Ryanair facing legal action for 'misleading passengers'
Ryanair Holdings (CDI)
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17:14 17/12/21
Ryanair is facing legal action for "persistently misleading" passengers about their rights following thousands of flight cancellations after the Civil Aviation Authority launched action against the budget airline for wrongly claiming it did not have to re-route passengers on rival airlines.
Travel & Leisure
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14:04 16/05/24
After the Dublin-based group on Wednesday cancelled a further 18,000 flights on top of the hundreds of thousands axed a week earlier, the UK CAA said overnight that it had launched "enforcement action" against Ryanair "for persistently misleading passengers with inaccurate information regarding their rights in respect of its recent cancellations".
Following its initial cancellations, the authority wrote to Ryanair to clarify their legal obligations and seek assurances around how and when they would reroute passengers onto alternative flights, telling the airline to make a corrective public statement to ensure customers were not misled and had accurate comprehensive information relating to their rights and entitlements.
However Ryanair, which said it was slowing its rate of growth this year and next in order to reduce traffic and resolve its pilot roster problems, "has again failed to provide customers with the necessary and accurate information relating to their passenger rights, particularly around rerouting and care and assistance entitlements, which includes expenses", the CAA said.
Analyst Neil Wilson at ETX Capital, commenting on Thursday morning, said it was not just customers who are in for a rough ride, with investors also advised to expect turbulence ahead as earnings are likely to be hit by higher costs and slower growth.
Last week Ryanair was forced to pay for replacement seats on rival airlines following the wave of flight cancellations and was embroiled in a dispute with pilots over how to avoid further cancellations, with the aviators turning down an offer of bonuses in return for foregoing some holidays.
In August the company warned of pricing pressures, saying that "after a difficult winter last year, we expect the pricing environment to remain very competitive" into the second half, with profit forecasts "heavily dependent" on summer bookings, stability of fares and the absence of a range of further variable such as security events, air traffic strikes or Brexit developments.
Earlier this month, Ryanair lost a court battle in the European Court of Justice where it had sought to continue forcing cabin crew based outside Ireland to take their disputes to Irish courts, in a case with implications across the low-cost airline sector as it raises the prospect of unionisation and more expensive direct employment costs.
"Investors may be right to question whether management is being entirely truthful when they claim there is no pilot shortage," said Wilson.
"However much Ryanair dresses this up as a holiday booking issue, it does not have enough pilots to cover the roster for the next six months. If this is not a pilot shortage it’s hard to fathom what is. The airline has said it has 650 or so pilots arriving in the next few months to take the strain."
Wilson said it was "the culmination of years of treating customers and its staff with utter disdain", with Ryanair running a very lean operating machine, with costs per available seat kilometre a lot lower than competitors helped by lower average crew complements.
"This approach has fuelled its rapid growth and huge profits, but has come undone, to a degree. Also, in cancelling all these flights Ryanair has made a rather cynical calculation that it’s better to take the hit early and pay less compensation, than if it had been forced into coping with delays and cancelling flights closer to the scheduled departures. Ryanair is reaping what it’s sown," he said, adding that this and the Mons court ruling threatens to eat into Ryanair’s main strategic advantage.
Ryanair assured this week that despite compensation costs in the region of €50m for the cancellations it still expects to generate full-year profit of €1.4-1.45bn, with traffic growth expected to be less than expected at 129m, but still up 7.5% on last year.
Wilson said while the company reputation has suffered a huge blow, "it’s probably not terminal".