Ryanair CEO Michael O'Leary is taking a hard line with unions, even as walkouts hurt the carrier's bottom line. He's been in control for more than two decades, and he's not finding it easy to compromise.
You might have thought Michael O’Leary was mellowing with age when he agreed last year to recognize trade unions at Ryanair, the low-cost carrier he’d built into Europe’s most valuable airline.
You’d have been wrong.
As Ryanair this week faced the biggest walkouts in its history, with more than 600 flights cancelled from Ireland to Italy, O’Leary reverted to form and punched back, hard. His first swing on Wednesday was a threat to fire hundreds of crew.
Irish pilots parried by announcing a fourth day of strikes, escalating a dispute that’s been simmering all year but is starting to boil over as vacationers across Europe pack their bags for summer holidays.
For three decades, Ryanair bypassed the labor strife that has dogged traditional airlines by vigorously opposing any attempt at unionization. While the carrier—which declined to comment for this story—insists it won’t bend to any demands that would threaten its low-cost model, the unions show no signs of backing down.
Investors, who had been warned by the airline to expect summer strikes, initially cheered O’Leary’s defiance, and Ryanair’s stock surged almost 5 percent Wednesday after the carrier threatened to fire 300 crew members in Dublin and move their jobs to Poland.
When the Irish Air Line Pilots’ Association union responded by saying it would extend the walkout, shares started falling, and on Thursday Ryanair dropped to its lowest level in almost two years.
The disputes center on pay, pensions, questions of promotions and privileges based on seniority, and the airline’s ability to order pilots to move to another city. But it’s really about control, as Ryanair has always moved quickly, deciding when to shift aircraft, hire newcomers, get rid of staff, or expand into new markets—all without consulting unions.
O’Leary, who has led the airline since 1994, has long said that flexibility is critical to his success, and he’s reluctant to loosen his grip.
Though Ryanair says it won’t negotiate with the Irish pilots union until the strikes stop, before this week’s walkouts the airline said it had been meeting with cockpit crew regularly and had made proposals to address their demands, but that the union hadn’t responded; The union says Ryanair wasn’t offering meaningful talks.
The strikers’ position has been shored up by a worldwide pilot shortage. As European discount airlines thrive, EasyJet Plc, British Airways and Norwegian Air Shuttle ASA have launched recruitment campaigns targeting disgruntled pilots and flight attendants at Ryanair.
With Ryanair’s shares up almost 15-fold over the past two decades, investors have stood behind O’Leary through stand-offs with passengers and tiffs with rivals, and even during a scheduling snafu that forced 20,000 flight cancellations in September.
O’Leary, who once said “hell would freeze over” before he would allow trade unions, agreed to do just that in December as a way to appease pilots in the wake of the scheduling crisis.
But today, “there is nervousness in the investor community,” said aviation consultant John Strickland. “This is a tougher situation than we’ve seen before.”
While the move to recognize organized labor eased tensions, the peace didn’t last. Through the winter and spring, unions across Europe quietly drew up lists of concerns ranging from simple requests like free water for cabin crew to more complex issues such as rules on shifting pilots between cities.
As the airline’s peak summer season got underway, they pounced: Strikes have forced the cancellation of flights in Ireland, Portugal, Spain, Belgium and Italy, and workers in Germany are voting whether to walk out as well.
Ryanair managers are “antagonizing their workforce, which in a union situation is never a good idea,” said Bernstein analyst Daniel Roeska.
O’Leary has shown that he’s willing to make changes if he thinks it will help boost profits, for instance seeking to improve treatment of passengers after widespread complaints. In an overhaul that began in 2014, Ryanair ditched irritants like excessive baggage charges and a trumpet sound that marked on-time arrivals, and began offering reserved seating and family-friendly services such as the ability to take a car seat on flights. Profits jumped.
“Everybody loves a converted sinner,” O’Leary said at the time. “We have learned humility, and when you’re Irish that’s a tough lesson to learn.”
Yet today, he’s staking out a hard-line position.
“These unions have to learn that Ryanair is not some legacy airline that’s going to roll over every time we’re threatened with a strike,” he told investors on Monday after reporting a 20 percent dip in earnings, partly due to the walkouts.
If O’Leary chooses to negotiate, a good place to start would be relaxing requirements that cabin crew meet targets for sales of add-ons such as duty-free items during flights—which wouldn’t hurt profits much but would offer a welcome reprieve to workers, said Philip Landau, an employment attorney in London.
O’Leary’s aggressive strategy “is likely to anger the trade unions and the striking workers,” Landau said. “If consumers decide to avoid Ryanair because of the strikes, this could have a serious impact on the business.”
©2018 Bloomberg L.P.
This article was written by Benjamin D Katz, Kaye Wiggins and Elizabeth Howcroft from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected].
Photo credit: As Ryanair this week faced the biggest walkouts in its history, with more than 600 flights canceled, CEO Michael O’Leary (pictured) punched back, hard. Ryanair