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Ryanair Holdings Plc risks reviving its image for predatory customer service with a move to scrap hundreds of flights through the end of October because of poor planning. The shares fell nearly 5 percent.
Europe’s biggest discount airline, which had previously treated its customers like a captive audience for hard-selling an array of products and services on board, has portrayed a kinder, friendlier image in recent years with the goal of wooing more lucrative passengers. Those efforts threaten to be undone by the cancellations that could leave hundreds of thousands of passengers in the lurch.
“It is the potential for long-term damage that concerns us,” Damian Brewer, an analyst with RBC Capital Markets, said Monday in a note to clients. “The poor PR could deter future bookings and may well put off more time-sensitive higher yielding demand, like business trips, if the carrier is seen as unreliable and less punctual.”
While the scrapped flights account for only about 2 percent of normal daily operations, the cause was avoidable. Amid aggressive expansion, Ryanair overscheduled its crews, which has led to a vacation backlog as it scrambles to meet holiday requirements by Irish authorities.
“We have messed up in the planning of pilot holidays, and we’re working hard to fix that,” Chief Marketing Officer Kenny Jacobs said after Ryanair revealed the timetable changes.
The Dublin-based carrier expects to cancel 40 to 50 flights a day through the end of October, compared with about 2,200 normal daily routes. As many as 385,000 passengers could be impacted over the six-week plan, according to Bloomberg calculations based on the airline’s data. Some 162 flights were dropped between Saturday and Sunday with another 164 due to be cut through Wednesday.
Ryanair will offer refunds or alternative flights to customers affected by the cancellations. The Dublin-based company says the move shouldn’t impact earnings in September and October.
Shares of Ryanair dropped as much as 4.8 percent and were trading down 3 percent at 16.56 euros as of 10:31 a.m. in Dublin. That pared the stock’s gains this year to 14 percent, valuing the company at 19.6 billion euros ($23.4 billion).
Ryanair is mandated by the Irish Aviation Authority to bring staff time-off in line with the calendar year from Jan. 1, requiring it to distribute the backlog before the end of 2017. That left the carrier without enough pilots and flight attendants to operate its full fleet of Boeing Co. 737s until the start of its winter timetable in November.
The airline is facing tens of millions in lost revenue as a result of the cancellations, refunds and compensation claims under European Union aviation rules, Liberum analyst Gerald Khoo said. He lowered earnings forecasts for the company by just under 5 percent.
The move may help bring punctuality back up to 90 percent by providing additional standby aircraft, after Ryanair’s on-time performance fell below 80 percent in the first two weeks of September. The delays have been prompted by air traffic control issues in France, the U.K., Germany and Spain, as well as thunderstorms, it said in the release.
Ryanair has been running its system at the limit, with 97 percent of seats occupied in August, when the carrier flew 12.7 million passengers. Flights are operating as usual for customers who haven’t received emails from the carrier.
“We apologize sincerely to the small number of customers affected by these cancellations, and will be doing our utmost to arrange alternative flights and/or full refunds for them,” Ryanair spokesman Robin Kiely said.
©2017 Bloomberg L.P.