RyanAir’s Stock Is Tumbling As It Cancels Hundreds of Flights

September 18, 2017, 12:14 PM UTC

Ryanair shares fell on Monday after the Irish budget airline disrupted the plans of hundreds of thousands of travelers by canceling flights to cope with pilot shortages and improve its punctuality record.

Ryanair (RYAOF) blamed a number of factors for the sudden cancellations including a backlog of staff leave, which must be taken by the end of the year. Europe’s largest airline by passenger numbers also said air traffic control strikes and weather disruption were affecting its performance.

Rival Norwegian Air said on Monday that it had recruited more than 140 pilots from Ryanair this year, adding to the squeeze on staffing.

Seeking to halt a decline in performance figures, Ryanair has taken the unusual step of announcing plans to cancel between 40 and 50 flights per day until the end of October.

Ryanair said the cancellations were designed “to improve its system-wide punctuality which has fallen below 80% in the first two weeks of September.”

Ryanair sent emails to the first affected passengers last Friday, giving them the choice of a refund or an alternative flight. It has issued cancellation notices up until Wednesday.

The move brought bad publicity for an airline which has worked hard over the past few years to improve a reputation for treating passengers badly.

News bulletins in Ireland ran interviews with disgruntled customers while newspapers asked readers to share their stories, including a wedding party who told the Irish Times they had been left stranded in France.

Price to Pay

Analysts at Dublin-based Goodbody Stockbrokers estimated that the cancellations would cost the airline around 34.5 million euros ($41.2 million)—comprising 23.5 million euros in compensation, 6.3 million euros in lost fees, and 4.7 million euros in subsistence such as meals, drinks and accommodation.

Goodbody said that would shave 2.3% off its full year forecast of 1.479 billion euros in profit after tax.

In July, Ryanair reiterated its 1.4 to 1.45 billion euro forecast for the financial year ending March 31, 2018.

Barring exceptional circumstances, airlines must under EU rules provide at least two weeks’ notice to avoid paying compensation of 250 euros per passenger for flights of 1,500 km or less or 400 euros for longer flights within the bloc.

The fall in Ryanair’s punctuality below 80% compared to an average of 89% in the three months to the end of June. Chief Executive Michael O’Leary said at the time he was not happy with that figure, seeking a mark of over 90%.

According to OAG flightview, which counts flights as on-time when they depart or arrive within 15 minutes of schedule, Ryanair’s on-time percentage also dropped to 81.3% in August and 80.1% in July.

Rival easyJet, which has been investing in making its operations less prone to delays after being named Britain’s tardiest airline for the last two summers, had an on-time percentage of 68.3% in August.

Pilot Shortage

The Irish Independent reported on Monday that Ryanair has been offering pilots a 10,000 euro ($11,925) “signing-on bonus” in response to recruitment problems.

Ryanair declined to comment on the report and the comments from Norwegian Air.

Ryanair employed 4,058 pilots at the end of March, according to its annual report, up from 3,424 a year earlier to keep up with a rapid growth in passenger numbers.

Training company CAE Inc warned recently that the worldwide commercial aviation industry will need an extra 255,000 pilots by 2027 to sustain its rapid growth and is not moving fast enough to fill the positions.

Shares in Ryanair, which fell by over 3% in early trading, were 2.3% lower at 1110 GMT. That marked the second decline in a week after the company lost an EU court battle in which it sought to continue forcing cabin crew based outside Ireland to take their disputes to Irish courts.