Flights and Fights: Inside the Low Cost Airlines

I'd like to ask for everybody's attention, please.

Low budget airlines have revolutionised the way we fly.

EasyJet now carries more passengers than British Airways.

And the giant of the low cost carriers is Ryanair.

HE SINGS: We're off to see the wizard, the wonderful wizard of Oz.

Michael O'Leary is its boss.

This way, is it?

He may not look like a tycoon, but he's built a multi-billion pound business.

Just another dull day in Katowice.

-That's our time in Amsterdam this morning.

-No passport required.

We've been here...

ten minutes.

-Good afternoon.

-Morning, sir.

Budget airlines are thriving -

by making their planes and their staff work harder.

And for passengers, too, air travel sometimes feels like hard work.

I think people don't like being treated like cattle.

Even the cattle in their lorries get free water.

And they don't have cope with these things.

GRUNTING

CORK POPS Whoo!

Good evening, easyJet. This is Stelios speaking. How can I help you?

The battle of the low cost airlines has been a clash of big personalities.

This is the inside story of how a Greek and an Irishman

fought to turn the airline industry on its head.

Millions now have a chance to experience more of the world than they used to.

But in the process, air travel has, well, lost a little of its glamour.

We do thank you very much indeed for your attention, ladies and gentlemen,

and we hope you have a pleasant flight this afternoon.

EasyJet has 200 planes.

Each makes up to four round trips every day.

Their crews meet up around 6am.

-Morning, how are we all? All right?

-Good, thank you.

-Super.

-Fit to fly?

-Yes.

-Outstanding.

Matt Illman, a cabin crew manager, meets his three colleagues

for the day, and puts them through their daily test of safety.

Kendel, you noticed a milky white build-up on the wing,

what might we think this build-up is?

-I would think that it was a rime ice.

-Absolutely, spot on.

At the table next to them, their pilot and co-pilot check their flight plans and the weather.

It's fine in Amsterdam, windy into Gatwick

and windy into Edinburgh.

Gatwick is just one of 22 airports where easyJet bases its planes.

Right, so have I got Gatwick online yet?

-'Yeah, I'm here, Will.'

-Morning.

-So the issues this morning...

While the first flights get underway, at company headquarters at Luton airport,

the senior management meet to review yesterday's operations.

OK, so we had a bit of a challenging weekend.

So, on Saturday we had 1,120 sectors flown,

we also had some snow closures in the evening.

So the daily ops meeting is the one place where the right people

get together who can take decisions

about the day-to-day operation of the airline.

We've got about five or six engineering issues during the course of the day.

Everyone knows what they are doing, why they are doing it and how they're doing it.

So it is an operation, I think, that is run in a militaristic fashion.

CORK POPS

Stelios Haji-Ioannou started easyJet with £5 million from his dad,

a shipping tycoon.

Stelios no longer runs easyJet, but he's still its biggest shareholder.

Now, all told, it's been a great investment for me.

I've made about a billion pounds in the process.

So it's a significant investment I keep an eye on.

Today Stelios also keeps an eye on other businesses he owns,

and charities he funds.

One, two, three, testing. Can you hear me? Testing, testing.

Between them, Stelios, a Greek Cypriot,

and Michael O'Leary, from rural Ireland,

have transformed the way the British fly.

It probably does take maybe a Greek mentality

and an Irish mentality to come at it from a slightly different angle.

I think it was logical that somebody growing a low-fare airline business

would emerge out of Ireland. To be fair to Stelios it is much more impressive that

the son of a Greek shipping billionaire -

who could, if he wanted to, be swanning around the world in executive jets -

has made another fortune by offering reasonably-priced air travel.

It's just not as reasonably priced as Ryanair.

The low cost rivals are fighting for traffic all over Europe.

Katowice in Poland is getting a lightning visit from O'Leary.

He's taking in three Polish airports today,

getting Ryanair's name in the media.

What do you like most about Poland?

I think what I like most today about Poland

is your rubbish football team, that are even more rubbish than the Irish football team,

and that's setting the bar pretty low in terms of rubbish.

O'Leary has business in his blood - he's the son of an Irish entrepreneur

who'd had both successes and failures.

Thank you very much. Dziekuje.

-Were you ambitious to make money?

-Yes.

I think one of the great things you learn

if your father has made money and lost money a couple of times,

the great lesson you learn is the NOT having money.

You don't remember the good times. You only remember the times when there wasn't money there.

And generally it breeds determination not to repeat that in your own life.

O'Leary learnt business less from his father

than from a father-figure - a world-class Irish entrepreneur,

Tony Ryan, who hired O'Leary as his personal assistant.

This was an opportunity for him to learn at the feet of the master, if you like.

Tony Ryan was a really tough task-master,

somebody who was very, very successful in business,

very driven and really drove people very hard himself.

Ryan had established a huge and profitable aircraft-leasing business, GPA,

and, in 1985, a small, loss-making airline which he called Ryanair.

