Ryanair turns the tables with union recognition
Concession to ‘save’ Christmas showcases ability of airline to adjust to fast-changing market realities
Ryanair’s concession of union recognition – albeit with conditions – will likely see pilot strike threat withdrawn and showcases the airline’s ability to act decisively in the face of fast-changing events. Photograph: Niall Carson/PA Wire
And so Michael O’Leary has saved Christmas. At least that’s the line Ryanair’s well-oiled marketing machine will spin.
The unions have yet to call off the strike planned in Dublin for next Wednesday or the threatened actions in Germany, Spain, Italy and Portugal. Impact, which represents the Irish pilots intending to strike, has yet to receive the letter in which, for the first time, the airline agrees to recognise trade unions.
But an announcement is likely later today. In the circumstances, it seems inevitable that the pilots will withdraw their threat – at least for now. Passengers flying home for Christmas will most likely not face disruption.
But no marketing should mask the magnitude of the announcement from the airline before markets opened on Friday.
Refusal to deal with trade unions has been a cornerstone of Michael O’Leary’s leadership of the “no frills” airline from the outset.
The airline has carefully developed a personnel strategy that sees it mix staff and contractors at each of its 60 or so bases. It paired this with negotiation of terms and conditions separately at each base. The structure was designed specifically to sidestep the possibility of collective bargaining – never mind union-led negotiation – by pilots (and other air crew).
Competing priorities of staff and contractors at each base also helped the airline to keep staff costs as competitive as possible.
The fiasco over rostering was the first sign that the airline was not as firmly in control of IR issues as normal. Failure to foresee the issue and the initially ham-fisted management efforts to handle the crisis without regard to passenger sentiment was a self-inflicted wound.
Some ill-judged words about the status, expertise and working conditions of pilots, as the airline adopted its traditional approach of going on the offensive when attacked, compounded the issue.
Pilots were stung by the criticism. More pragmatically, they also sensed a rare moment of vulnerability at Ryanair. Both factors led to a decision that now was the time to press again for collective bargaining. The pilots calculated that, having cancelled the flights of some 700,00 passengers over the roster fiasco, the airline would be desperate to avoid further disruption.
Still, up to Friday morning, all scenario planning on how the pilot action might play out was predicated on the certainty that O’Leary would not bend on letting trade unions in the door.
“I just cannot see Michael O’Leary running a unionised airline,” said Merrion chief investment officer and analyst David Holohan as recently as Thursday. His conviction was based on a view that O’Leary’s dislikes of unions stems form a view that they have the potential to raise costs over the longer term, threatening his company’s ability to offer cheap air fares and generate profits.
“When profits are high, unions tend to negotiate very good contracts, when those profits erode, unions tend to give very little back,” Mr Holohan says.
John Geary, professor of industrial relations and human resources at UCD School of Business, agreed that O’Leary would oppose what he sees as any union attempt to get a foothold in Ryanair.
“This is going to be a sheer trial of strength,” he said, “and it’s going to get nasty.”
Not for the first time, the mercurial Ryanair chief has confounded expectations, flat-footing his opponents as he looks to regain the upper hand.
To be sure, Ryanair’s concession is well short of full surrender. Recognition is contingent on trade unions establish specific committees of Ryanair pilots to deal solely with Ryanair issues. The airline’s antipathy to dealing with unions representing pilots more broadly – specifically including those who might work for rival airlines – remains in place.
The company’s statement also suggests the airline will insist on dealing separately with unions in each country rather than staff bargaining collectively across the group.
But, for all the caveats, it is still a landmark move, and reassurance that the ability of Ryanair and O’Leary to act decisively in the face of fast-changing events in the marketplace remains unmatched.