Ryanair lays off 3,000 and lashes out against state aid to European airlines

Ryanair shares fell as much as 5.3% in London, with markets closed in Dublin and other European cities because of May 1 holiday

Michael O’Leary has consistently railed against bailouts, saying that they are in breach of EU competition and state aid rules, and said the carrier will challenge them in court. REUTERS

Ryanair Holdings will cut 3,000 jobs and said it will challenge some 30 billion euros ($33 billion) in state aid being doled out to save its European competitors.

The Irish discount carrier on Friday added to a mounting employment toll that includes 12,000 cuts at British Airways and 5,000 at SAS AB. The reductions represent about 15 per cent of Ryanair’s workforce and would include pilots and cabin crew.

The company plans 20 per cent pay cuts for the remaining staff, Chief executive Michael O’Leary said in an interview with Bloomberg TV. Mr O’Leary expects demand to bounce back slowly while warning that bailouts will worsen the effects of weak demand on the industry by helping spur discounts that add to pressure on ticket pricing.

“The people who went in weakest, which is the legacy airlines, Air France, Alitalia, Lufthansa, have either been nationalised or are receiving extraordinary volumes of state aid,” Mr O’Leary said. “These are going to hugely distort the level playing field for aviation in Europe for three to five years. What we’re facing now is a historic decline in air traffic in Europe for the next 12-18 months.”

Ryanair shares fell as much as 5.3 per cent in London, with markets closed in Dublin and other European cities because of the May 1 holiday. UK discounter EasyJet dropped as much as 7.3 per cent, while IAG, the parent of British Airways, declined as much as 4.6 per cent.

Ryanair said in a statement that it will carry less than 1 per cent of its normal passenger volume in its fiscal first quarter and doesn’t expect a full recovery until summer 2022 at the earliest.

Mr O’Leary has consistently railed against bailouts, saying that they are in breach of European Union competition and state aid rules, and said the carrier will challenge them in court. Carriers across the region are asking for help to survive the coronavirus crisis that has grounded much of Europe’s air traffic, endangering not only the airlines but connections that keep tourists flowing to Rome and Paris and help power Germany’s export economy.

British Airways sister airlines Iberia and Vueling on Friday said they reached agreements for a combined €1bn ($1.1bn) in Spanish government-backed loans to weather the disruption caused by the pandemic.

Balpa, which represents some of Ryanair’s pilot said that there had been no warning or consultation by Ryanair about the job losses.

“Ryanair seems to have done a U-turn on its ability to weather the Covid storm,” Brian Strutton, general secretary of Balpa, said in a statement. “Aviation workers are now facing a tsunami of job losses.”

Ryanair said it expects flights to resume in July, and that “it will take some time for passenger volumes to return.” The company is working on reducing deliveries of 737 Max narrow-bodies from Boeing and Airbus SE A320-series jets from leasing firms.

Ryanair has 150 higher-capacity Boeing jets on order with options from another 60. The Max has been grounded for over a year following two fatal crashes and Boeing now expects the plane to return to service in the third quarter of 2020.

“We would still like to take some if not all of those aircraft,” Mr O’Leary said. “We need to rightsize the company for what is going to be 3-5 years of very grim trading for Ryanair.”