The problem was he had all of this income coming in from GPA

and going straight out the door into Ryanair, which was a bottomless pit.

O'Leary had studied accountancy, so Ryan sent him

to his airline to see what could be done to stem its losses.

I urged, repeatedly, shut this thing down, it can never make any money.

It had lots of passengers but it could make no money,

because the costs were too high.

The early Ryanair had business class,

a smart ticket office in Dublin,

and a habit of dishing out free food and drink at every opportunity.

Charlie Clifton was among its first staff.

It was good, old-fashioned customer service.

If there were flight delays, we'd give them food and drink and all the rest of it.

And you would get passengers coming up to you who were not delayed,

had no delay at all, queuing up for their food

and everything like that,

thinking, "It's Ryanair, it's feeding time at the zoo".

O'Leary believed Ryanair would always lose money.

31 through 60.

But his boss, Tony Ryan, still had hope.

He knew how deregulation had been shaking up American aviation since the late 1970s.

We are looking at an evolution where an industry that was inefficient

is required to become efficient in the marketplace.

And those airlines that don't get their costs in line

are not going to survive.

Ryan had heard about an entrepreneur called Herb Kelleher.

MUSIC: "Eye Of The Tiger" by Survivor

Kelleher ran an airline called SouthWest.

He was the kind of guy who'd settle a legal dispute

with an arm-wrestling match.

CHEERING

Ryan sent O'Leary to find out more.

He said, we're going to have one last go, would I go to the States, meet SouthWest Airlines.

He arranged a meeting with Herb Kelleher

and it was the kind of road to Damascus moment.

Remember who brought those low fares and how you keep them.

Because they go away unless you fly SouthWest Airlines

again and again and again.

SouthWest did everything airlines thought they shouldn't do

if they wanted to make money.

It let its passengers take any seat on the plane,

just like on a bus or train.

It didn't serve full meals, just drinks and snacks.

It made its planes and its crews work more flights per day.

And it offered dramatically cheaper tickets.

It just seemed to be blatantly obvious that this was the way forward.

That's what started the revolution in low fare air travel in Europe.

ANNOUNCER: Could the last remaining passengers travelling to

Amsterdam with easyJet flight EZY8873

please go immediately to gate 112.

Gate 112.

Back at Gatwick, at 7am, easyJet's first wave of flights is boarding.

Morning, sir.

Once again ladies and gentlemen, a very good morning to you all

and a warm welcome on board this easyJet flight to Amsterdam.

Do you have a special voice?

-SHE LAUGHS

-Yes. Yes I do!

My friends and family always ask me to do my work voice

and show them what I say on board, and they all find it highly amusing.

Are you ready for Freddie?

It was back in the '70s when Freddie Laker tried to undercut

the traditional airlines by offering cheap fares across the Atlantic.

Which seat do you want, darling? Which seat?

-Laker was knighted for his efforts...

-Cheers!

..but four years later his business went bust.

National airlines were still owned by governments

and governments didn't want too much competition.

Travellers between Scotland and London

will now be able to make the trip for as little as £29

on a new airline called, appropriately enough, easyJet.

More than 10 years later, deregulation finally came to Europe.

Welcome on our first flight.

For easyJet's young founder, business wasn't as much about

the need to make money as the desire

to escape from a privileged upbringing.

I was suffering from the rich son syndrome,

so whatever I was doing,

people said, "It's really your father's doing."

I'm eternally grateful that at the age of 28,

he actually gave me the opportunity to do this amazing thing.

"Here, son, go and prove yourself." And, of course, it wasn't a guaranteed success.

Maybe it wouldn't have worked. It would have been very embarrassing to go back and say,

"Dad, I've lost it all."

Like O'Leary, Stelios made the pilgrimage to Texas to find out how to run a low cost airline.

I had a big advantage because I've never worked in an airline before,

so I literally travelled a bit on SouthWest,

read a couple of books and a Harvard Business School case study on it.

And then said, "OK, let's see how we're going to make this work."

Richard Gooding was the manager of a small, unprofitable airport north of London at Luton

when he got a visit from a keen young man who said he wanted to start an airline.

We had seen many people who had wanted to start airlines.

They had a common ingredient.

They had been to the bank, who had laughed a lot, and had then

come to us to say, would we lend them the money to get started.

Stelios was different. He already had money.

And he was less interested in planes than in selling tickets.

He had a theory of something called the ignition price.

His view of the ignition price was if you could

get your price down to what that is, the market will explode.

This was very interesting, innovative thinking for us in aviation.

I know that it had happened in other retail industries,

but in aviation we hadn't thought like that.

Stelios hired a couple of planes at Luton.

What would make easyJet different was its branding.

Stelios felt that he wanted to own a colour,

he wanted a colour that nobody else was using, and orange was his idea.

And we sat behind a computer screen

until we arrived at the most shocking, vivid shade of orange

we could find, which was pantone 021C, I think,

which is easyJet orange.

EasyJet reservations, Vicky speaking. How may I help you?

