Ryanair scraps more flights, ends Alitalia bid

PILOT SHORTAGE

BENJAMIN KATZ LONDON • Ryanair Holdings PLC will extend flight cancellations into next year while dropping plans to bid for bankrupt Alitalia SpA as Europe’s biggest budget carrier seeks to come to grips with the crisis surrounding a pilot shortage.

After shocking customers by abruptly scrapping flights earlier this month, Ryanair said it will operate 25 fewer planes than planned during its winter schedule starting in November, and 10 fewer from April. That will mean cancelling 18,000 flights on which about 400,000 passengers were booked, bringing the total number affected to about 715,000.

In additional fallout from the crisis, Ryanair has informed administrators managing the bankruptcy of Alitalia that it is withdrawing from the bidding to “eliminate all management distractions,” the Dublin-based company said in a statement on Wednesday. Avoiding the risk and cost associated with the Italian carrier helped buoy Ryanair shares, which rose the most since November.

By scrapping more services, the airline aims to comply with changes to Irish labour laws requiring it to squeeze a year’s worth of vacation into nine months in 2017 and ensure that there’s no hangover into next year. The groundings will also create spare aircraft and crews, so that no further cancellations should be necessary, the company said.

All passengers affected by cancellations have been offered “re-accommodation or full refunds,” chief executive Michael O’Leary said in the statement. The cost of free ticket vouchers issued to passengers affected in the new round of cancellations will be about 25 million euros (US$29 million), bringing the tally since the start of the crisis to almost 50 million euros.

Ryanair cautioned that it expects to see a softening in yields or fares over the next two months as it offers a range of seat sales to win back unhappy passengers. Discount carriers operate a reduced schedule in the slower winter season, and the company will suspend 11 routes as part of the usual adjustment, it said. The carrier is still forecasting a profit after tax of 1.4 billion euros to 1.45 billion euros in the year ending March 31.

All told, Ryanair expects to fly 129 million passengers in 2017, two million fewer than it had previously planned, according to the statement.

The stock rose 3.9 per cent, the biggest jump since Nov. 7, boosting gains this year to 18 per cent and valuing the company at 20.2 billion euros.

The business changes helped reassure investors that “the issues are put to bed,” Mark Simpson, an analyst at Goodbody Stockbrokers, said by phone. “Ryanair put together a clear defined response which critically weakens any bargaining position its pilots might have had.”