February 5, 2018 / 8:40 AM / 20 days ago

Ryanair prepares for new battle with pilots as profits rise

DUBLIN (Reuters) - Ryanair warned its pilots it would face down “laughable demands” for conditions similar to high-cost rivals even if that meant strikes at Easter, overshadowing an increase in profit for Europe’s largest budget airline.

The Irish airline also warned that its competitors were being overly optimistic in expectations of fare rises on European short-haul routes over the coming summer and urged analysts to maintain “extreme caution.”

Profits rose by 12 percent in the three months to the end of December on an annual basis despite a turbulent period in which it had to deal with mass cancellations because of a shortage of pilots and the threat of strikes.

It said it would return 750 million euros ($933 million) to shareholders via a share buyback, a move analysts said was coming sooner than expected.

Ryanair averted the threat of widespread Christmas strikes by unilaterally recognising unions in December for the first time in its 32-year history, but it has struggled to formalise relations since.

Ryanair shares were down 3.25 percent at 0940 GMT because of concerns about further disruption.

SHOWDOWN LOOMS

Buoyed by strong financial results and formal agreement on recognition with its British union, Chief Executive Michael O‘Leary said the airline was preparing to face down other pilot unions.

“We have some jurisdictions where we are getting ... laughable demands for legacy-type inefficiencies,” O‘Leary said referring to the pay and working conditions typical of the higher cost carriers Ryanair has undermined in recent decades with its ultra-low-cost model.

FILE PHOTO: Ryanair Boeing 737-800 aircraft taxi at Manchester Airport, Britain, January 8, 2018. REUTERS/Phil Noble/File Photo

“Frankly we will never agree to those ... if we have to take strikes or disruptions in those jurisdictions, then we will take those,” he said in a pre-recorded presentation to investors.

Pilots, who enjoy increased leverage due to a relative shortage of experienced pilots in Europe, say they only want the same conditions to those at low-cost rivals such as easyJet and Norwegian Air Shuttle.

Some have complained of a toxic working atmosphere at Ryanair and a lack of trust between staff and management.

They say they will refuse a unilateral offer of a pay rise unless they get assurances it won’t impact future talks on pay and conditions.

Goodbody Stockbrokers said that while the airline’s operating performance was solid, there was a heightened risk of a showdown with unions.

“This is Ryanair drawing the line in the sand” with unions, analyst Mark Simpson said.

Profit after tax for the quarter was 106 million euros, up 12 percent from a year ago and slightly ahead of a consensus forecast of 101 million euros in a Ryanair poll of analysts.

Revenues for optional extras such as pre-booked seats and extra bags beat expectations, while the airline increased its passenger forecast for the year to end-March to 130 million from 129 million.

The cancellation of thousands of flights in the quarter cost Ryanair 25 million euros in passenger compensation, while pay increases for pilots are expected to cost 45 million euros in the six months to the end of March.

Ryanair said it expected to post profit after tax of between 1.4 billion and 1.45 billion euros in its financial year, which ends on March 31, 2018, a forecast that has remained unchanged since May.

($1 = 0.8035 euros)

Reporting by Conor Humphries; Editing by Louise Heavens and Keith Weir

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