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Ryanair CEO takes rap for costly cancellations 'cock up'
















By Padraic Halpin

DUBLIN (Reuters) - Ryanair <RYA.I> boss Michael O'Leary admitted on Monday to a "cock up" over pilot shortages that led him to cancel flights and disrupt the plans of hundreds of thousands of travelers in his bid to improve the budget airline's punctuality.

The Irish airline said it was preparing for up to 20 million euros ($23.9 million) in compensation claims and 5 million euros in lost fares as a result of the cancellations, although analysts estimated the total cost could be higher.

"This is clearly a mess up, I take responsibility for the mess up and I have to clear it up. I say sorry on behalf of Ryanair. I say we want to put our hands up, which is what we do when we make a mess," O'Leary told a news conference.

Europe's largest airline by passenger numbers 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, air traffic control strikes and bad weather.

O'Leary promised the problem would not recur in 2018 but said there would be a reputational hit from cancelling flights to and from destinations including Barcelona, Brussels, Lisbon, Madrid, Milan and Rome, which would not help future bookings.

Norwegian Air <NWC.OL> said it had hired more than 140 Ryanair pilots this year, although O'Leary said it had lost less than 100 of its 4,200 pilots and had recruited some from its rival, meaning it could fully crew its peak schedule.

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.

"Have I damaged Ryanair's reputation with these cancellations? Yes but I would rather damage the reputation of Ryanair by cancelling 2 percent of our flights than significantly delaying 40 percent of our flights," O'Leary said.

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 "to improve its system-wide punctuality which has fallen below 80 percent in the first two weeks of September". This fell as low as 70 percent in the days before the drastic move to cancel flights.

COUNTING THE COST

While it currently calculates crew leave from April to March, the Irish Aviation Authority is forcing it to calculate it from January to December from the start of 2018.

O'Leary said the problems were "because we're giving pilots lots of holidays over the next four months." Every passenger who is entitled to compensation will receive it in full, he added.

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.

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.

Analysts at Dublin-based Goodbody Stockbrokers estimated the cancellations would cost the airline about 34.5 million euros ($41.2 million)m -- 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 percent off its full-year forecast of 1.479 billion euros in profit after tax.

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

PILOTS IN DEMAND

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 percent compared to an average of 89 percent in the three months to the end of June. O'Leary said at the time he was not happy with that figure, seeking a mark of over 90 percent.

O'Leary confirmed a report in the Irish Independent that Ryanair had been offering some pilots a 10,000 euro ($11,925) "signing-on bonus" to keep up with its rapid passenger growth.

Training company CAE Inc <CAE.TO> has warned the worldwide commercial aviation industry would need an extra 255,000 pilots by 2027 to sustain its rapid growth and was not moving fast enough to fill the positions.

Shares in Ryanair, which fell by more than 3 percent in early trading, were 1.85 percent lower at 1430 GMT.

(Additonal reporting by Ole Petter Skonnord in Oslo, Victoria Bryan in Berlin and Alistair Smout in London; Writing by Alexander Smith; Editing by Mark Potter/Keith Weir/Edmund Blair)