‘Toxic tactics by Ryanair chief crashed our shares!’
... say investors suing airline they blame for fuelling staff strife and pilot walk-outs
ANGRY Ryanair investors have launched legal action over allegations the airline’s ‘toxic’ relationship with its workforce has crashed the share price.
The shareholders claim they were misled in statements about the firm’s industrial relations, said to have been ‘excellent’ by chief executive Michael O’Leary.
They allege that Ryanair’s worker policies led to recent strikes, which have dented the company’s profits and contributed to a collapse in the value of their shares.
The airline has been plagued by a series of walkouts in recent years, most notably last summer, leading to hundreds of flights being disrupted or cancelled.
It managed to avert any cancellations last week despite some pilots backing a 48-hour strike.
Ryanair’s share price on the London Stock Exchange has more than halved since its peak of more than €19 in the summer of 2017, now standing at €8.59.
The investors suing Ryanair claim its market value was previously ‘ artificially i nflated’ and t hat O’Leary ‘personally cashed in on such artificial inflation’ by selling shares worth $120 million (£97 million) during this period.
Rya n a i r h a s rubbished the ‘ambulance-chasing’ claim, applying for it to be dismissed from the US courts.
But lawyers from Robbins Geller Rudman & Dowd are set to hit back on behalf of investors this week in a bid to keep the legal action alive.
The original legal claim was filed in November last year by the City of Birmingham Firemen’s and Policemen’s Supplemental Pension System and City of Birmingham Retirement and Relief System in Alabama.
The cl ai m – which Ryanair responded to in June and acknowledged in its annual report last month – is scathing in its descriptions of the airline which, it says, is ‘known for taking the “no-frills” experience to extreme levels’.
O’Leary, it said, has a ‘reputation as an aggressive and penny-pinching, albeit brilliant, businessman who, in his own words, “didn’t give a s***” what customers or the general public thought of him’.
But, the claim added, that because Ryanair’s flights ‘were the cheapest in the market and had high rates of punctuality, customers were willing to overlook insult and continue to flock to Ryanair’.
The investors claim, though, that Ryanair’s success was heavily dependent on keeping personnel costs low and that this was done by ‘underpaying and even exploiting’ its staff.
They say that its policies – which allegedly included making crew members cover the costs of training and uniforms, as well as meals and accommodation when abroad for work – made it ‘unsurprising’ that unrest would follow.
The investors say that in 2017, between May 30 and July 25, they were assured in public statements that Ryanair’s labour relations were ‘excellent’ and there was no risk of unionisation.
However, they claim, in early 2017 t he a i r l i ne was a l r e a dy ‘ undergoing an exodus of hundreds of pilots’. And in September 2017, Ryanair was forced to cancel hundreds of flights due to a ‘rostering cock-up’.
They said that at the end of October, Ryanair claimed labour relations were fine, the firm was an ‘excellent employer of pilots’ and it would ‘remain a non-union company’. Six weeks later, Ryanair said it would recognise unions.
The following year, 2018, saw strikes affect hundreds of flights in the summer and then in October Ryanair revealed it would not meet its annual profit guidance. The investors claim Ryanair and O’Leary ‘knew, or were reckless in not knowing,’ that statements reassuring investors about the likelihood and impact of industrial unrest were ‘materially false and misleading and omitted material facts’.
They alleged that between May 30, 2017, and September 28, 2018, Ryanair’s share price was ‘artificially inflated’.
They argued that ‘O’Leary personally cashed in’ by selling a substantial amount of his company stock. Applying for the claim to be dismissed, Ryanair said these share sales were ‘ unremarkable’, and noted that O’Leary remains one of its largest shareholders.
Ryanair said it ‘made the difficult, unplanned decision to hold discussions’ with unions just before the 2017 Christmas season.
It added: ‘Ultimately, as Ryanair had warned, based in part on the consequences of these strikes, along with a host of separate far more significant industry- wide factors (most notably rising fuel prices), the company reduced its 2019 profit guidance.
‘The [claim] commandeers this reduced guidance, alleging, based inappropriately on little more than their say-so and with the benefit of hindsight, that prior statements by Ryanair and O’Leary concerning labour relations and costs were intentionally misleading.’
Ryanair called on the claim to be dismissed because it ‘ fails to adequately allege that any of the challenged statements were false or misleading when made’.
The airline also said the action does not contain enough facts to prove its claims.
When the claim was originally filed in November, Ryanair vowed to ‘defend and defeat these bogus ambulance chaser claims’.
Lawyers for the investors confirmed that this week they would be filing their response to Ryanair’s application to dismiss the case.
The airline declined to comment.