Ryanair's O'Leary Makes Personal Appeal to Stem Pilot Revolt

(Bloomberg) -- Ryanair Holdings Plc Chief Executive Officer Michael O'Leary made a personal pledge to improve pay and career prospects for the budget carrier's 4,200 pilots amid concerns about a rebellion in the aftermath of its cancellation fiasco.

O'Leary, often dismissive of pilot demands, is seeking to soothe disgruntled cockpit crew with wage increases of as much as 10,000 euros ($11,700) and loyalty bonuses of up to 12,000 euros that are tied to “achievable” performance targets, he said in a letter to the employees. The appeal is aimed at keeping flight staff from bolting to rivals.

The changes “will transform your pay and carrier prospects in Ryanair,” O'Leary said in the Oct. 5 letter, a copy of which was obtained by Bloomberg. “If you have or are considering joining one of these less financially secure or Brexit-challenged airlines, I urge you to stay with Ryanair for a brighter, better future for you and your family.”

The letter highlights the urgency facing O'Leary as he attempts to stabilize Ryanair after scrapping more than 20,000 flights, affecting over 700,000 passengers, because of a lack of available pilots. In addition to botched vacation planning, Ryanair's bare-bones operations were further stretched as competitors poached crews.

“Michael O'Leary made a costly error by initially disrespecting the skillset of pilots, and in a rare move is being forced to backpedal, apologize and meet their pay demands,” Darren McKinley, an analyst with Merrion Capital, said in a note to clients, adding that the measures could cost the carrier as much as 100 million euros. The move “reduces the risk of a mass exit at Ryanair by its pilots.”

Europe's biggest low-cost airline will negotiate so that pay offers “don't just match” but “exceed” rival carriers such as Norwegian Air Shuttle ASA and the U.K.'s Jet2 which operate the same Boeing Co. 737 aircraft-type that Ryanair flies, O'Leary said.

Ryanair shares fell as much as 3 percent and were down 2.4 percent at 16.60 euros as of 3:57 p.m. in Dublin. That pared its gains this year to 14 percent, valuing the company at 19.6 billion euros.

No Unions

The plea comes amid efforts by Ryanair pilots to organize company-wide representation, an effort that has secured the financial and logistical backing from the pilots union at American Airlines Group Inc. O'Leary has remained firm in his opposition at the company's shareholder meeting last month, saying the airline would only accept unions when “hell freezes over.”

He reaffirmed his stance that the company will stick with its local employee committees to discuss staff issues. “We will not, and cannot be forced to, deal with third-party pilot unions,” he said in the letter. “If pilots choose to not use these tried and tested forums for negotiating with us, then you and your colleagues will suffer a delay in delivering these pay increases and other benefits at your base.”

Unions said the efforts are falling short. “Our feedback from Ryanair pilots who have seen Michael O'Leary's letter suggests that he still doesn't get it,” British Airline Pilots' Association said in a statement. “Pilots from bases all over the U.K. have told us that they don't want half-hearted excuses to shut them up.”

The CEO also said Ryanair will negotiate differences between its Irish contracts and employment benefits -- including sick pay, maternity leave and probation requirements -- required where its pilots are based. Ryanair has come under pressure after a ruling at the European Court of Justice said employee lawsuits could be heard in local jurisdictions, a development analysts say could lead to a shift away from its cut-rate Irish contracts.

Any adjustments to work rules “will not change the fact that crews will continue to be employed on Irish contracts of employment or that Irish law will be applicable to these amended contracts,” O'Leary said.

To contact the reporter on this story: Benjamin Katz in London at bkatz38@bloomberg.net.

To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net, Christopher Jasper