If you want to speak to her first...

Even more original than the Pantone orange was Stelios's idea for selling tickets.

EasyJet's call centre would take bookings direct from its customers.

No longer would travel agents get a hefty slice of every air fare.

It was suddenly possible to cut out the commission of the travel agent,

cut out all the accounting of tickets,

and save the best part of 20%.

I've got two flights available there as well.

I didn't know what I was doing.

Remember, it could have been possible that

I could have opened the airline, say, "We only take bookings over the telephone,"

and the planes could have been empty. But I was the right place at the right time.

Good evening, easyJet, this is Stelios speaking, how can I help you?

The low fares revolution had begun.

20 years ago, it would be unheard of for a group of lads to pop off to Eastern Europe for a stag party.

Today, it's nothing special.

We're going to Riga in Latvia. It's a mate's stag do,

cheaper than Prague, etc, Amsterdam,

so, yeah, should be a good craic. Off we go.

Lower fares have changed attitudes to travel.

Passengers are in many cases indifferent to where they go.

So long as it's a sunshine destination

or a historic destination,

depending on what their personal preference is.

If it's Krakow or Prague, it really doesn't matter.

Or if it's Alicante or Malaga, it doesn't matter.

It's the price that determines that demand.

When you can travel to somewhere like, you know,

a couple of hours away on a plane, different country,

different culture for the same price it would take you to get up to somewhere

like Manchester or Liverpool, then it's a bit of a no-brainer really.

The arrival of low cost airlines has created work in Riga...

..not least for the local police.

Soon as we had Ryanair, for example,

we had more and more Brits coming here.

It's very easy to find here some cheap entertainment

that concerns girls, some striptease,

maybe even prostitution, and that it was easily available.

That brought here a lot of youngsters.

Riga responded to the influx by setting up a special

police department just to deal with the new tourists.

They were all taught English, which they would need

on their nightly patrols.

-Are you keeping us safe?

-Is that a cameraman? Hello!

The tourist police have learnt how Brits like to enjoy themselves.

In the night there are many Brits having stag parties.

There was one British guy dressed as Spider-Man,

he was, like, fat Spider-Man.

That's how they enjoy their time here.

Richard and his friends are already impressed with Riga's nightlife.

A lot going on. Lots of different places to go and see.

It's what we expected when we came here,

so it's been really good so far.

Many locals see the new tourists as a gift from low cost airlines.

Low cost airlines are doing a really good thing

because they are bringing money here.

Tourists come just for the weekend here

and they are spending enormous money.

Only when dawn breaks will the casualties be revealed.

Yes, it usually happens.

Some British guys wake up somewhere,

they don't remember where they have been, where are their friends,

where are they staying.

So it takes hours to find the place where he is staying.

BELL CHIMES

Low cost airlines are certainly a boost to Riga's economy,

but perhaps not the kind that locals would have chosen.

All these stag parties going to Eastern European cities -

do you feel you owe any apologies there?

I think you're... Look, we're a low fares airline.

We carry 80 million passengers a year.

The overwhelming majority of the passengers

we carry each year are families going on holidays, business people...

I think the apocryphal stag or hen party is a tiny proportion

of the business, and I think you'll find that in most Eastern European

cities or in Dublin or in the cities where we bring that stag party

or hen party business, they are very grateful for the business.

The stag parties have to go somewhere.

Back in the early '90s, when the young Michael O'Leary

returned from the States inspired by SouthWest,

he wasn't sure he'd be able to transform the ailing Ryanair.

Perhaps he just didn't have the personality for it.

All of our flights on time.

Michael O'Leary was a sober-suited accountant

who really sat at the side of the room, was very quiet.

People really didn't know what to make of him.

He turned up to work with blazers, he was very, very conservative.

In 1994, the airline's founder, Tony Ryan, asked his protege

to step up to the top job, as Chief Executive of Ryanair.

I really didn't want to do it. I didn't want the profile of it.

And eventually I was persuaded to do it.

O'Leary threw out the smart suits, unbuttoned his collar

and got to work.

It was a very simple choice. Close the airline or cut the costs.

It was brutal in terms of changing the model, but it changed

dramatically and quickly, and Michael was the driver behind that.

To be low cost, you really have to eat, sleep, drink and believe in low cost.

No more stuff for free.

When you took away the free stuff, guess what?

Lots of people started buying a couple of litres and 200 fags.

Even better than cutting costs was to turn a cost into a profit.

It worked beautifully with the orange juice.

Finches Orange Juice were trying to break into the UK market.

So it was very valuable for them, even as a marketing tool,

for people going from Ireland to the UK, to be drinking Finches Orange Juice.

So, at the start, we were buying that product from them

but we had to have a conversation with them then to say, "We can't afford to do this."

They said, "OK, well, we still want to be on board,

"so we'll give it to you for free."

And then we discovered that this probably was a marketing

opportunity for them, so they should pay for the privilege.

