Ryanair scrambles to please pilots, customers and investors

By Conor Humphries

DUBLIN (Reuters) - Ryanair boss Michael O'Leary on Thursday scrambled to placate pilots and reassure investors as the airline's annual general meeting was dominated by the cancellation of 2,000 flights in a "cock-up" that exposed major staffing issues.

The often outspoken CEO told investors that no more flights would be cancelled because of rostering issues and that the company's profit margin would not be affected by the problems that sparked customer outrage and a wave of negative media coverage across Europe.

O'Leary told shareholders he took personal responsibility for the staffing issues and the way the company broke the news to customers, adding that Ryanair's pilot pay levels may have been too modest in the past.

However, he also used the meeting to outline a stick-and-carrot approach to dealing with pilots after some prepared a letter demanding new contracts.

"Will there be squabbles with pilots? There may be. They have been happening for about 30 years," he said.

Captains at four under-pressure bases have been offered an extra 10,000 euros ($11,914) a year in addition to an offer of a 12,000 euro bonus for those who work an extra 10 days before the end of the year.

Citing pilot sources, Irish national broadcaster RTE said late on Thursday pilots from 55 bases had rejected the bonus pay offer, including at large Ryanair hubs in Dublin and London's Stansted airport.

PILOTS WARNED

At the shareholder meeting, O'Leary had denied reports that a significant number of pilots had rejected the offer.

He also said he was considering forcing pilots to change their holiday plans and said any pilot who failed to show up for work as a form of industrial action would be frozen out of pay talks and denied promotion.

The Irish airline, Europe's largest by passenger numbers, faced a wave of anger from customers after its announcement on Friday of plans to cancel between 40 and 50 flights a day until the end of October.

O'Leary said the decision was taken to cancel what amounted to 2 percent of the airline's total flights to avoid a sharp increase in delays because of a lack of reserve pilots. The rate of Ryanair's on-time flights has since increased from 65 percent to 91 percent, he said.

"It was the right operational decision, but we handled it badly ... we upset and worried 80 million passengers," O'Leary added.

Passengers on cancelled flights have complained that notice was far to short and that it was difficult to claim compensation. Others said they would not book a Ryanair flight while services were threatened with cancellation.

An unusually contrite O'Leary had held an emergency press conference on Monday to apologise and to publish a list of all affected flights.

The airline said the cancellations were because of a change in the way pilot's annual leave is calculated meant that too many were granted four-week breaks.

While the cancellations were required because it was too late to cancel those breaks in September and October, O'Leary said he may force pilots due leave in November and December to take three week blocks instead of four. Some of the leave may be postponed until next year, he said.

Some 1,750 of the airline's 4,200 pilots had blocks of four-week leave due before the end of the year, he said.

MORE OVERSIGHT

There were sufficient pilots to staff flights for the rest of the year but reserve crews are "tight", O'Leary said, meaning there may not be enough on standby to deal with unforeseen issues and avoid flight delays.

He said pilots had collectively offered to work an extra 2,500 days since the crisis broke -- the equivalent of 10 days from each of 250 of Ryanair's 4,200 pilots.

A source told Reuters that a letter had been approved by pilots at 17 of 85 Ryanair bases demanding new permanent, contracts under local labour law, though this could not be independently verified by Reuters.

"We haven't been sent anything yet," O'Leary said when asked about the letter. "We will not be responding to anonymous circular emails."

The crisis comes shortly after a ruling by the European Court of Justice said that Ryanair's employment contracts could, under certain circumstances, be challenged in courts outside of Ireland. Some analysts have suggested this could help staff to secure improved conditions.

"There will be more oversight of these contracts by local courts," O'Leary said of the ruling, "But there will be no changes to those contracts."

Ryanair has said it expects up to 20 million euros in compensation claims and 5 million euros in lost fares as a result of the cancellations, though analysts estimated the total cost could be higher.

Shares in Ryanair were down 0.6 percent at 16.42 euros at 1334 GMT, having briefly dropped below 16 euros while O'Leary addressed the meeting.

(Additional reporting by Padraic Halpin; Editing by David Goodman)