By Conor Humphries
DUBLIN (Reuters) - Ryanair (ISE:RY4B), Europe's biggest budget airline, has promised to transform its "abrupt culture" in a bid to win customers from costlier rivals, admitting for the first time that a reputation for treating its passengers badly might have become a problem.
The Irish firm, this week voted the worst of the 100 biggest brands serving the British market by readers of consumer magazine Which?, said on Friday it would become more lenient on fining customers over bag sizes and overhaul the way it communicates.
"We should try to eliminate things that unnecessarily piss people off," Chief Executive Michael O'Leary told the company's annual general meeting, after several shareholders complained about the impact of customer service on sales.
He said the company would overhaul its web site, set up a new team to respond to emails and stop fining customers whose carry-on baggage exceeds minimum sizes by a matter of millimetres.
"A lot of those customer services elements don't cost a lot of money ... It's something we are committed to addressing over the coming year," O'Leary said.
While Ryanair's obsessive focus on cost cutting has enabled it to become one of the world's largest airlines, flying more scheduled international passengers last year than any other airline, shareholders complained that the company's reputation for poor customer service was limiting its room for growth.
"I have seen people crying at boarding gates," said private shareholder Owen O'Reilly. "There is simply something wrong there that needs to be addressed."
O'Leary, who for years has scoffed at complaints about customer service, citing statistics about revenue growth and on-time departures, nodded sheepishly as other shareholders chimed in with anecdotes about family members refusing to fly Ryanair and verbal attacks they had suffered at dinner parties.
"I am very happy to take the blame or responsibility if we have a macho or abrupt culture. Some of that may well be my own personal character deformities," O'Leary said.
He said no significant management changes were planned during the roll-out of the new customer service model and he had no intention of stepping down after shareholders pinned much of the blame on him for the company's abrupt style.
O'Leary said he was personally irritated by the fact that some Ryanair staff fined customers when their carry-on baggage was slightly above the maximum size, which along with charges for not printing out boarding passes, is one of the biggest bugbears cited by many customers.
He said management would now be encouraging staff to be more lenient with customers on bag size.
"If it's a millimetre over size, get on with it. We are not trying to penalise people for the sake of a millimetre, he said.
A company spokesman later denied recent media reports which alleged that staff can earn bonuses for charging passengers for oversized hand luggage, saying Ryanair staff do not receive any incentives for levying such charges.
O'Leary denied that the move to change the airline's culture was a reaction to competitive pressures.
But he admitted that rivals like easyJet (LSE:EZJ), Ryanair's largest low-cost competitor, were basing their entire public relations strategy around the fact that their customer service was seen to be better than Ryanair's.
A front-page headline in Ireland's Daily Mail newspaper on the morning of the shareholder meeting said, "Ryanair sinks to new low", after a Dublin surgeon was charged 188 euros to reschedule a flight days after his entire family was killed in a fire in England.
O'Leary apologised, said the customer would be refunded, and promised to deal more quickly with similar cases in future.
"They aren't changing their fundamental business model, but this is significant. There is clearly low-hanging fruit because of perceptions in some markets," said Davy Research analyst Stephen Furlong.
"There is a bit of a lull before Ryanair's next plane delivery so they seem to have decided to put some time and energy into improving things around the edges," he said.
Ryanair's shares were up 0.2 percent at 6.30 euros at 1209 GMT on Friday.
(The story has been filed again to correct paragraph 19 to read 'Davy Research', not 'Goodbody'.)
(Editing by Mark Potter and Greg Mahlich)