And if they didn't want to do it, we'd get somebody else.

So they said, "OK, we'll pay for it."

Then we said, "Why don't you give us the glasses as well?"

Ryanair was soon offering more flights

and lower prices from Ireland than Aer Lingus and British Airways.

High prices had kept families apart, so now even God was backing Ryanair.

Ryanair was really surprised that they found a powerful marketing agent

in the Catholic Church because the priests started preaching

from the pulpits, reminding their congregations that now there were cheap flights to Ireland,

so if they did want to go home and visit their families,

they could afford to do it, and that they should check out Ryanair.

Today, easyJet and Ryanair still follow most of the original

SouthWest formula for how to run a low cost airline.

Thanks very much, sir. Thank you, madam. Bye, now. Thank you. Goodbye.

Thank you very much. You're very welcome. Thank you. Bye-bye.

They both rely on quick turnarounds.

-Right, have we got any gloves?

-Yes, plenty.

-Would you like one?

-Yes, please, that'd be grand.

In a 25-minute stop, there's no time for cleaning staff

to come on board, so that's up to the crew.

It's amazing what gets left behind.

Laptops, iPads, passports... You name it.

Even easyJet's co-pilot helps out.

-Oh, thank you, darling.

-That's all right.

As you can see, the rubbish is now out and we are ready to go.

Morning, sir.

This team has landed in Amsterdam,

but it doesn't make much difference to them.

That's our time in Amsterdam for this morning.

That was our trip to Amsterdam.

How long have we been here?

-No passport required.

-We've been here...

ten minutes.

And the passengers, if you turn around, are already boarding,

so it's my time to go, I'm afraid.

Whatever passengers might assume, low cost airlines mostly fly

younger planes than the rest of the industry.

Each airline flies only one kind - easyJet only flies Airbus planes.

And Ryanair only flies Boeings.

It's another part of the original low cost model.

All our pilots can fly all the planes.

We only need one bank of spares for all those planes.

The cabin crew, when they get on board, know all the galleys

and everything will be in exactly the same spot.

So it's simply replicating a simple formula

and making it simpler and simpler.

The more simple we can make it, the more lower cost

and efficient it will be.

There's a final, key part of the SouthWest formula

that easyJet never adopted, but Ryanair has embraced.

It's the use of smaller, out-of-the-way airports.

If you are going to Frankfurt, they'll bring you to

Frankfurt-Hahn, which is about an hour and 20 minutes away.

You can go to Paris, but you go to Beauvais with Ryanair,

which is a good hour from Paris.

So their model has been to develop secondary airports.

They're mainly disused, old airbases that they have got

scattered around Europe.

So this is what your cheap flight with Ryanair will get you.

Conor McCarthy helped set up Ryanair's European network.

We just lined up these small airports, maybe ten at a time

and did a bake-off, tried to pick the top three and, basically,

competitive tension did the rest for us.

Most of those airports had never seen anything like it in the past,

but the prospects of them getting a daily flight to London

was just far too mouth-watering for them to ignore it.

Next, Ryanair developed a cunning scheme to make its network

of obscure airports sound more important - by renaming them.

If you wanted

Beauvais, for example, which is outside Paris,

to be designated as a Paris airport,

then the airlines that flew there had to vote for it to be such.

Since Ryanair was often the only airline at many of these airports,

the votes went Ryanair's way.

Small airports suddenly got grander.

And so Beauvais became Paris, Charleroi became Brussels,

Prestwick became Glasgow and we developed

a pretty unique way of, again, circumventing the status quo

while the other airlines were fast asleep.

So, how do airlines make money from low fares?

At Ryanair, it's a strategy of pile it high and sell it cheap.

Howard Millar is one of the company's

deputy chief executives, and its chief accountant.

-How are you? Good to see you.

-Good to see you as well.

Our objective is to keep our planes full as much of the time as we possibly can.

So to that end we are always aggressively targeting

the maximum number of bums on seats on every flight.

We're less worried about what the average passenger pays

on the basis that we've a very low break-even load factor.

And the fact that every passenger spends about 13 euros on

other things such as hotels, car hires, etc.

Ryanair's average fare is £40, but that additional revenue,

including in-flight sales, brings the total per passenger up to £52,

excluding air passenger taxes.

On the cost side, fuel comes to £20.

And, here's where being a low cost airline really counts.

Everything else, including the staff, the planes,

airport charges and financing,

comes to £26.

Which means there's a profit per passenger of £6.

Keeping costs low enough to make a profit on low fares is hard work.

For staff in Ryanair's old, cramped offices,

it means a battle for everything that costs money.

There is a head of stationery, and you go upstairs

and you request whatever item you want

and you are usually cross-examined as to whether you actually need them

and if it's a pen, you're encouraged to go to the local hotel and get them.

And if it's staples, they are given out by line rather than box. So...

I do ban us buying biros for the staff in Ryanair,

and I'm happy to supply hotel pens whenever I can.

I can give you the pen from the DeSilva hotel in Katowice.

