How much would it cost O’Leary to be nice to his pilots?

How much would it cost O'Leary to be nice to his pilots?

The Ryanair flight cancellation debacle has once again thrown a spotlight on the airline’s industrial relations.

At the time of writing, Ryanair pilots had rejected a £12,000 pay offer to forgo some of their leave entitlement, which would have helped reduce the prospect of further cancellations, in favour of holding out for local employment contracts and better conditions[1].

Despite the estimated €25 million cost of the fiasco in lost revenue and compensation pay outs, Ryanair boss Michael O’Leary confirmed at the firm’s annual meeting on 21 September that its profit guidance for the year would remain unchanged at €1.4bn-€1.5bn[2].

We wondered exactly how much it would cost the airline to be “nice” to its pilots and whether this would impact on Ryanair’s ability to compete in the ultra-competitive low cost market.

We chose to define “nice” as a better work-life balance, achieved by a 20% increase in the number of pilots, plus a 20% increase in pay across the board.

We assumed that Ryanair has 4,200 pilots (Captain and First Officer) on an average salary of €60,000.

Ryanair would therefore need to hire an additional 840 pilots at a cost of €50,400,000.

To give all pilots a €12,000 pay rise would then cost an additional €60,480,000.

This brings the total cost of the “Nice Strategy” to €110,880,000 – approximately 2% of Ryanair’s annual turnover.

So, what would this mean for the airline’s competitiveness?

While a bill of €110,880,000 may initially sound expensive, when considered in the context of Ryanair’s whopping 128,000,000 seats in the market, it works out at a mere €0.87 per seat.

Aviation Analytics has calculated that Ryanair’s average seat cost is currently €41.65. Pursuing the strategy outlined above would bring this up to €42.52.

We also calculated that Ryanair’s chief competitors, Wizz and EasyJet, have average seat costs of approximately €44 and €56 respectively. Ryanair’s new cost position of €42.52 would therefore remain highly competitive.

The employment market for pilots is known for being cyclical, with pay and conditions squeezed during periods of constraint in the airline business, only to rapidly improve as the industry expands and demand increases. However you choose to measure it, the cost to Ryanair of appeasing its workforce does not appear to be significant. Given the current high levels of demand for pilots from across the industry, Ryanair employees are well placed to hold out for the improved pay and conditions which many feel are long overdue. We wish them luck!

Get the full picture. How do other LCCs stack up against Ryanair? For fare performance, seat costs and profitability for all European and US LCCs, contact Jon Soars on +44 (0) 207 856 0159 or at jonsoars@aviationanalytics.com.com

[1] Reported in Financial Times

[2] Reported in Financial Times

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