Ryanair Extends Flight Cancellations Into 2018By
Some 400,000 more people to be impacted by cancellations
Carrier will operate 25 fewer jets this winter than planned
Ryanair Holdings Plc will extend flight cancellations into next year while dropping plans to bid for bankrupt Alitalia SpA as Europe’s biggest budget carrier seeks to come to grips with the crisis surrounding a pilot shortage.
After shocking customers by abruptly scrapping flights earlier this month, Ryanair said it will operate 25 fewer planes than planned during its winter schedule starting in November, and then 10 fewer from April. That will mean canceling 18,000 flights on which about 400,000 passengers were booked, bringing the total number affected to about 715,000.
In additional fallout from the crisis, Ryanair has informed administrators managing the bankruptcy of Alitalia that it is withdrawing from the bidding to “eliminate all management distractions,” the Dublin-based company said in a statement on Wednesday. Avoiding the risk and cost associated with the Italian carrier helped buoy Ryanair shares, which rose the most since November.
By scrapping more services, the airline aims to comply with changes to Irish labor laws requiring it to squeeze a year’s worth of vacation into nine months in 2017 and ensure that there’s no hangover into next year. The groundings will also create spare aircraft and crews, so that no further cancellations should be necessary, the company said.
All passengers affected by cancellations have been offered “re-accommodation or full refunds,” Chief Executive Officer Michael O’Leary said in the statement. The cost of free ticket vouchers issued to passengers affected in the new round of cancellations will be about 25 million euros ($29 million), bringing the tally since the start of the crisis to almost 50 million euros.
Ryanair cautioned that it expects to see a softening in yields or fares over the next two months as it offers a range of seat sales to win back unhappy passengers. Discount carriers operate a reduced schedule in the slower winter season, and the company will suspend 11 routes as part of the usual adjustment, it said. The carrier is still forecasting a profit after tax of 1.4 billion euros to 1.45 billion euros in the year ending March 31.
All told, Ryanair expects to fly 129 million passengers in 2017, 2 million fewer than it had previously planned, according to the statement. The 2018 total will drop to 138 million from 142 million, it said.
The airline, which has 4,200 pilots, hit back against the likes of Norwegian Air Shuttle ASA over what it said were “false claims” about losing crew to rivals, saying just 100 captains and 160 first officers have left, mainly due to retirement and moves to long-haul operators. Still, the changes are an acknowledgment that Ryanair was stretching its operations, which are built on cheap seats and punctuality.
To ease the strain, O’Leary said Ryanair has hired 650 more cockpit personnel who will join over the next eight months to help staff another 50 Boeing Co. 737 jets still due to join the fleet by next May. The number of pilots employed per aircraft should increase to 11 from 10.4 over the next 12 months, he added.
A raise of 10,000 euros for captains and 5,000 euros for first officers has also been agreed for pilots stationed in Dublin, London Stansted, Berlin and Frankfurt. The hikes, which will come into effect from Oct. 1, were agreed with staff representatives over the past week, and management will schedule further meetings at other bases over coming months.
Ryanair also disputed claims of an industry-wide pilot shortage, saying it has seen a surge in applications from former Gulf airline crews, as well as from Germany and Italy in the wake of the Alitalia and Air Berlin Plc insolvencies.
The stock rose 3.9 percent, the biggest jump since Nov. 7, boosting gains this year to 18 percent and valuing the company at 20.2 billion euros.
The business changes helped reassure investors that “the issues are put to bed,” Mark Simpson, an analyst at Goodbody Stockbrokers, said by phone. “Ryanair put together a clear defined response which critically weakens any bargaining position its pilots might have had.”