O'Leary keeps tabs on the bigger items from his desk

at the end of the office.

Every Monday at 8.30, senior management is summoned.

You had a list of items to complete.

You had a date beside them when the items were given to you.

If you haven't achieved what's on the list,

then you're in big trouble.

And people had their shit together on Monday morning, that's for sure.

O'Leary adopted the practice from his mentor, Tony Ryan,

along with some of Ryan's personal style.

Razor-sharp mind, he's a razor-sharp mouth

and he had the ability to decimate somebody fairly quickly

if they weren't thinking in the right direction.

It was always going to be somebody's turn,

and if the hate beam came in your direction,

it wasn't a very pleasant experience.

The word is that you're pretty aggressive at those meetings.

I think, you know, some of that is sort of,

what do you call it? Water-font talk.

I think we try to have a very open culture in Ryanair.

I will be critical of people who don't accomplish what they are supposed to accomplish.

But people are equally critical of me.

And we, I think, try to foster a culture in Ryanair where I think

the person that gets criticised most at the Monday morning meetings is me.

HE LAUGHS

I don't think so.

Maybe he saw it that way, but no, I think it was pretty one-way traffic.

Is it true that you have been reduced to tears in that meeting?

Yeah, initially.

I suppose I've been in that meeting for ten years now, so I didn't like

the kind of loudness of some elements of the meeting.

But yes, I've... I can't remember the last time I cried in a meeting.

We've had a few shouts and storming out, but they are very interesting.

I don't think she's unique.

I think there'd be quite a few people, grown men included.

I mean... Nobody, to my knowledge, has ever cried

at a Monday morning management meeting, including myself.

But, you know, we don't hang around, we don't have this...

We don't hold hands and sing the company song.

Despite being on the receiving end of O'Leary's anger,

many of his managers have continued working with him for years.

You could have had the worst gouging of your life

at 9.30 in the morning, and by 11.30 he'd be

sitting in your office having a cup of coffee.

He's not out there to upset people,

but it's certainly a life experience,

and I've developed hugely as a manager because of Michael.

By 1998, four years after O'Leary took over,

Ryanair was making solid profits.

Just wait for the rest.

O'Leary had done well personally, too, after negotiating with

Tony Ryan for almost a quarter of the company's shares.

Today he's thought to be worth more than £350 million.

Do you feel like you've made enough money now?

I made enough money a long time ago.

-Have you made enough money?

-I don't know. What is enough?

Which credit card are you using to pay with?

And the expiry date is?

After the elation of easyJet's inaugural flight, there was

a drastic fall in ticket sales.

Stelios started getting worried.

We were two months in, it wasn't looking good, and at that point

Stelios pulled out his chequebook and said, "Spend, spend, spend."

In fact, I think he said,

"Spend a million pounds this week or you're fired."

In one moment I'll give you a confirmation reference for this flight, OK?

Anderson splurged a couple of million in six weeks, producing

a blitz of orange advertising in the press and on television.

Well, I mean, is two million quid a lot of money or not? I don't know.

I'm afraid they have all been booked up on that date.

It was part of launching a company, you know, you had to do it.

Do you have another date in mind?

When you spend those sorts of sums of money,

you expect an effect and we got an effect.

The public responded, the public got the message,

people could see that we had substance.

With easyJet making a splash and Ryanair already established,

the big airlines started getting interested in these new rivals.

It was the first time

we got some acknowledgement of the business model.

Until that moment the discussion was,

"Well, these things don't really work, they're not really safe,

"how can they do it for such a low price? Are they maintaining the aircraft?"

So we went from rubbishing the concept basically,

to saying, "It is a valid business model, and we're going to copy it."

British Airways appointed one of its star executives,

Barbara Cassani, to create BA's own budget airline.

She began by studying the competition.

We felt that Ryanair was... I mean, I call it a flying pub.

It was just all, kind of,

chaotic and a little bit dehumanising to customers.

And easyJet was too orange to my taste.

I thought, "How much orange can one person take?"

British Airways' own budget airline, Go, was born.

Stelios took British Airways to court, claiming Go had copied easyJet,

and was trying to put his airline out of business.

Take nothing away from easyJet, but I didn't copy them.

And in fact, what we did was we looked at all of the low-cost airlines,

Southwest in the US, as well as Ryanair and easyJet, etc, and we created our own.

Gate number is number 14, boarding time for the flight is 8.30.

On Go's inaugural flight, it was Stelios who had the last laugh.

I was wandering around the call centre,

as the folks were taking bookings, and one of them came over to me

and said, "You won't believe who I've just taken a booking for."

Stelios had booked ten seats for himself and other easyJet staff.

Somebody called the police and the police just laughed.

We got on the flight and Stelios walked up and down the aisle

talking to the passengers.

We decided to give away free easyJet flights to the passengers of Go.

And I think that took the edge out of it

because you're giving people something for free, they take it. They enjoy it.

