December 15, 2017 / 8:23 AM / in 8 months

Ryanair offers to recognize unions in historic shift to try to avert strikes

DUBLIN (Reuters) - Ryanair offered on Friday to recognize pilot unions for the first time in its 32-year history in a last-minute attempt to avert its first-ever pilot strike.

A Ryanair commercial passenger jet is seen at Barcelona El-Prat Airport in Barcelona, Spain, October 10, 2017. Picture taken October 10, 2017. REUTERS/Eric Gaillard

The move convinced Italy’s largest pilot union to suspend a four-hour strike planned for Friday afternoon, but it was unclear if other unions would call off strikes planned for next week in Ireland and Portugal.

Investors also took fright at the potentially major change to the business model at Europe’s largest low-cost carrier, with Ryanair shares tumbling as much as 9 percent to 14.90 euros.

With his offer, Chief Executive Michael O’Leary is reversing a policy at the heart of the ultra low-cost model he developed to turn a small Irish regional airline into Europe’s biggest by passenger numbers. He was once quoted as saying he would rather cut off his own hand than recognize unions.

“Recognizing unions will be a significant change for Ryanair, but we have delivered radical change before,” O’Leary said in a statement. “We hope and expect that these structures can and will be agreed with our pilots early in the new year.”

The pilots mobilized after Ryanair in September announced the cancellation of around 20,000 flights, which it blamed on a lack of standby pilots due to a failure in its rostering following a rule change by Irish regulators.

Pilot groups complain of a toxic work atmosphere and have said Ryanair is facing a major staffing shortage, but management has repeatedly denied this and says it offers some of the best pay and conditions in the sector.

Management was quick to reassure investors there would be no major changes to Ryanair’s business model based on filling seats irrespective of how low the fare and that it might be easier to attract pilots once unions were recognized.

But analysts said the move introduced significant uncertainty in terms of both staff costs and possible future disruption by emboldened employees.

“It adds complexity, it adds uncertainty, and you can’t put a number on that,” said Mark Simpson at broker Goodbody.

Investec, though, said it saw the share price move as a buying opportunity and that it would not shift its target price from 19 euros.

URGENT MEETINGS

Ryanair sent a letter to unions in Ireland, Britain, Germany, Italy, Spain and Portugal at 0800 GMT on Friday to offer talks to formalize recognition and asking for confirmation that industrial action would not proceed.

The move comes after Ryanair pilots in several countries threatened to strike in the busy run-up to Christmas.

While Italian union ANPAC suspended a strike due to take place between 1400 and 1800 GMT on Friday, the FIT-CISL transport union, which represents a smaller number of Italian pilots and some cabin crew, said the planned four-hour strike on Friday would go ahead.

It was not immediately clear if Ryanair’s concession would be enough to stop a 24-hour stoppage by pilots in Ireland and Portugal on Dec. 20.

ANPAC and Irish union IALPA asked for urgent meetings with Ryanair, while British pilot union BALPA said it accepted the offer to start talks, describing the company’s change of heart as welcome. Other unions said they were considering their position.

A Ryanair spokesman said “the sensible course of action” for both ANPAC and IALPA was to meet the airline on Wednesday, the day their strikes are due to take place, but to call off the threat of disruption before then.

The spokesman added that if other pilot unions approached management about recognition, it would consider their request.

The company will “wait and see what comes” before deciding about recognizing unions in other parts of the company, Chief People Officer Eddie Wilson told Reuters.

Wilson said, however, he did not expect management would deal with an unofficial pan-European pilot body, the European Employee Representative Council (EERC), that pilots have formed in recent months, describing it as “unworkable.”

Management will, though, be open to talking to pilots about their demand to introduce local contracts rather than the Irish contracts used across Ryanair’s European bases.

Wilson said there was no reason to think costs would increase as a result of the move, but declined to comment on how the events of recent months might impact profitability.

Additional reporting by Stefano Bernabei, Victoria Bryan, Padraic Halpin and Steve Scherer; Editing by Jason Neely, Adrian Croft and Mark Potter

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