Ryanair Recognizes Unions in Historic Shift to Avert Strike

(Bloomberg) -- Ryanair Holdings Plc buckled under pressure from disgruntled pilots and agreed to recognize labor unions in an eleventh-hour move by Europe’s biggest budget airline to avert strikes threatening flight disruptions during the busy holiday season.

The move led shares to plummet the most in almost a year and a half amid investor concern the carrier’s labor costs will rise. Unions in a number of European countries reacted coolly to the airline’s overture, with Irish pilots maintaining a scheduled walkout.

The about-turn by Chief Executive Officer Michael O’Leary, who once said “Hell would freeze over” before Ryanair unionized, reflects the intensity of the pressure pilot groups have put on the airline for recognition. The CEO had pledged higher pay and bonuses to keep flight-deck crews from bolting to rivals and also threatened them with retaliatory measures if they went on strike.

“If we need to change, we do it,” Edward Wilson, chief people officer at Ryanair, said in an interview. “If unionization is what we need to do not to have disruptions for our customers then we’re going to do it.”

The Irish company said Friday it has written to pilot organizations in Ireland, the U.K., Germany, Italy, Spain and Portugal, inviting each of them to talks. The carrier will “recognize these unions as the representative body for pilots in Ryanair in each of these countries.”

Italy’s main pilots’ union, Anpac, canceled its participation in a planned four-hour walkout scheduled for the afternoon. The action would have been the carrier’s first-ever and the opening volley in a series of disruptions by labor groups in other European countries.

Another Italian union said it would go head with the strike. “Ryanair is a company sustained by all of its workers, pilots, flight attendants and engineers, so it can’t just dialogue with some of them,” Antonio Piras, an official at Fit-Cisl, said in a statement.

Members of the Irish Airline Pilots’ Association have called for a strike on Dec. 20. The Impact trade union, which includes the pilots’ group, said Friday it wants to meet with management as early as this weekend “to clarify issues and make progress.”

The letter from Ryanair represented a “significant” step forward, Patricia King, an Irish union leader, told state broadcaster RTE, though she said it was impossible to predict if next week’s strike could be averted before the two sides meet.

‘Dramatic Change’

In Germany, a spokesman for the Vereinigung Cockpit union said it’s evaluating the offer for talks. The group representing flight-deck crews in that country said this week it’s ready for stoppages “at any time,” without specifying a date.
“This dramatic change in policy has been made to avoid widespread industrial action and disruption to service over the Christmas period,” Investec analyst Alex Paterson wrote in a note. The move raises the possibility that more staff at the company will also become unionized and that improved pay and conditions for pilots will “at least partially” erode the airline’s cost advantage over time.

Ryanair shares fell as much as 9.1 percent, the most since July 2016, and were trading down 7.6 percent at 15.12 euros at 3:16 p.m. in Dublin, giving a market value of 18 billion euros ($21 billion). The drop was accompanied by trading volumes seven times the average of the last three months.

Ryanair said in its statement that unions will be recognized so long as they establish committees of its pilots to deal with issues relating to the company. There will be no engagement with pilots who fly for competitor airlines, the company said, calling on crews to call off planned walkouts.

Lawsuits

The company’s decision to work with unions follows a ruling in September by the European Union’s top court that the airline could face employee lawsuits wherever cabin crew are based. That decision could pave the way for a flurry of claims outside of Ireland and a possible increase in employment costs, analysts had said at the time.

Ryanair’s move Friday on unions could also reduce employment flexibility, wrote Sanford C. Bernstein analysts including Daniel Roeska.

“Ryanair is likely to be forced to engage in lengthy negotiations processes,” they said. “In the longer term, the consequences could be profound.”

--With assistance from Tommaso Ebhardt Christopher Jasper and Dan Liefgreen

To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net, Dara Doyle in Dublin at ddoyle1@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel, Brad Cook

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