After a couple of years, Cassani's Go started making money,

but it never got a chance to prove itself.

BA sold it to venture capitalists, who, in turn,

couldn't resist the offer made to them by...

none other than Stelios.

All the stars aligned for easyJet

and they very shrewdly took out their most effective competitor.

By allowing Go and easyJet to be merged,

BA really created a huge competitor for itself,

which was most unfortunate,

and I think the British flying public lost a great product.

To Ryanair, with its separate network of smaller airports,

Go was less of a threat than an entertaining sideshow.

I never cease to be amazed at the spectacular capacity of, you know,

legacy flag carrier airlines to screw it up.

-You have no bags you are checking in, no?

-No.

That's fine, you can go directly to security.

Low cost airlines have reversed the traditional pricing of air tickets.

In the past, if you waited till the last minute you might get

a standby ticket at a bargain price.

Boarding will be at 1 o'clock

and security straight down the end of the hall.

Today, the longer you leave it, the higher the price.

Ryanair aims to sell at least 80% of its seats.

Say we launch a route in January and the first flights were in June,

we will monitor the bookings each month as we go along

and in order to have 80% of the seats sold

by the time the first flight is flown,

we will know four to five months out from the experience

of similar routes that we've had over a number of years

that we need to have 5% sold by the end of January,

15% by the end of February and so on.

We will know whether we are over or below that target,

and if we are above it, we can increase the fares,

because we need to slow down the rate of booking,

or if we are below it, we need to reduce the fares.

We tracked the prices of

three flights from London to Berlin.

As the flight date approaches,

fares rise.

But when a flight isn't

selling well enough,

prices are cut to increase sales.

In the last few days before the flights,

the British Airways fare rose dramatically,

leaving Ryanair the cheapest, with easyJet in the middle.

BELL CHIMES

C'est tous les bijoux que je fabrique moi-meme.

Brenda Henderson is from Surrey, but she's moved to Excideuil,

a small town in south-west France.

Lovely countryside, lovely people, lovely food.

Brenda is one of many British expats in the region.

There's areas that are almost like a little England,

with lots of activities, lots of enjoyable things,

and I'm sure that community wouldn't have been as large

if we weren't near an airport

and the low-cost airlines weren't available.

At nearby Limoges airport, 80% of the traffic is to and from the UK.

Passenger numbers have trebled in the past ten years,

and the French talk about a revitalisation of the area

thanks to the British.

Excideuil even boasts its own English cafe.

If the low-cost airlines weren't around,

my business would definitely suffer.

For example, there are lots of Brits who have second homes here,

so they will often pop out for the weekend.

We wouldn't see them, I don't think, if they had to drive each time just for a few days.

Sheila Pickering moved to France more than 20 years ago,

before you could fly cheaply between England and Limoges.

It's really changed family life because they can just pop over.

The family can pop over if we're having an anniversary.

They can pop over for the weekend. This would never have happened before.

Gone are the days when it cost you,

to go to the South of France, £500.

Those times have gone. We're moving on,

and we're moving on very, very fast.

I think the greatest contribution of the concept of the low-cost airline in Europe,

at its most idealistic, if you like, is that it creates

an environment where people can cross borders easily and frequently.

Tous les jeunes comme moi alors...

However bold it may sound, it promotes peace.

BELL CHIMES

If the low cost revolution has led to peace,

it's only been achieved through conflict.

-O'LEARY:

-I've been told and it's no lie.

ALL: I've been told and it's no lie.

-O'LEARY:

-EasyJet's fares are far too high.

ALL: EasyJet's fares are far too high.

Ryanair and easyJet have argued over which is the cheapest.

Ryanair has always admitted it chases controversy

as an alternative to paid publicity.

The core of our marketing strategy is always to spend

as little money as possible advertising.

We don't have an advertising agency,

we don't use any advertising agencies.

We design them all ourselves.

We have a group of young kids who get together once or twice a week

and come up with ideas for new ads.

And the more controversial, the funnier, the more humorous they are, the better.

A classic Ryanair ad featured the Pope whispering to a nun

the fourth secret of Fatima.

Ryanair paid for it to appear in just one newspaper.

That ad went all over the world, kind of annoyed a lot of people,

offended some Catholics, and it was seen as, you know,

a really cheeky, and pushing the boat out,

but for the publicity it garnered

it was probably the best ad Ryanair has ever placed in its history.

The idea that all publicity is good publicity was tested

to destruction by Ryanair in a story that began happily enough.

The winner is Miss J O'Keeffe.

APPLAUSE

In 1988, Ryanair gave a prize to its one millionth passenger.

Jane O'Keeffe was a secretary from Dublin.

I was sitting up in the bar with my sister and I said, "No way will I win this.

"I've never won a thing in my life, and I won't win this time."

-You're trembling. Is it the drink or the excitement?

-I think it's a bit of both.

The generous prize was free flights for life on Ryanair.

For almost ten years, O'Keeffe made modest use of her free flights.

