Michael O'Leary, Chief Executive Officer of Irish airline Ryanair HARDtalk

Now on BBC News, it's time for HARDtalk.

Welcome to HARDtalk from Dublin.

I'm Stephen Sackur.

Ireland was battered by the financial crisis in 2008.

It picked itself up from the floor, but now this country faces another

potential crisis, this time not of its own making.

It's all about Brexit, which could have a massive impact

on this country's economy.

My guest today is one of Ireland's leading businessmen -

Michael O'Leary, the boss of Ryanair.

Can Ireland avoid the Brexit blues?

Michael Owen Louis, welcome to HARDtalk.

It's a great pleasure to be here and welcome to sunny Dublin.

Thank you very much.

How big a problem is Brexit for you right now?

No, it went altered the business plan.

It was to grow from 100 million passengers last year to about 180

million passengers over the next eight years.

But it is clear we are going to have to pivot some of that growth away

from the UK, so I think the UK will lose out,

certainly over the next two years, as there is this political

and economic uncertainty.

But Ryanair will continue to grow strongly, just more of that growth

will take place in continental Europe instead of the UK.

But businesses don't like uncertainty and there is now

uncertainty all over the place, not least among your passengers,

who don't know what their own incomes will look like,

and they also don't know, looking ahead two, three,

four years, about how easy it is going to be to

travel around Europe.

So when you're making a plan, for your future, suddenly,

uncertainty is everywhere.

It is, but in Ryanair we love uncertainty, because we have the one

great response to uncertain times and uncertain economic times

and that is lower prices.

We issued a profit warning last week on the back of the fact that we're

going to cut fares this winter by 15%.

An unheard of reduction in air fares.

But that's eating into your profits.

I think that's a good thing.

Do you think your shareholders feel the same way?

Given what has happened to your share price.

My shareholders can wait in line.

It's much more important that we are looking

after our customers, that we are reducing the cost of air

travel for our customers.

And over the longer term, our shareholders will benefit.

But in the short-term, they'll have to take some pain.

The problem is, it comes back to how much pain you're

going to have to take.

You don't know, for example, how low the pound is going to go

against the dollar, but that is another big,

big problem for you.

It's not really.

I mean, the UK accounts for about 25% of our revenues.

It's your biggest market.

It is.

And the pound is now so much weaker, again, it's going to lead people,

ordinary families across the UK, to think, can I afford

that foreign holiday?

Can I afford to fly Ryanair?

What it will do is leave more and more of them to book Ryanair

because it's the only way they will be able to afford

those holidays in Spain, in Italy, in Greece,

all over Europe.

Let's talk about that phrase you've already used in this interview

and you've used it before as well, this pivot that you feel you now

have to to make away from your core operations in the UK.

What does that really mean in practical terms?

Firstly, our core operations are not the UK.

Core operations are Europe.

The UK accounts for about 25% of our revenues, Europe about 75%.

I think our plan next year in 2017, Stephen, is we were going to grow

capacity in the UK by about 12%.

We now expect to grow by 5%.

So we've halved our rate of growth next year in the UK.

And we've reallocated those aircraft and those additional flights

to countries like Germany, Italy, Poland, where, frankly,

we can continue to grow without the risks of Brexit

or the economic uncertainty of Brexit.

Some of those flights will operate back into the UK,

but there will be less capacity in the UK for the next year or two

while somebody tells us what the hell is going

to happen with Brexit.

So yours is one significant example of the way in which Brexit

and the uncertainty that comes with it is doing real material

damage to the UK economy.

I think there is no question in my mind that Brexit will do...

I say, the uncertainty over Brexit, I mean, we have to be careful here.

We are still two years away from Brexit.

Sure.

So we are in a period of great uncertainty, not helped by the lack

of political leadership in the UK, because nobody in the UK has a clue

what Brexit looks like.

And we simply have to to whether our way through that uncertainty.

Here's a quote from a very grumpy Michael O'Leary after June 23.

You said, whether the UK leaves the EU or stays,

frankly, I couldn't care less, the issue for us is all

about whether the UK stays in the single market.

Yes.

Well since you said that, I think it's become clearer

that it's very unlikely that we are either going to stay

inside the single market or have extremely preferential access to it.

Given what you've heard in the last few days and weeks,

what is your view of the final deal that is likely to be done?

