Unmerciful boot to the ego after latest body blow to airline
IS RYANAIR’S business model on its knees? CEO Michael O’Leary certainly spent yesterday metaphorically doubled over, after an unmerciful boot to that most sensitive organ – the ego.
Earlier this month, Ryanair launched a legal action against the Irish Independent, claiming our coverage of its ongoing dispute with pilot unions, dating back to the start of October, was designed to damage the airline. We reject that. Events have borne out our reporter John Mulligan’s coverage, culminating in this week’s strike notice by pilots and yesterday’s dramatic reversal by Ryanair of its decades-long policy of refusing to talk to unions.
No one is under any illusions that a management team led by Mr O’Leary was brought willingly to talks with its newly recognised pilots union. But Ryanair management, not the Irish Independent, is the author of its destiny. September’s self-inflicted rostering fiasco, when the airline discommoded hundreds of thousands of travellers because it couldn’t roster enough pilots to fly its planes was a game changer, shifting the balance of power within the airline in favour of pilots – at least in the short term.
Trade unions have been anathema to Mr O’Leary as he successfully rode, and helped drive, a wave of European deregulation to create what’s probably the most successful Irish business ever. Its reaped billions for investors. The question now for investors, is whether that airline can recover from the latest in a series of body blows.
For decades Ryanair’s winning formula has been to offer cheaper fares than rivals by keeping costs lower (including by keeping unions out); a reputation for being safe and reliable, and constant growth.
Of that winning formula, only its outstanding safety record remains fully intact. In October, it failed to have enough pilots available to fly its constantly increasing fleet, a double blow to its reputation for getting the travelling public where they need to be on time, and for managing growth.
The resulting eye-watering pay increases Ryanair offered to retain and attract cockpit staff strained the cost base, and also opened the way to this union recognition. It seems after October’s mass cancellations, the company just couldn’t countenance the risk of further disruption.
Investors must now calculate the longer term implications for the business of being forced to buy off unions for industrial peace. It is a new variable that will play out over decades, not months. Experience suggests the company will ultimately roll with the punches. Mr O’Leary’s style might be belligerent but his approach has always been pragmatic.
If being nice to customers made sense to grow the business, he did it. If flying to expensive main airports helped take the brand to a broader market, he did it. In the end, he had to talk to unions to keep planes in the air. That’s what happened.