Ryanair’s penny-pinching runs into fierce headwinds with pilots
CEO vows to fight any unionization
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.