In my view, I think the final deal will be the UK will stay

in the single market.

Really?

Yeah.

I think they'll concede open borders.

Have you had any clue from anybody in government that that's the way

they are heading?

Absolutely..

And look, I called the referendum wrong, as well.

So that is just wishful thinking on your part.

I don't think it is.

I think it is the more practical reality.

Remember, most of the UK population in the referendum were sold a lie.

The lie was that you could leave the European Union but stay

in the single market.

It's now becoming quite clear you can't.

You are either going to stay in the single market,

in which case you will obey European regulations and you will concede

free movement of people, which I think ultimately

is what is going to happen, or you leave, in which case the UK

economy is going to suffer a very long and very dark recession.

Let's suppose that actually it's a hard Brexit, as they say,

and that we accept the WTO basic trade arrangements with Europe

from the point of view of the UK and nothing more.

At that point, would you have to seriously reassess your entire

operation in the UK?

Again, it's hard to know, Stephen, because it depends

on what the UK does with open skies.

If the UK leaves open skies, and it's again hard to envisage,

you could go back to UK citizens needing visas to go on holidays

in Spain and Italy and in Greece.

Again, it's hard to envisage, but if they do, at the end

of the day, the UK citizens will still want to go

on holidays to Spain, Italy and Greece -

it may be more expensive, it may be more cumbersome,

they may need visas, but people will still fly.

And the evidence of our growth over the last 30 years across post-9/11

and wars, pestilence, is people will keep flying.

You have got also a very specific problem about your shareholder base.

What percentage of your shareholders are UK-based?

We think are probably about 25% of our shareholders

are UK nationals.

And again, if the UK leaves open skies, it looks...

In theory, you may have to to treat the UK shareholders as non-EU

shareholders, like American shareholders.

Of course you would.

And force them off the register.

But the corollary of that is BA, IAG, will also have to separate

BA from Iberia.

They won't be able to own each other.

It will cause chaos within the airline industry,

which is why again it's almost hard to envisage that hard Brexit

will actually be the outcome.

Again, because even if it is...

Frankly, the decision being made upon the interests of businesses

like yours is a political decision.

I understand.

But the political decision is based on the assumption that you can

control your borders.

Look, we had a hard border between the north of Ireland

and the Republic of Ireland for 30 years, with British Army

troops manning the border, and they were never able

to secure the border.

So this idea that the politicians are selling in the UK that you can

control your borders, if only we leave the single market,

A, is absurd, B, is undeliverable, and C, I'm not sure when the real

reality dawns of the UK electorate and UK politicians that you can't

stay in the single market, I think they'll change their minds.

A final specific on your business, then I want to broaden it out,

I think I am right in saying that this year you are getting

50 new planes.

Yep, every year.

Major investment.

How many of those planes, given what you are seeing happening

in the UK, are you actually going to put in the UK?

Originally, Stephen, we were going to put about 12

of those aircraft in the UK in 2017.

Now where going to put none in the UK.

None?

None.

They will all be based at European airports.

Now, some will still fly back into the UK.

We will add some flights to probably UK regional airports.

We are not growing at Stansted, we are not growing in Manchester,

but we are growing in places like Edinburgh and Glasgow.

So some capacity.

You have characterised the Brexit vote as madness stop do you take

some responsibility for it, and in that I mean...

I've known you for a long time.

I was there in 2004 in Brussels when you came out of a meeting

with the European Commission describing the European Commission

as, this is a direct quote, the evil Empire.

And every year since you have taken every opportunity to slag off

Brussels, slag off the institutions of the European Union and suggests

that it is deeply dysfunctional.

It can't be any surprise to you that the British,

hearing what you say about the EU, decides to walk away from it.

I think it was a huge surprise.

Firstly, we have been consistently critical of the,

I think, the corruption, the kind of bad policies that come

out of the European Commission in particular.

But we have consistently over 20 years been a singular advocate

of the single market.

In fact, we've campaigned twice in Ireland.

Forgive me, but why wouldn't the British people, listening

to you describe the commission, the executive arm of the EU,

as the evil Empire, why would they want to stay in this evil

Empire?

Because I think you've only got two choices and,

frankly, I supported David Cameron's position,

which was, you stay in and reform from within.

There is a significant desire to see reform and efficiency

within the European Union.

You go back to the days of Margaret Thatcher,

when Europe was a single market and it was a competitive

single market.

