Ryanair Weighs Pay Freezes and Leaner Crews as Fuel Costs Rise

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Ryanair is looking at pay freezes, smaller crews on flights and more use of AI. The airline says it must find savings because jet fuel is getting far more expensive, and that sets up a possible confrontation with unions.

A fuel bill up by about €2bn

Ryanair expects its jet fuel costs to rise by roughly €2bn (£1.6bn) in its next financial year, which ends in March 2028. The airline links the surge to the Middle East conflict. Oil hit a six-month high on Friday and fell to about $106 a barrel on Monday.

Chief executive Michael O'Leary said fuel prices should stay high well into 2027 unless the conflict is resolved quickly. He expects European short-haul fares to rise materially, and forecasts ticket prices across European airlines up by as much as 20%. Even so, he said, that is unlikely to offset the full €2bn.

Ryanair has 80% of its fuel needs until the end of March hedged at $67 a barrel, and 25% of the following 12 months hedged at $95. O'Leary said the industry is not well hedged.

Where the savings may come from

O'Leary listed what the group is reviewing: airport negotiations, labor agreements that are maturing and may need temporary pay freezes, lower crew ratios and more AI. Several pay deals come up for renegotiation from March.

Hiring is also slowing. The airline is cutting back recruitment of pilots and cabin crew, and the intake for its training courses, O'Leary said.

AI would target operations and back-office work. By O'Leary's account, AI has already added 4% to capacity. With 650 aircraft, he said, the job is too big for a human, and the machines design schedules better.

The union response

Unite said it has not been told of any such proposals. A multiyear pay deal covers 2027, said national officer Oliver Richardson, and it is not tied to company performance. He expects it to be honored.

Profit and the fleet

For the quarter ending in September, post-tax profit was €1.61bn, down 6% and in line with analyst forecasts. Passengers grew 5% to 64.5 million. Average fares fell 2% year on year.

Fares in the final three months of the year are trending modestly ahead of last year, though the airline says that depends on close-in bookings around school holidays and Christmas.

Aircraft deliveries will slow from about 30 a year to 15 for the next few years. Boeing 737 Max 10 deliveries begin in January. The jet has about 20% more seats and burns a fifth less fuel than the current fleet.

Our Take

The company is floating measures before any are decided. The word from O'Leary is "may", and Unite says its deal covers next year. The first test is the renegotiations that start in March, which could show how far the airline can push on pay.

Source: the Guardian