O’Leary red faced as Ryanair endures torrid week

Business Week: budget hints, tax summit, housing crisis and a raft of jobs

Staff watch Taoiseach Leo Varadkar and Minister for Business Frances Fitzgerald officially open LinkedIn’s Europe, Middle East and Africa headquarters in Dublin. Photograph: Dara Mac Dónaill

Staff watch Taoiseach Leo Varadkar and Minister for Business Frances Fitzgerald officially open LinkedIn’s Europe, Middle East and Africa headquarters in Dublin. Photograph: Dara Mac Dónaill

 

Ryanair chief Michael O’Leary lifted his hands off the table and raised his eyebrows on Thursday when it was put to him at the company’s agm that some of his pilots had privately referred to him as “the clown” following recent crises.

“There were reports during the week of groups of pilots referring to you as ‘the clown’ in Whatsapp groups,” ventured a reporter. “Were you aware of that? Does that bother you? Or would you even give any thought to it?”

O’Leary nodded. “I think, given the performance of our rostering department over the last week, a description of me as a clown is appropriate in the circumstances,” he replied, matter-of-factly.

If only every curveball over the past few weeks had been dispatched with so expertly. O’Leary accused the assembled media of getting “all excited” about the airline’s woes, but the truth is the company has endured a torrid time.

Between four and six Ryanair flights in and out of Dublin Airport will be cancelled every day between now and the end of October as part of an average of 48 flights to be scrapped daily across its pan-European network.

The flight cancellations came about after the airline “messed up” its pilot rosters after changes to annual leave required by European rules. The episode could end up costing Ryanair in excess of €100 million in compensation and reduced profits.

However, the impact was not just financial as the travel plans of thousands of people were thrown into disarray. Stories emerged of holidays and weddings ruined, and O’Leary didn’t duck any punches.

“Yes, it was short notice and, yes, it was unexpected, and for that I sincerely apologise. We did not focus on the concerns or the worries of customers. I say sorry. We want to put up our hand when we make a mess.”

But he didn’t stop there. With concerted efforts to entice pilots to forego time off having been resisted, O’Leary accused some of being “precious about themselves” and “full of their own self-importance”.

The pilots had rejected an offer of €12,000 in bonuses in lieu of holidays, which prompted O’Leary to say the airline didn’t need permission to simply strip them of a week’s leave.

The situation is exasperated by the number of pilots that are deserting the airline, defecting to other low cost carriers such as Norwegian Air. O’Leary said he would offer them an extra €10,000 a year to stick it out with Ryanair and stop the bleeding.

The airline lost as much as €2.1 billion of its market value at one stage during the week. When asked if he would resign, O’Leary was adamant: “I don’t think my head should roll. I need to stay here and fix this.”

Varadkar ‘unapologetic’

Taoiseach Leo Varadkar was unapologetic this week when he told Labour leader Brendan Howlin that those who “pay for everything” would be looked after in the budget next month.

Varadkar also insisted that those on low salaries would not be ignored, and that employees outside the USC net will see “improving social insurance benefits” through reductions in the costs of childcare “and other things”.

Speaking at The Irish Times/PwC Tax Summit this week, Minister for Finance Paschal Donohoe said the current tax system was “neither fair nor efficient” if a worker earning average wages loses up to 50 per cent of their income in tax.

Employers’ group Ibec told the Oireachtas Committee on Budgetary Oversight that cutting USC “is not the best use of our resources”.

The lobby group’s director of policy and public affairs Fergal O’Brien said that given the resources we have available, we should be “increasing that entry point to the top rate of tax and reducing the top rate of tax over time”.

Separately, the Nevin Economic Research Institute called on Donohoe to shore up the State’s finances, avoid cutting taxes on labour further, but to increase spend on education, childcare, housing and infrastructure.

Housing crisis

Whatever about tax cuts, Donohoe will be expected to put forward some sort of plan to solve the housing crisis when he takes to his feet in the Dáil on the second Tuesday in October.

One thing he won’t be doing, though, is introducing tax breaks for developers after Varadkar ruled out any such move at Ibec’s annual dinner. “We are being imaginative in how we approach the crisis, and we will do all that is necessary to solve it,” he said.

“Build more council houses and apartments; service more development land; make apartments more affordable to build and buy; make it more attractive to let a house or apartment. We will not, however, introduce new tax breaks for developers.”

For its part, the Royal Institute of the Architects of Ireland claimed the crisis was being compounded by lengthy planning processes and overly-complex regulations. Despite the demand, it said it could take about three years for new properties to come on stream.

Meanwhile, planning permissions are rocketing, with a 42 per cent increase reported in the year to June 2017. Houses accounted for the vast majority (82 per cent) of permissions, with the pipeline of new apartments sluggish at best.

In the second quarter of the year permission for just 823 apartments was granted, up 2.7 per cent on the same period in 2016 but down 8 per cent on the first quarter of the year.

All the while, an analysis by Savills shows house prices may return to peak April 2007 prices in Dublin by February 2020 – just 2½ years away – if the current rate of growth continues.

Dublin expansions

A couple of days prior to the Ibec dinner Varadkar was out at Wilton Place, Dublin, where social networking service LinkedIn opened its first purpose-built facility outside the US following an investment of €85 million.

The 17,650sq m building is the company’s Europe, Middle East and Africa headquarters, and will facilitate LinkedIn’s 1,200 employees in Ireland. Currently the company has more than 70 jobs on offer at the facility.

Several other companies also announced plans to expand or set up shop here, including three more US firms.

Dataminr, a tech company backed by Twitter and an array of leading Wall Street investors, is recruiting an initial team of up to 20 for a new Dublin office.

Meanwhile, payments company Square and ratings agency Kroll Bond Rating Agency both plumped for Dublin as their European headquarters, with the latter to create 100 jobs in doing so.

Separately, Marlet Property Group appointed Walls Construction as the lead contractor on a €100 million development planned for its Charlemont Exchange building close to the Grand Canal in central Dublin, creating 100 construction jobs.

There was less cause for cheer in Bray, Co Wicklow, where almost 50 jobs are to be lost at the end of the month when mobile phone company Totterdell Communications shuts its doors following the end of its relationship with mobile network Three.

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