It's brought about low fare air travel, which is just one

of the great things it has delivered.

What has happened in recent years, it has moved away from advocating

a single markets towards this kind of political union,

which nobody, frankly, supports.

Which suggests that, in many ways, to many people,

it is unreformable.

Only a month ago, you made a big noise here in Ireland by telling

the Irish government, it your best advice,

to tell the EU to F off over an EU ruling about tax and Apple.

Yeah.

Again, it's about a sort of tone you adopt, a responsibility that

you've taken upon yourself to constantly tell the public that

the EU and all of its institutions are deeply dysfunctional, are not

operating in their interests.

Again, it's a selective review of history.

I've campaigned actively on the two Irish referendums on Nice

and on Lisbon in favour of a Yes vote in Ireland.

I campaigned actively in the Brexit referendum in the UK in favour

of a Yes vote, because I believe in the single market,

I believe in the European project as a single market,

but yes, the Commission has not delivered.

It will continue to fail unless we who are within that stay

in and reform.

Let's move on to a very important but different decision facing the UK

Government, that is where to put a new runway to serve London

and the south-east of England.

You've taken a view on it, you've expressed an opinion

that they ought to be building more than one new runway.

Sure.

All the noises we get and I should say we are recording this interview

before the latest government statement on this, but all

the noises we get is that they favour going ahead

with a third runway at Heathrow.

If that's the decision, what is your view of it?

Well, firstly, we are recording this just after they announced

that they are going to dither and fudge for at least another 12

months, which is a shame.

They call it necessary consultation.

But the bottom line is...

They've been consulting on this thing for 15 years.

They keep kicking the can down the road.

The bottom line is one runway in the south-east is not sufficient.

Even if you approve Heathrow runway three, it won't be delivered

for another ten years.

It would be fall before it's even completed, and that assumes

you can move the M25, or tunnel under the M25.

The way to address this, and the UK is particularly bad

at dealing with these big infrastructure projects,

whether it is wrong ways or HS2, is to actually let

the market deliver.

You have three competing airports in London.

Heathrow, Gatwick and Stansted.

Pretty good road infrastructure, pretty good services there.

Allow each airport to build another runway.

I fail to understand what the UK Government is doing in the middle

of the decision on providing infrastructure.

Let the three airports provide their own runways,

if they want to build another runway.

The only way to solve this problem for the long-term in the UK

is to not permit one but actually to authorise three additional

runways in the south-east, while at Heathrow, one at Gatwick,

one at Stansted, because it is only by providing that competing

development you'll keep the cost of that runway infrastructure down.

You have always, as long as I've been talking to you,

had these massive and ambitious expansion plans for Ryanair.

You once said, in 30 years' time I hope Ryanair won't be carrying 100

plus million passengers, I hope we will be doing

ten times that.

Which logic would suggest would be 1 billion passengers a year.

It must have been a very fine bottle of wine!

When our you going to realise that actually just constant expansion,

constant growth, cannot be maintained?

Yes, you're right, over the longer term, but certainly we have a plan

and we have aircraft orders in place now to grow to 180 million

passengers over the next eight years.

And Ryanair will carry on...

Is there a part of view that's actually beginning to regret some

of that ambitious, 10-year plan?

Do you really need all those aircraft?

Yes.

Because the prices we're charging...

Demand for Ryanair services all across Europe, in the UK,

in Ireland, all across Europe, has never been higher.

The message hasn't changed, that's clear, but, actually...

Prices have.

They have come down.

I will tell you what else has changed, and you would acknowledge

it, I guess, your tone.

You had to change the way you approach to the customer

because you used to be proud of being, well,

let's say - you said it yourself - cheap and nasty.

And you said, we've got to change and be cheap and cheerful.

How hard is it for you to be cheap and cheerful at the same time?

I think it's been a learning process.

I think that the last 15 or 20 years in Ryanair,

we were obsessed with having the lowest costs, and it almost

didn't matter how you treated the passengers as long

as it was cheap..

Absolutely.

And we passengers felt it every time we got anywhere near your airline.

True.

Except the passenger numbers kept rising.

I think we should have rear lies to earlier than we did,

-- I think we should have realised earlier than we did,

actually passengers want a bit more service.

They are not...

They want more than just the basic safe on-time flights.

We should have given allocated seating, we should be nicer

when problems arise.

