Ryanair sees risk to 2020 growth if 737 MAX grounded beyond November.
Disruption set to hit a new peak with at least 400 flights lost
LONDON: Ryanair Holdings Plc is grappling with major strikes for the first time in its three-decade history.
Disruption is set to hit a new peak with at least 400 flights lost across five nations as pilots ramp up a bid to wrest better contracts from a company defined by its penny-pinching culture.
At stake is Michael O’Leary’s no-frills strategy, its boss since 1994. Many of the demands being pursued by unions representing pilots and cabin crew – from higher salaries and pensions to free drinking water – would lift expenses, something chief operations officer Peter Bellew says is unacceptable if it threatens the discount model; the same Bellew who was COO of Malaysia Airlines Bhd in 2015 before becoming its CEO soon after.
He left MAS to rejoin Europe’s biggest low-cost airline in 2017.
O’Leary famously vowed never to accept unionisation, but backed down in December after rostering foul-ups roiled Ryanair’s schedule.
The unions were relatively quiet early this year as they drew up their demands – but battle was joined at the start of the summer season, when planes are packed and Ryanair makes most of its money, allowing strikers to hold its feet to the fire.
Pilot grievances vary from country to country and can be pretty technical. Some want Ryanair to raise the fixed component of their pay and cut the variable part, which depends on flying hours, so that salaries become more predictable.
Others want to make it harder for the carrier to move them to different cities.
Pilots are “not nomads who set up their tents where Ryanair is smelling business,” German union Vereinigung Cockpit said this week.
Cabin crew demands are mostly more straightforward.
A charter presented by staff from 21 countries seeks a “fair living wage,” unpaid leave, reductions in agency employment, a universal pension scheme – and an end to being stung for an in-flight gulp of water.
Labour representatives haven’t sugared the pill; VC says Ryanair must accept that personnel costs will rise and productivity fall.
Ryanair told 300 staff at its Dublin base that they may lose their jobs this winter as demand ebbs, and that they should consider moving to Poland.
At other times the tone has been more conciliatory, such as an offer of mediation to resolve the dispute in Ireland.
Ryanair’s apparent mood swings is that the left hand doesn’t know what the right is doing, with management divided on the best approach, said analyst Andrew Lobbenberg at HSBC Global Research.
A more generous view would be that the airline is employing “good cop, bad cop” tactics, he said.
Shares of Ryanair have declined 10% this year, but with a market value of 15.5 billion euros (US$18bil) the group is still just about Europe’s most valuable carrier, narrowly ahead of British Airways owner IAG SA.
A lack of clarity about how much unionisation will add to costs is the major concern.
“The degree of magnitude is uncertain,” says Jonathan Fearon, investment director at Standard Life Aberdeen Plc, who has resisted selling down his stake and is betting that the strike amounts to “an interruption in a good long-term story.”
A spokesman for the airline did not respond to questions about the bill for disrupted flights, but refunding thousands of passengers won’t come cheap.
Ryanair has budgeted 200 million euros for rising staff costs this year, half for higher pay, half for a rising headcount as it continues to expand even amid the walkouts.
Unit costs excluding fuel will increase by 6%, partly because of higher pay, it said in May.
Then there are other less-tangible costs. The industrial action has forced the airline to cut fares, Bellew said at a briefing in Frankfurt on Wednesday, while chief marketing officer Kenny Jacobs reckons the labour strife has put some potential customers off booking. — Bloomberg
