Thursday, 14 September 2017

ECJ ruling challenges Ryanair's employment model

Today saw a highly important by the ECJ relating to low-cost airline Ryanair. As many people will know* Ryanair is anti-union. It also relies on extensive use of indirect employment, with many cabin crew employed by agencies like Crewlink, whilst many pilots are self-employed contractors (yes, really).

But the other striking thing about Ryanair is that a large number of staff are employed under Irish law. This happens whether they work in Ireland or, in the case today, in Belgium. By happy chance Irish law has weaker employment rights in a number of areas than other nations in which Ryanair crew work. Today's decision, which you can access here, was essentially concerned with whether staff based in countries other than Ireland could have cases heard in their own country, and plays into the question about which country's law should apply.

I won't summarise the ECJ ruling, our resident legal expert has done that here, but it is very favourable to employees on this point, and thus a major setback for Ryanair, though the company claims otherwise.

The ITF has put out a statement on the ruling, which you can read here. There is also quite a bit of media coverage, most of it good (the Telegraph news story not so much!). Interestingly, some sell side analysts have come out with negative comments about the impact on Ryanair in response to the ruling, and various figures are being knocked about regarding the potential impact on its costs. This, plus the 3%+ drop in the company's share price, should tell you that financial markets have not bought the company's claim that the ruling doesn't change anything.

To me it looks like today is just the start of the company's employment model coming under more scrutiny and challenge. If I was an investor in Ryanair I think I'd be asking whether today's bombastic statements bear much relation to the truth, and just how much risk/cost there is tied up with the current model. It's interesting that the Advocate General's opinion in this case, which came out in April, did not even get a mention in the annual report.

As if that was not enough, Ryanair has its AGM next week. Again there has been a string of stories about corporate governance advisers recommending votes against the company's remuneration report and board directors. So today's news could not come at a worse time.

It will be a turbulent couple of weeks.

* If not, here's just one recent example:
“We don’t believe it will lead to unionisation because the first people up over the barricade looking for unions will find their base either frozen or closed,” he said.

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