We should address some of the passengers' concerns.

And we are working very hard to do that.

It's interesting that you say, given the Brexit climate

and the uncertainty in the UK, we are going to pivot much

more our European-wide operations - that's where our expansion lies

and where our future lies.

The trouble is, the way you run your airline runs counter

to so many of the sort of social and economic policies

and regulations that are in place in key European markets for you.

You are being taken to court in France.

In fact, you lost a big court case in France and you are appealing it.

We lost the local case.

You are in huge trouble with the German tax authorities,

because of the way you claim the pilots working for you are

self-employed and the German authorities say they are not.

You've got a problem that your values are not

European values.

Not true.

Firstly, we are the fastest-growing airline in Europe.

What's not true about what I just said?

We are the fastest-growing airline in Europe, so last year we carried

106 million passengers, this year 119 million passengers.

So the consumers of Europe supporters.

Let me deal with a couple of issues.

We are being attacked by the French government over employment of pilots

and cabin crew in France.

We don't employ any pilots or cabin crew in France.

All of our pilots, all of our cabin crew were Irish, employed on Irish

contracts, flying Irish aircraft.

And the French courts believe that they are fundamentally

working in France.

And yet they are not.

The way you arrange it is unacceptable.

There is no evidence to support that.

The evidence is that the courts have decided against you.

The local French court in Aix-en-Provence,

which we will be appealing.

The European Commission supports our stance,

as does the Irish government, which requires us as an Irish

airline that all of our employees flying on Irish registered aircraft,

which are legally defined as Ireland, must pay

their taxes in Ireland.

The German case is interesting too.

The German cases have already said that Ryanair is not involved

in the German cases.

There are a number of pilots who are employed...

Who do they fly for?

Who are employed by Ryanair.

Thank you.

Who have paid their taxes in Ireland, sought a refund of taxes

in Ireland, because they were resident in Germany,

and then didn't pay their taxes in Germany.

The Germans have looked at the working conditions...

We are cooperating with the German authorities who have publicly

confirmed that Ryanair is not the subject of these investigations.

We are fully tax compliant in every country in Europe,

but there is a dispute in France.

Yes.

But these pilots in Germany are claiming the conditions

they work under our actually dangerous.

They've talked about the prevalence of pilots and copilots

under your working conditions who doze off mid-flight

as well as make increased errors as a result of fatigue...

Untrue.

..Because of the contract you impose upon them.

Those are false claims made by German pilots' unions.

The contracts we impose upon our Ryanair pilots,

under which, by the way, by law in Europe you cannot fly more

than 900 hours in the year, which is an average of 18 hours

a week, for which you get paid up to 150,000 euros a year -

which is why we have a waiting list of over 3000 qualified pilots

who want to join and fly with Ryanair.

Now, in Germany, you have the German pilots' unions, none of whom have

members in Ryanair...

Who would say, and I am quoting them directly,

these contracts throw pilots working conditions back into the 19th

century and play no part in our society today.

It just comes to this point.

You can say there's a justification for it, I'm just saying to you...

I didn't say it was a justification for it.

I said we employ more than 3000 pilots.

There is a waiting list of pilots who want to join Ryanair.

Before we end, I want to broaden the horizon from your business

and the way you operate in Europe to a bigger thought about Ireland.

Now, you are one of Ireland's richest, most successful

businessmen.

You're a sort of poster boy for Irish economic success over

the last generation.

You are.

You can laugh, but you are.

But, right now...

And much hated here in Ireland, hut nevertheless...

Oh, I know that too, believe me.

An Irish former Prime Minister said just the other day that,

in his opinion, the fallout from Brexit - and as we have

discussed, it hasn't happened yet, but it is going to happen -

represents the biggest challenge to Ireland and the whole Irish

economy in 50 years.

Do you think he is right?

No, I think we worry overly about the impact of Brexiteer.

Look, we're longer tied our currency to sterling, but it's clear the UK

is one of Ireland's biggest trading partners.

I think the real serious issue's over the border between the Republic

and the North of Ireland.

And I worry about the imposition of a hard border, which I think

is inevitable.

Do you?

Oh, yeah.

One idea being floated in London is that somehow the Irish

authorities will take on board the border duties that one might

have seen at a hard border with Northern Ireland and actually,

for example, entry point in Dublin airport will be policed along

the lines and the wishes of the British Government.