Then one day, she found Ryanair wouldn't book another flight for her.

O'Leary was now in charge.

Michael said, "I'm not having any more of this.

"You're to stop her free flights."

So yours truly was dispatched to take the free flights for life

off the person who had won free flights for life.

You can imagine what a thankless task that was.

O'Leary's objection was that there was no formal agreement between

Ryanair and O'Keeffe to support her claim to free flights for life.

Here's the free flights for life. Well, what does that actually mean?

Is it documented? No.

She had nothing in writing to evidence the prize

other than some interview on an Irish TV station.

O'Keeffe sued Ryanair.

And in Dublin's High Court,

she claimed O'Leary had shouted at her on the phone.

Mr Justice Peter Kelly found Ryanair had

breached its contract with her.

Jane O'Keeffe, he said, was clear in her recollection

and was a more persuasive witness

than the airline chief executive Michael O'Leary.

I can only reiterate what I said in court -

I was shabbily treated by them, and the judgement has vindicated me.

O'Keeffe won £43,000 in compensation.

The High Court row with the one millionth passenger was

a disaster for Ryanair, and it kind of exposed for the first time, I suppose,

how rotten they could be to customers and how ruthless they were.

We looked bad, we were bad, we looked in the wrong, we were in the wrong,

but there were whole pages of publicity about Ryanair

and so as far as we were concerned, it was another case of,

win, lose or draw, a court case is good news.

-Where are you going today?

-Oklahoma City.

The next one is at 3.10. We can put you on that one.

Ryanair was inspired by SouthWest airlines...

Check in at gate number four, to get your boarding card.

..after the visit to the States that had so influenced the young O'Leary.

But there's one part of the SouthWest formula he didn't pick up on.

I love customers.

We just enjoy each other. We really do, and love each other.

We'd much rather have a company that was bound by love rather than

one that was bound by hate.

I think one of the greatest slogans we ever had was,

"We smile because we want to, not because we have to."

-HE LAUGHS

-Wham!

O'Leary believed he didn't need that kind of thing at Ryanair.

I think that a lot of the peace and love at SouthWest

is very much a cultural phenomenon, particularly in the Southern states,

in the US, where you go to MacDonald's and you go to restaurants and it's,

"Have a nice day, y'all, missin' you, come back and see us again sometime."

That kind of schlock doesn't work here in Europe.

Tonight on Watchdog, the boss of Ryanair who says he wishes

he could charge extra for fat people and to use the loo.

Budget airlines, like the schlock-free Ryanair,

are a gift to consumer journalism.

The BBC's Watchdog gets more than one complaint a day about easyJet

and the same for Ryanair...

..usually about unexpected charges.

Hello and good evening and welcome to Watchdog...

So many people get caught out and it's very common

for the complaints to end with "I will never fly with them again

"and I want to warn anybody else not to make the same mistake we did."

Michael O'Leary, the Ryanair boss, has been listening to all that.

As long as you're talking about us, Anne, I know we're doing a good job.

OK, you've done away with check-in desks, what's next?

In many ways, Michael O'Leary is a journalist's and a broadcaster's dream

because he just comes out with fantastic quotes.

But I think all of us have to be aware that he's very media savvy

and he will use us for his own ends.

If you like high fares, don't book Ryanair.

If you want the guaranteed lowest fares in Europe, fly Ryanair.

It's a very good commercial.

Now, welcome to our very special Ryanair flight.

I'm sorry it's a bit cramped.

O'Leary makes journalists' jobs easy by coming up with stories

that write themselves, whether or not they're true.

We are, as you know, working hard on a plan to charge for the toilets.

Myself and Mike were in London and we arrived into Gatwick

and Michael needed to use the bathroom.

Of course we had no money, no change so we had to go

and buy a can of Coke in order to get the money

and of course somebody asked him about hidden charges.

And he said, "Well, actually, I'll tell you about hidden charges,

"I'm going to charge to go to the bathroom."

And of course, if Michael says something like that, the media coverage is absolutely enormous.

So it's not what actually the message is, it's the fact that

you are in the media generating lots of free publicity

that we're using ultimately to convert into substantial profits.

Caroline Green has to deal with the fallout from O'Leary's remarks.

He might make a comment in the press,

whether it's putting porn on the aircraft

or paying for the toilets, or some other... Standing up on aircraft.

People think they're ridiculous, but they do believe it, to a certain extent.

But we all know that's what Michael is, and, you know, I would

prefer if some of the comments weren't made, but that's publicity.

We asked O'Leary to clear up, once and for all, some of the myths.

-You want to charge people to use the toilet?

-False.

You want to have people standing up at the back of the plane?

No, it's never been a plan.

-Would you like to charge fat people more?

-No.

Is there a rule against Ryanair staff charging their personal mobiles in the office?

Yes, it's one of the great PR initiatives.

Does anybody obey the ban?

No, they all charge up their mobile phones.

But it makes for great PR - we're so focussed on not wasting money

that we don't even allow people to charge up their mobile phones.

