Ryanair's overall relationship with customers was beginning to get more friendly after decades of stinginess. But it's clear the airline has a serious hole in its customer service operation that goes beyond its current flight-cancellations dilemma.
Ryanair Holdings Plc will extend flight cancellations into next year while dropping plans to bid for bankrupt Italian carrier Alitalia SpA as it struggles to come to grips with the crisis surrounding a pilot shortage.
Ryanair will operate 25 fewer planes than planned during its winter schedule starting in November, and then 10 fewer from April, it said Wednesday. That will mean canceling 18,000 flights on which about 400,000 passengers have booked. Some 315,000 people had already had travel plans through October disrupted.
Europe’s biggest discount airline has meanwhile informed administrators managing the bankruptcy of Alitalia that it is withdrawing from the bidding in order to “eliminate all management distractions,” according to a statement. Shares of Ryanair rose as much as 3 percent, the biggest gain since before news of the pilot crisis first emerged on Sept. 15.
By scrapping more services Dublin-based Ryanair aims to comply with changes in Irish labor laws requiring it to squeeze a year’s worth of vacation into nine months in 2017 and ensure that there’s no hangover into next year. The groundings will also create spare aircraft and crews so that no further cancellations should be necessary, it said.
All passengers affected by cancellations have been offered “re-accommodation or full refunds,” Chief Executive Officer Michael O’Leary said in the statement. The cost of free ticket vouchers issued to passengers affected in the new round of cancellations will be about 25 million euros ($29 million), bringing the tally since the start of the crisis to almost 50 million euros.
Ryanair cautioned that it expects to see a softening in yields or fares over the next two months as it offers a range of seat sales to win back unhappy passengers. Discount carriers operate a reduced schedule during the winter low season, and the company will suspend 11 routes as part of the usual adjustment, it said. The carrier is still forecasting a profit tax of 1.4 billion euros to 1.45 billion euros in the year ending March 31.
All told, Ryanair expects to fly 129 million passengers in 2017, two million fewer than it had once planned, according to the statement. The 2018 total will drop to 138 million from 142 million, it said.
The airline, which has 4,200 pilots, hit back against the likes of Norwegian Air Shuttle ASA over what it said were “false claims” about losing crew to rivals, saying just 100 captains and 160 first officers have left, mainly due to retirement and moves to long-haul operators.
O’Leary said Ryanair has hired 650 more cockpit personnel who will join over the next eight months to help staff another 50 Boeing Co. 737 jets still due to join the fleet by next May. The number of pilots employed per aircraft should increase to 11 from 10.4 over the next 12 year, he added.
A raise of 10,000 euros for captains and 5,000 euros for first officers has also been agreed for pilots stationed at Dublin, London Stansted, Berlin and Frankfurt. The hikes, which will come into effect from Oct. 1, were agreed with staff representatives over the past week, and management will schedule further meetings at other bases over coming months.
Ryanair also disputed claims of an industry-wide pilot shortage, saying it has seen a surge in applications from former Gulf airline crews, as well as from Germany and Italy in the wake of the Alitalia and Air Berlin Plc insolvencies.
The stock traded 2.6 percent higher at 16.85 euros as of 2:51 a.m. in Dublin, boosting gains this year to 16 percent and valuing the company at almost 20 billion euros.
Photo credit: Ryanair is trying to downplay the impact of its pilot shortage on its business but it's clear the carrier is taking a hit. Pictured are tails of Ryanair jets with the airline's livery. Bloomberg