Chris Bryant is a Bloomberg Gadfly columnist covering industrial companies. He previously worked for the Financial Times.

Contrition and generosity aren’t characteristics usually associated with Michael O’Leary, CEO of Ryanair Holdings Plc. Yet both were on full view in his grovelling letter to pilots to try to stop them deserting the budget carrier. 

One might expect shareholders to cheer such a gesture, but the stock fell almost 2 percent. That O'Leary felt compelled to turn on the charm suggests his labor relations are badly bruised. Repairing the damage will be expensive, even if the company's fat profit margins will cope.

Low Costs, High Profits
Ryanair has squeezed staff to deliver impressive earnings. Now the pushback has begun
Source: Bloomberg

Clarifying his “misreported” remarks last month that pilots were very well paid for doing an easy job, O’Leary insisted he was talking about other companies' staff and had “always tried to be courteous, respectful and grateful for the outstanding job” done by the Ryanair crew.

Nevertheless, with scores of personnel jumping plane to low-cost rival Norwegian Air Shuttle ASA he offered to “transform [pilot] pay and career prospects”. Pilots will get pay rises and if rivals offer more, Ryanair will beat them.

After a recent European Court of Justice ruling, Ryanair will hold discussions too with international staff over any differences between the terms of their Irish contracts and local employment rules -- over things like sick pay or maternity leave. “I urge you to stay with Ryanair for a brighter better future for you and your family,” he concluded.

A possible conclusion from all this is that Ryanair's margins are unsustainably high. Last year, Ryanair generated a 23 per cent operating margin, according to Bloomberg data, yet this was partly a function of squeezing employees. Wages, salaries and benefits consumed only 10 percent of revenue, less than half the level at Deutsche Lufthansa AG, according to Bloomberg data. Now, some of Ryanair's staff seem to have had enough. 

Does that mean the end of the Ryanair investment case? No. Even if the wage bill increased by one-quarter, it would still report a very impressive 21 percent operating margin: twice what Easyjet Plc managed last year, according to my rough calculation. Like O’Leary, Ryanair shareholders are just going to have to learn moderation.

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To contact the author of this story:
Chris Bryant in Berlin at cbryant32@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net