a country with, with regulators, they are working on it.

• 43:07Speaker 01

  Yeah.

• 43:08Speaker 00

  They're trying. Federal courts sometimes don't hand down the fines that we want them to, but you know, there are lines. We've talked about where are the lines in this episode, and there are some. I mean, they're not where we hoped they'd be, but they're, they're there.

• 43:22Speaker 01

  They're definitely there.

• 43:23Speaker 00

  But the part of the story you possibly can become a bit disheartened with is Michael O'Leary. In 2025, Ryanair's share price hit a target written into his contract, and it triggered a bonus worth over a hundred million euros.

• 43:38Speaker 00

  Yeah, and he's worth about a billion, maybe more euros, that is.

• 43:42Speaker 01

  Wow.

• 43:44Speaker 00

  Yeah. I mean, Ryanair listed on the Dublin Stock Exchange and has secondary listing on the NASDAQ. In 1997, it listed at $1.27 and it's now trading at about 60. It's a four and a half thousand percent return, Rob.

• 43:57Speaker 01

  Wow.

• 43:59Speaker 00

  I mean, it worked. Like, that was the point all along to make money.

• 44:03Speaker 01

  It all started with olives.

• 44:04Speaker 00

  It did a bit. It all started with Tony Ryan telling Michael O'Leary that he'd get rich if he made Ryanair profitable. It all came true. It happened. Like it or hate it, and I do hate these systems. It is a success story. You have to say that. You can, in theory, fly on one of these planes for the rock bottom ticket price. You're probably gonna have to pay some extra, though, and that grey area is worth billions. It's a way of thinking that has changed businesses all over the world. Consumers now have more choices, but every choice comes at a cost. The fare you see is almost a lie.

• 44:49Speaker 00

  And now we have to be almost lied to when we buy pretty much everything, which is infuriating, really. So the next time you watch a $40 flight turn into $110, you can get annoyed, and that's fair enough. But if you feel like you've been misled, you should report it. Make a complaint, post about it on social media. That is what being a customer is all about. You do get to object occasionally. Even if it goes nowhere, it's gonna make you feel better.

• 45:19Speaker 01

  Yeah.

• 45:23Speaker 00

  Shall we do the two truths and a lie?

• 45:24Speaker 01

  Let's do it.

• 45:25Speaker 00

  Let's do it. Fact one was Ryanair cut ice from its drinks. This one's true. 1998, ice was deemed to be a frill and people could do without it. It was estimated that they saved about 40,000 euros per year with that. And, you know, as mentioned, you were getting knockoff drinks at name brand prices and they were lukewarm.

• 45:51Speaker 00

  Fact two, Michael O'Leary registered his Mercedes as a taxi to use Dublin's bus lanes? Also true. Time is money.

• 45:59Speaker 01

  Yep.

• 46:00Speaker 00

  Michael O'Leary. Fact three, this is an interesting one, the fat tax. This is the online poll that asked whether or not people should be paying surcharges over a certain amount of weight.

• 46:12Speaker 01

  Hmm.

• 46:13Speaker 00

  Them and their bags weighed together. Ryanair did do that poll. People did vote yes. It's a half lie, which I think makes it the perfect lie for this episode, really, because it's an almost truth. Ryanair actually did run that poll. It was in 2009, floating the idea of a fat tax. It got a lot of attention, which was all part of the strategy, but it never actually implemented the surcharge. And I mean, look, as mentioned, this is O'Leary's favourite thing to do. Plenty of examples of him doing this. He suggested he might make people pay to use the toilet. He said he was going to give the lady on the logo of Ryanair a boob job. Um, which obviously he never did, but it got a lot of headlines. Standing room only tickets, he suggested.

• 46:58Speaker 00

  I mean, he never meant any, but he just wanted the free advertising because he's a tight ass. The whole thing is a kind of a dark masterclass, Rob. And it sort of puts you in two minds, the consumer mind or the business mind. I mean, you can see why a lot of people idolise this Herb Kelleher guy, because he did it in a way that maybe wasn't as feral. Um, but people, there might be a lot of people out there who think that Michael O'Leary is a business genius.

• 47:23Speaker 01

  Yeah.

• 47:24Speaker 00

  But then, you know.

• 47:25Speaker 01

  I guess it just depends on where your conscience lies and, you know, is looking after people more important to you? Or is it just simply, you know, the bottom line is what matters to you the most? I mean, I'm sure we'll get to a point one day in podcasting where halfway through the podcast, we can stop and say, it's an extra dollar 29 and then we can keep going. We're not there yet.

• 47:44Speaker 00

  Are we there yet soon?

• 47:45Speaker 01

  Maybe, maybe one day. Spotify, if you're listening.

• 47:48Speaker 00

  There was an intensity in your eyes just then.

• 47:50Speaker 01

  I just had, I just had an idea. Oh God. I gotta, I gotta get out of here. I gotta get out of here.

• 47:56Speaker 00

  Coming to you soon. Um, I don't know. Yeah. Sometimes I reverse, this is a weird one. Sometimes I reverse drip price my son's pocket money, Rob.

• 48:04Speaker 01

  Yep.

• 48:04Speaker 00

  There's the base rate, five bucks a week. And then he gets a little bit more if he like, you know, clears the table or cleans up his clothes in his room. I don't know if I'm teaching him bad habits or good habits. I actually. What is the lesson? I haven't thought about that enough.

• 48:17Speaker 01

  Hmm. Yeah, I'm not there yet.

• 48:19Speaker 00

  I'm not. Yeah, I'm not sure about it, but I'll. It's not really working. But that's neither here nor there.

• 48:26Speaker 01

  Yeah.

• 48:27Speaker 00

  But thank you. I mean, that is Ryanair. And that's drip pricing. And the reason why nothing you ever buy really costs what you think it's going to cost. Next episode, we're sticking with the idea of selling people maybe something that they didn't absolutely need. It's a little bit smaller than an airfare though. Something you maybe put your leftovers in.

• 48:47Speaker 01

  Hmm.

• 48:47Speaker 00

  Hmm. Maybe a big hint as to what that will be. Looking forward to that episode. Thank you, Rob, as always.

• 48:53Speaker 01

  Goodbye.

• 48:54Speaker 00

  Much appreciated. I'm Chris Kohler. Thank you very much for listening. See you next time.

• 48:59Speaker 00

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