Ryanair’s penny-pinch­ing runs into fierce head­winds with pi­lots

CEO vows to fight any union­iza­tion

National Post (National Edition) - - FINANCIAL POST - BEN­JAMIN KATZ Bloomberg

LON­DON • Michael O’Leary built Ryanair Hold­ings PLC into Europe’s most valu­able air­line by be­ing cheap, right down to charg­ing pi­lots for cof­fee on their own flights. Now those avi­a­tors are push­ing back.

A group of dis­grun­tled flight crew is de­mand­ing more pay, bet­ter con­di­tions and the abil­ity to bar­gain col­lec­tively across Europe. They’re em­bold­ened by ris­ing de­mand for pi­lots at ri­vals and a sched­ul­ing foul-up that forced Ryanair to scrap more than 20,000 flights, un­leash­ing an out­cry by ag­grieved cus­tomers and a re­buke from Bri­tain’s avi­a­tion reg­u­la­tor.

That’s left O’Leary caught be­tween his re­bel­lious pi­lots, whose de­mands threaten to erode Ryanair’s low-cost ad­van­tage over ri­vals, and the po­ten­tial wrath of in­vestors should he make con­ces­sions that un­der­mine the air­line’s busi­ness model. He’s re­sponded by of­fer­ing his cock­pit crew a raise while re­cruit­ing ag­gres­sively and vow­ing to re­main union-free.

“Frankly, most of the share­hold­ers would rather Ryanair doesn’t fly any planes for six months than the work­force be­comes union­ized,” said Barry Nor­ris, at Arg­onaut Part­ners in Lon­don, which owns Ryanair shares.

Pi­lots have never been ex­empt from Ryanair’s pen­nypinch­ing. In pri­vate dis­cus­sions, cur­rent and for­mer avi­a­tors who asked to re­main anony­mous said many crew mem­bers are em­ployed as con­trac­tors on a month-tomonth ba­sis and must foot the bill for uni­forms, mo­bile phone use, ground trans­port and ho­tel costs when work­ing from other bases.

A Ryanair spokesman said the ma­jor­ity of its cap­tains and first of­fi­cers are em­ployed di­rectly by the air­line, and re­ceive an al­lowance of 6,000 eu­ros ($9,000) per year for uni­forms, badges, med­i­cal checks and snacks.

In a let­ter last week, a group of 59 pi­lots said their pay and con­di­tions fall short of the in­dus­try stan­dard. In par­tic­u­lar, they com­plained that an “over­whelm­ing ma­jor­ity” of Ryanair con­tracts per­mit the car­rier to move them to any base in Europe, with­out no­tice or re­lo­ca­tion pay­ments.

“We sim­ply want to be rep­re­sented with one col­lec­tive voice,” the pi­lots wrote. “We seek di­rect ne­go­ti­a­tions with the com­pany man­age­ment.”

Ryanair, in a writ­ten re­sponse, said the air­line “will not en­gage” with this or “any other group fronting for the pi­lot unions of com­peti­tor air­lines.”

For decades the Dublin­based car­rier’s low-cost, low­fare phi­los­o­phy has fu­elled growth and prof­itabil­ity and made Ryanair a dar­ling of in­vestors, even if O’Leary’s brash state­ments some­times of­fended cus­tomers and staff.

Yet even O’Leary has learned to adapt. As other low-cost car­ri­ers around him started to be more ac­com­mo­dat­ing to cater to the busi­ness crowd and trav­ellers look­ing for a fuller ser­vice, Ryanair fol­lowed suit. It went on a push dubbed “Al­ways Get­ting Bet­ter” that touted im­proved cus­tomer ser­vice and did away with some of the most ag­gra­vat­ing re­quire­ments, like charg­ing sky-high fees to print out a miss­ing board­ing pass.

But at its heart Ryanair re­mained laser-fo­cused on its dis­count roots. The lim­its of that bare-bones ap­proach were ex­posed in Septem­ber, when man­age­ment ad­mit­ted to botch­ing an­nual hol­i­day plan­ning, leav­ing it with too few pi­lots to fly its planes. Bump­ing more than 700,000 peo­ple from their flights un­leashed a back­lash from con­sumers and forced Ryanair to trim its growth fore­cast.

Yet now cheap tick­ets are start­ing to win back cus­tomers and the net­work hic­cups have sub­sided, leav­ing the up­ris­ing by flight crew as O’Leary’s big­gest headache.

Their ef­fort comes at a mo­ment when pi­lots are in de­mand. Car­ri­ers like China Eastern Air­lines Corp. and China South­ern Air­lines Co. are driv­ing growth in Asia, while in Europe op­er­a­tors such as Nor­we­gian Air Shut­tle ASA and Ice­land’s Wow are rac­ing to ex­pand even as es­tab­lished car­ri­ers push to win mar­ket share while fuel prices stay low. Ryanair is in ex­pan­sion mode too.

Its pi­lots, re­spected for their skills and work ethic, are prized by ri­vals. And some com­peti­tors hold out the prom­ise of longer flights as an al­ter­na­tive to the Irish car­rier’s reg­i­men of ul­tra­quick turn­arounds on short­hop Euro­pean routes.

“Ryanair pi­lots are very good. They are very highly trained, highly skilled,” Nor­we­gian Air CEO Bjorn Kjos said in an in­ter­view in Lon­don. “If they come, they are su­per pi­lots.”

The competition for cock­pit crew has prompted Ryanair to raise pay and step up re­cruit­ment to re­place those leav­ing and meet ex­pan­sion needs. The com­pany said it has hired more than 1,000 new pi­lots in 2017, and is “in­un­dated” with ap­pli­ca­tions from flight crew at a trio of Euro­pean air­lines that failed this year: Italy’s Al­i­talia SpA, Germany’s Air Ber­lin PLC and Monarch Air­lines Ltd. of the U.K.

O’Leary, who has said he’d rather cut off his own hands than sign a deal with a union, pro­posed an un­prece­dented 22-per-cent an­nual raise to flight crew to lure re­cruits and throw cold wa­ter on or­ga­niz­ing ef­forts. He said the com­pany can pay 20-per-cent more than ri­vals and still re­tain a cost ad­van­tage over them.

“We will re­main a nonunion com­pany by pay­ing our peo­ple more and by fix­ing the bro­ken el­e­ments of com­mu­ni­ca­tion with pi­lots,” O’Leary said Oct. 31.

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