Ryanair agrees to recognise labour unions of its pilots

Bloomberg

Ryanair Holdings Plc pilots got an unexpected Christmas present when Europe’s biggest low-cost carrier agreed to recognise their labour unions. Investors are the ones paying for it.
The move, which CEO Michael O’Leary had previously said wouldn’t happen before “hell would freeze over,” was aimed at averting the first-ever walkout by employees. Ryanair stock fell as shareholders digested the potential for higher labour costs at the notoriously tight-fisted airline.
The Irish carrier, which had already cancelled some 20,000 flights since September because of botched planning for crew vacations, said it acted to reduce the threat of further disruption during the busy holiday season. “If unionisation is what we need to not to have disruptions for our customers, then we’re going to do it,” Edward Wilson, chief people officer at Ryanair, said. Pilot unions in Germany, Ireland, Portugal and Spain had called for strikes in coming days.
Caught off guard, unions reacted cautiously. “We have received Ryanair’s offer for talks,” said Markus Wahl, a spokesman for the German pilot union. “We will now evaluate it and then discuss how to proceed,” A spokeswoman for Ireland’s umbrella IMPACT trade union called for an “immediate meeting” with Ryanair management to clarify the situation. It might be a good offer with substance, or it might just be a tactical move to avoid the strike next week, said another person familiar with union leaders’ views of the situation. Still, the decision marks a watershed for the Dublin-based carrier.
“More power is likely to be shifted towards unions, and Ryanair is likely to be forced to engage in lengthy negotiations,” Daniel Roeska and analysts at Sanford C. Bernstein Ltd. wrote.
The six countries where Ryanair has agreed to recognise unions—Germany, Ireland, Italy, Portugal, Spain and the UK—account for 80 percent of its pilots, the Bernstein analysts estimated. “We’d expect a full coverage of pilot unionisation to come very quickly, and cabin crews are likely to follow,” they wrote.
Ryanair has been struggling to quell a rebellion among its 4,200 pilots, many of whom have complained about inflexible work rules and limited opportunities for promotion. Efforts to appease them with pay raises have failed, and defections to other carriers worsened the vacation-scheduling fiasco.
Adding to pressure on Ryanair, the European Court of Justice struck down a company rule that required employee lawsuits to be heard by Irish courts rather than in the jurisdictions where the employees are based. And US pilots’ groups had offered to support Ryanair crews in unionising.
Ryanair’s offer to pilots comes with some caveats. The airline said it would recognise only unions that establish committees of Ryanair pilots to discuss company-specific issues and would not engage with any pilots who fly for competitor airlines. “Pilots may not be entirely happy” with those restrictions, which would limit the role of national umbrella unions and other major labour groups, analysts at Irish brokerage Goodbody wrote in a note.
Others said markets had overreacted to Ryanair’s action. Its effort to retain pilots by offering generous pay increases will already add an estimated $118 million in annual costs, analysts at Raymond James in London wrote, adding: “We fail to see a material impact to earnings” from the decision to recognise unions.