Ryanair avoids unions with ultra-low-cost unit

Ryanair is ramping up a new subsidiary with weaker labour rights to better compete in eastern Europe, infuriating staff and unions by bypassing concessions granted during a year of industrial strife.

However, a key element of the plan, forcing staff to move to self-employment contracts, is being probed by Polish authorities and a law to allow contractors to join unions, and potentially push for concessions granted in western Europe, is due to enter force there in January.

Ryanair has seen almost a third wiped off its share value in 12 months since strike threats led it to recognise unions for the first time. Investors fear better staff conditions could undermine its business model, among other issues.

While hailing progress in securing deals on improved conditions with unions in Europe, management is planning the rapid expansion of Polish-registered Ryanair Sun, where staff are self-employed contractors, a model Ryanair has largely phased out at its main airline under union pressure.

The model denies staff normal employment rights such as paid sick leave and effectively blocks union representation, staff and union representatives said.

“On the one hand, Ryanair is busy reaching out to the unions to show a new socially responsible face,” said Philip von Schoppenthau, secretary general of pilot group the European Cockpit Association.

“But at the same time they are busy working in the opposite direction building up a potentially union- free, by design union-free, company, Ryanair Sun.”

Ryanair counters that many staff are happy with contractor status, which they say gives them higher pay. It says the contracts are standard in Polish airlines and that the unit’s rapid expansion, from five to 20 planes next year, would not be possible if conditions were not competitive.

“It’s not necessarily the best model for union membership growth, so I would expect the unions to say negative things ...but look, it’s the way the Polish market works,” chief marketing officer Kenny Jacobs said.

Ryanair Sun is currently only operating in Poland, Ryanair’s largest market in eastern Europe, and Ryanair declined to say whether it planned to expand the unit to other markets. However, chief executive Michael O’Leary said in July he planned to expand Ryanair Sun and Austrian unit Laudamotion “as quickly as they’re able to grow”. In October he told investors the two units would drive much of the airline’s growth.

With more than 200 planes on order over five years, Ryanair has the capacity to build both units into mid-sized European airlines with tens of millions of passengers a year each.

While Laudamotion has signed a collective agreement with its unions, HSBC Bank described Ryanair’s new multi-unit structure as “an attempt to counter the pressures of unionisation”.

Goodbody said Ryanair Sun gave Ryanair “the chance to create an ultra-low cost business”.

Mr O’Leary made the decision to recognise unions under the threat of a mass Christmas strike last year, after months of cancellations and an extremely tight global market for pilots. With several union deals done and small airline failures increasing pilot supply, the airline is under less pressure now.

Ryanair has singled out central and eastern Europe as a key market for growth, split between “essentially just two airlines” — Ryanair and union-free, Hungary-based Wizz, Mr Jacobs said.

Ryanair says its staff costs were on par with Wizz before the staffing crisis, at €5 per customer flown, but have since increased to €6.

While Ryanair Sun will help Ryanair compete with Wizz in eastern Europe, Wizz is likely to face pressure from unions as it moves into Western Europe, Mr Jacobs said. Non-unionisation also means Ryanair Sun avoids collective labour agreements that can put restrictions on transfers to other bases.

Moving planes and crew quickly between airports helps give Ryanair the lowest airport costs in Europe accounting for up to two-thirds of their cost advantage over some rivals.

Unions say Ryanair is using the unit to pressure staff in negotiations in other countries. When Irish pilots threatened to strike earlier this year, Ryanair announced it was cutting capacity in Ireland and offered staff jobs at Ryanair Sun.

Reuters


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