Michael O'Leary's lessons from Napoleon

By A.B.

RYANAIR is in talks with aircraft manufacturers about the acquisition of up to 300 planes. The low-cost carrier apparently reckons it could pick up market share in Europe during this time of economic uncertainty, and so wants to expand its fleet. But Joseph Lampel, a professor of strategy at Cass Business School in London, is unconvinced by the rationale for such a move. I rather like his explanation:

One of history's enduring mysteries is why Napoleon invaded Russia. He had an empire, all the pomp and circumstance of an imperial court, and the all round title of military genius. And yet he could not resist the lure of complete domination of the European continent. He had plenty of victories, but what he wanted was total victory.

One gets the same feeling reading the news release about Michael O'Leary's ambition to acquire 300 aircraft from Russian or Chinese manufacturers if he cannot get them from Boeing and Airbus. The goal is to grow Ryanair to 130 million passengers, which would make the airline the largest in Europe, and one of the largest in Europe [sic].

What is the rationale for this audacious expansion? It seems that Michael O'Leary is convinced that the economic recession will lead to mass defection from other airlines to Ryanair. What this assumption seemingly ignores is that the cost of air travel is a smaller proportion of the total cost of travel. The cost of being there is usually much greater of the cost of getting there. The recession is therefore likely to reduce air travel primarily because fewer people can afford to spend their hard earned cash on hotels, restaurants, and other travel pleasures.

Is O'Leary unaware of this basic economic reality? This is hard to say. What is clear is that he sees the current economic crisis as an opportunity to push aggressively forward where other airlines fear to tread. The risk he runs is that an extraordinary success story will come apart. It is not only that this expansion will stress Ryanair's organizational capacity and constrained terminal availability to the limit, but there are also other forces lurking in the background ready to take on O'Leary if he stumbles. There are shareholders who are told that they can expect much lower dividends during the expansion, and there are also O'Leary's many critics who have always felt that he cuts too many corners.

Perhaps he should take a lesson from Napoleon. When told by his advisers that the winters in Russia were exceptionally long and cold he insisted that they were misinformed. The winters in Moscow, he told them, were no colder than Paris, just a bit longer. He lived to find out that reality can bite.