But you see there's lots of this nonsense being talked

about in London, where they are essentially

talking to themselves.

I think it's going to be very difficult when you have

Boris Johnson and David Davis and Liam Fox go to Europe,

file their Article 50 notification and are then told,

you can have the single market, in which case you obey free movement

of people, or out.

And if it's out, I think there will be a hard border imposed.

What will that do for the Republic of Ireland?

The Republic of Ireland, we will adapt as we have always done

over the years.

We will continue to trade successfully with the UK,

although it would be a much more difficult trading environment,

and we will continue to trade successfully with Europe.

We will adapt and we will find a way round.

But there is no doubt in my mind that the UK economy will suffer

a very deep and prolonged recession if they move out

of the single market.

I think Enda Kenny, the Taoiseach, the Prime Minister here,

believes that actually the people who suffer the most might be

here in the Republic.

I mean, he's talking about convening...

I think he's calling it a civic dialogue of business leaders,

politicians, for early November.

As I said...

You roll your eyes.

Are you not interested in participating?

Talking shops set up by politicians to talk more about these things

are a complete and utter waste of time.

Like most business people, I just get on and deal with it -

whatever the consequences of Brexit, we'll deal with.

Ryanair will pivot some growth away from the UK,

but we'll continue to grow strongly.

I do worry though, and it is one of the reasons I was critical

of the Irish government response to the EU Apple tax ruling,

here you have the European Commission.

We have sovereign - we are a sovereign state.

We have autonomy over our tax decisions, so if the Irish decide

to tax Apple at 12.5%, they are free to do so.

You can't have the European Union, though, ten years after the event,

coming along saying, oh, no, we think that was illegal state aid.

The point I've made is, why haven't they gone to the UK

and told them, listen, we don't like the res non-doms

in London - we think you should be taxing all the Russian oligarchs.

They wouldn't dream of doing that.

So this is an example where the European Commission

is trying to bully Ireland and Ireland needs to do more.

Rather than just appealed the decision, we need to tell

the European Union to politely foxtrot Oscar because that's

the only language they understand.

It's the only language you seem to be able to use...

Well that's a bit unfair, but nevertheless.

When the European Union tells Ireland in a Brexit scenario,

you must put up walls around the North of Ireland,

you must have a hard border, Ireland needs to have a much more

robust response with the European Commission.

It is not in Ireland's interests and we are not going to impose some

hard border between the North and the Republic of Ireland.

And if the European Commission doesn't like it, they can

go to hell.

Well, you're not mincing your words, but to take that thought

one stage further. but to take that thought

Enda Kenny said recently, Brexit negotiators should be

prepared for a prospect of a referendum on uniting Ireland,

ie, the truth is a majority of the people of Northern Ireland

actually voted to remain.

Do you, as an Irishman, think there is any possibility

that this whole sort of Brexit uncertainty could,

in the long run, be the harbinger of a debate about uniting Ireland?

Look, I think that's a very sensitive subject.

Of course it is, but what do you think?

We have peace in Northern Ireland for the last ten years,

which is a phenomenal achievement on all sides.

I don't think it is appropriate for somebody in the Republic to be

going, we want a united Ireland.

We want peace in Northern Ireland.

This isn't your first appearance on HARDtalk.

In 2009, you said this, "I think there's going to be

a certain time in the development of Ryanair where it is appropriate

to take me out and replace me with somebody else, and I think that

may be in the next two or three years."

You said that in 2009.

Yeah.

Well, you're still here.

Just goes to show how bad I am at predicting the future!

So when are you going to take yourself out?

I mean, look we have a plan for the next five years to grow

to 180 million passengers, we have very exciting developments

in Ryanair labs, in the digital platform, and it's a very exciting

time in this industry.

So I've signed up for another four years to take me too,

I think, the end of 2018...2019.

And I think we - I and the board - will revisit it at that stage,

and, if the board is happy with the way I am performing,

then who knows, they will either ask me to leave or I can stay on.

So you will be the guy who has to cope with what ever actual Brexit

brings to Ryanair?

I hope so, but I am fairly sure what it will bring will be lower

fares and many more millions of customers.

Michael O'Leary, I am going to stop you right there before

the advertising gets really unbearable.

Thank you, Stephen.

Thanks for being on HARDtalk.

Thank you very much.

A great pleasure.