Today, easyJet is launching a new route to Moscow.

While they've always been seen as rivals,

easyJet and Ryanair mostly fly to different airports

and only compete directly on a small proportion of routes.

Now they're diverging even more.

EasyJet wants to appeal to business travellers.

Russia's outside the deregulated EU,

so this route needed government approval.

What was really good was that we were awarded this

and I think it showed that we have the credibility to fly the route

and it is predominantly a business route.

So I thought it said quite a lot about easyJet today.

Carolyn MacCall is making the most of it with a press trip on the inaugural flight.

Last year, easyJet started offering assigned seats instead of

the usual low cost practice of finding a seat when you board.

MacCall denies she's making easyJet more like a traditional airline,

and moving away from the low cost model.

We are completely a low-cost airline in our operating model.

Completely. We are also a low fares airline to the passenger.

So, what I think a passenger doesn't say is

"I'm going to fly a low-cost airline today."

They just don't use that terminology.

They think, "Yeah, low fares, good value, great service. I'm off.

"I'll try easyJet."

Back in Moscow, easyJet's party of journalists

and businesspeople are entertained at a local restaurant.

The highlight is a performance by a couple of easyJet cabin crew.

# We flew here to Moscow Flight 8401

# We're known as Pearl and Dean

# Que sera, sera

# Whatever will be, will be

# The future's not ours to see

# Que sera, sera. #

APPLAUSE AND CHEERING

If things appear to be going well for easyJet,

it's despite a long-running battle over different visions of its future.

Surprisingly, it's easyJet's founder who's sceptical about how much more can be achieved.

He's worried that rising fares caused by rising fuel prices

and higher charges by airports are eroding the company's profitability.

The available opportunity to grow this business must have

gone down because the costs have gone up.

As easyJet's biggest shareholder,

he wants to stop the company buying new planes.

Every airline at the end of the day goes bust because it buys

one aircraft too many that flies on one unprofitable route.

And multiply that by 150, and you end up like Pan American, TWA

and other great names of the sky.

Stelios's fears are at odds with easyJet's management.

For the airline not to buy any more planes, we would be in decline

and we believe that we can continue to grow, as I said,

to grow profitably and to deliver returns to shareholders.

Welcome, easyJet, for their first flight and more opportunities

for more Russians to come and see more of Britain.

So how much more scope is there for low-cost airlines to grow?

That's great, hold that there, thank you.

Well, while the average Brit now makes more than three short haul flights a year,

in France, it's less than two,

and in Poland it's less than one flight every two years.

Carolyn, down here, please.

So, if the rest of Europe starts flying as much as the British,

low-cost airlines should continue to do well.

But Stelios has his doubts.

I mean, some of these countries that display a very low propensity

to travel is because they live in a very beautiful country in the first place.

Remember, you live in the UK,

and you're conditioned over the last three or four decades that

holiday means getting on an aeroplane and going to the sun, mostly,

away from your country, because your country doesn't have sun.

But this doesn't happen in the South of France and in Spain and Portugal.

They live in the sun already.

Despite Stelios's fears, easyJet's announced plans to order 135 new planes from Airbus.

But McCall says the battle of the low-cost airlines is about customers.

The difference between easyJet and Ryanair is that we have

really good service on board and on the ground

and we care about our passengers. There's a big difference there.

You don't think Ryanair cares about their passengers?

I'll leave you to judge that.

I think we're the airline that people love to hate.

You know, there's the sensationalism that comes out of Michael's interactions with the press,

but underneath the covers we're an incredibly efficient airline.

We're today announcing and celebrating four new routes here at Katowice...

As a business, Ryanair is now valued at £7 billion -

more than both easyJet and British Airways.

The strategy remains what it's been since O'Leary took over.

We cannot offer low fares without having a really low cost base.

So that means that if we have to get up in the morning

and have a fight with everybody, we will.

We are absolutely determined to do that.

Any of the carriers that we have seen that have failed

have all lost one thing - they lost control of their cost base.

And you do that in this industry at your peril.

This is a very, very competitive industry,

very, very capital intensive, and if you are not in control of your cost base,

you've got lots of problems coming your way.

In April, Ryanair demonstrated its confidence in the future with

an order for 175 new planes from Boeing.

I still have this vision that, in time, the flights will be free,

but we'll get paid for all the other optional services around.

Now, we're not quite at that level yet,

but you can really begin to say to people around the UK and Europe,

"Your flight will cost 20 quid.

"In five years' time, it will cost ten quid.

"And then in ten years' time it might cost 5 quid."

Then we'll be carrying 500 million passengers. And why not?

A realistic ambition from one of the most successful

executives in the business - or just another piece of O'Leary spin?

You decide.

-How many more cities today, then?

-Two more cities today.

We do... Next is Wroclaw, and then back home to Dublin.

Should be back in the office by about 4 o'clock.

And then the day's work has to start.

All the best.

Subtitles by Red Bee Media Ltd