Ryanair could face a €100m workers bill after its cancellation nightmare

But the airline’s low-cost business model remains ‘intact’, one analyst says.

By Conor McMahon Reporter, Fora

RYANAIR’S BILL FOR staff pay rises could be as much as €100 million, according to a pundit at Goodbody stockbrokers.

In a morning briefing note, analyst Mark Simpson said labour cost increases at the low-cost carrier will likely be hard to offset over the next 12 months.

Ryanair last month announced the cancellation of thousands of flights due to a shortage of available crew members.

Some 315,000 passengers were affected by the decision, although the airline said yesterday that the vast majority have been compensated or re-routed on different flights.

Earlier this month, chief executive Michael O’Leary sent a letter to pilots offering them a pay increase of €10,000 for captains and €5,000 for first officers if they didn’t jump ship to rival carriers. They were also offered a “productivity/loyalty bonus” of €12,000.

O’Leary offered the incentives on the condition that negotiations were held between the company and in-house ‘employee relations committees’, or ERCs. Ryanair said it would not negotiate with third-party trade unions.

Goodbody said the pay increases and bonuses are “expected to cost €70-€100 million over the next year”.

Ryanair press conference Ryanair CEO Michael O'Leary
Source: Niall Carson/PA Archive/PA Images

Rejection

However, there have been reports that some cabin crew, namely at Stansted Airport, have rejected the pay increase offer.

Some workers have formed a centralised, European ERC. As previously reported by Fora, foreign airline workers have offered training and funding for Ryanair pilots to “unify” under one organisation.

Meanwhile, Italian media have been reporting that members of the local union, Fit-Cisl, are planning strike action on 27 October, shortly before Ryanair announces its 2018 half-year results.

Goodbody’s Mark Simpson said its expected that the airline will report a net profit after tax of €913 million for the first half of next year – virtually unchanged compared to the same six-month period this year.

However the stockbroking firm said it believes Ryanair’s “lowcost/high growth (business) model is intact” and welcomed the fact that Ryanair is addressing “internal reporting issues”.

Separately, Ryanair confirmed that former-director Peter Bellew will rejoin the airline as chief operations officer. It was announced earlier this month that Michael Hickey was stepping down from the role.

Bellew, who is currently chief executive of Malaysia Airlines, will take up the job on 1 December.

The airline said he will take up a “specific responsibility for pilot production, training and career development” to ensure that Ryanair’s rostering failure “will never be repeated”.

Sign up to our newsletter to receive a regular digest of Fora’s top articles delivered to your inbox.

Comments