Ryanair cannot afford an endless war against unions
Cliff Taylor: Michael O’Leary must balance wage rises and airline’s low-cost status
Is your holiday about to be disrupted by the rising tensions between Ryanair and its trade unions? It might be tempting to conclude that this is some kind of struggle for the soul of the airline. But in reality it is all about the money. Ryanair has recognised that it must accept unions and pay up. The question now is how much.
There is a lot at stake for both sides. Ryanair is trying to work out how to mix a unionised workforce with its low-cost model. The unions see an opportunity and are trying to get as much as possible, as soon as they can.
There are dangers here for the airline, of course, particularly in the wake of the rostering mess last September and the resulting disruption. But there are also risks for the unions. Well-paid pilots, in particular, would need to take care in undertaking industrial action. They could end up as popular among travellers as the perennial strikers in French air-traffic control.
Ryanair has been the darling of the stockmarket for years because it makes such high profit margins. And these have been built on its low-cost model, with implications for both customers and employees.
Its treatment of customers for many years seemed to almost glory in being nasty. “You’ve got a cheap flight, what more do you want” seemed to sum up its attitude. Ryanair boss Michael O’Leary once said, only half in jest: “Anyone who looks like sleeping, we wake them up to sell them things.”
And O’Leary has also been famously dismissive of Ryanair staff, for example causing some controversy last year by saying pilots were “very well paid for doing a very easy job”. This was during the rostering mess which caused 2,000 flight cancellations last autumn and is likely to have accelerated the move to recognise trade unions.
The increasing size of the company’s operations in unionised southern European markets like Spain and Italy and the restrictions on employing people via contracts across different markets were central to this decision, but last autumn’s events were the catalyst. The airline can afford to pay more and have somewhat better conditions because its profit margins are so high. Its latest results showed margins of 20 per cent and profits up 10 per cent to €1.45 billion.
The fight now is about how much Ryanair has to pay for peace and smooth operations – and just how far its profit margins will shrink. It is about how the pie is divided up between employees and shareholders. It is about what investors get in dividends versus what employees get in better terms and conditions.
The fight now is about how much Ryanair has to pay for peace and smooth operations – and just how far its profit margins will shrink
Ryanair has the financial firepower for a fight, but having come remarkably smoothly out of the rostering mess last autumn it will not want to lose business in its key summer period. That said, its senior executives have made clear that it will not “import” what it sees as inefficient practices from other big airlines. The issue for the unions, meanwhile, is that this is all about the complexities of rostering, employee rights and, in some cases, earnings. Public sympathy for both sides will be limited if there are a series of disruptions.
At the centre of this is Michael O’Leary, still the una duce, una voce of the airline, still the man driving it forward as its customer numbers and fleet grow and grow. Only he can answer the question about whether he is the one to lead the airline into the new era because, as of now, it is his choice.
Of course something could go wrong – a series of damaging strikes, for example, could hit bookings. But so far most recent flight disruptions, since the rostering mess, have been courtesy of French traffic control rather than any industrial actions, which the company has seen off with minimal fuss. The question is whether it can continue to do so as the unions look set to up the ante.
War of attrition
Many airlines do operate successfully with trade unions, including lower-cost operators like Southwest Airlines in the US, while others suffer ongoing disputes and disruption. The trick for Ryanair, if it is to pay up, is to ensure that it can move into a new negotiated stability, while still being able to compete on low fares. It cannot afford an endless war of attrition.
Sometimes Ryanair itself seems unsure of how far it needs to move into the mainstream as it completes its transformation from a plucky outsider to an industry giant. This is why recognising unions was such a big step – and somewhat unexpected, at least in terms of timing.
The trick for Ryanair, if it is to pay up, is to ensure it can move into a new negotiated stability, while still being able to compete on low fares
And it is also why its approach to customer service moved in 2014, away from its previous somewhat aggressive persona to something more “normal” under its “always getting better” programme. Draconian cabin baggage rules were changed, the company invested in its website and Michael O’Leary appeared at the photo-shoot announcing it all cuddling a puppy. In recent months there have been hints of some backsliding – some cabin baggage rules were tightened again, for example, and the online selling of everything from car hire to hotel rooms is relentless.
As customers, we are all watching. Having been subjected to a short-notice, seven-hour delay on a Ryanair flight this summer – badly handled at the time – I thought that maybe the bad old days were back in terms of customer service. But a prompt apology and a generous refund gave me second thoughts. The old Ryanair would not have offered this.
We’ll continue to put up with the lottery ticket sales and the noisy landing jingle if the fares are competitive and the planes, mostly, leave on time. Making this happen in a new unionised era is the challenge.