Management Of Conflict Between Ryanair And IALPA
The newspapers in recent months have seen Ryanair as the protagonist, not for the often-controversial declarations and the rough ways of their CEO, but because of their attitude towards their employees, which caused numerous strikes in the past few months in several Europeans countries and frictions with the Irish Air Lines Pilots Association (IALPA). At the basis of the strikes is not only Ryanair reluctance to recognize the unions (O'Leary said he would rather cut off his right hand than to sign a deal with unions) but also the employees' desire to seek better terms and conditions. Ryanair’s story showed that their position can be quite aggressive at times and, while this can work in some situations, in the long term it probably exasperated the feelings of the parties involved. Can the company's organizational culture explain or justify their decisions? Who has been affected by their way of handling the conflict with the unions?
Organisational culture and conflict
An organisational culture can be described as the “personality” of an organisation or the way things are done in a company. People working in an organisation interact with internal or external individuals, groups, and departments and as such, conflicts are likely to occur. Conflicts is a process that begins when one party perceives that another party has negatively affected (or is about to) something that the first party cares about (A. Huczynski, 1985). Some level of conflict can be functional to the organisation and bring productivity and innovation, but when the conflict is dysfunctional it can easily lead to low motivation and creativity, or to high hostility and chaos. The latter of course is not desirable as it reduces the company perform, and that’s what happened to Ryanair. Let’s examine some of the factors that have been affected by their decisions.
- Shareholders – Ryanair has seen a share value and earnings reduction this year. Despite shareholders recently voted for O’Leary to stay as CEO (98. 5% ignored ISS and Pirc recommendation), there are signs that Ryanair’s investors are dissatisfied with the corporate governance. The recent tensions also questioned the company capability to meet the target of 200 million passengers by 2024.
- Employees – Ryanair reaction to the threat of a strike was quite aggressive by issuing redundancy notices to 300 staff in Dublin, instead of opening a communication channel and listening to what pilots were demanding, i. e. better pay and benefit like better sick pay and an end to high in-flight sales targets.
- Customers – Ryanair saw an increase in passenger number this year and despite cancelling thousands of flights which effected a conspicuous number of customers, they retained their position as Europe’s main carrier. Their “overall cost leadership” strategy and flight punctuality drive customers preferences who still choose to travel with them even though they are unhappy with the company.
- Suppliers – Fuel and food suppliers have probably seen the effect of the strike in their business: it goes without saying that no flight means no fuel and food payable to their supplier. However, presently there are not any known actions pending against Ryanair, suggesting low bargaining power which, in a way, might explain Ryanair carefree attitude.
While Ryanair shares lost a fifth of their value in the past year, its low-cost rival easyJet, which has long-standing union agreements, saw their share price increased by a fifth. Even Wizz Air, a fast-growing Hungarian competitor that uses cheaper eastern European staff, was eager to profit from Ryanair’s problematic situation. O’Leary claimed negotiations with employee unions had been derailed by interference promoted and coordinated by competitor airline employees and their unions, probably alluding to the fact that the majority of IALPA members operate in Aer Lingus, ASL, CHC, CityJet, Norwegian, and Stobart Air. He also asked the European Commission for an immediate investigation over the anti-competitive behaviour. Whether these accusations are true or not, other companies can face or have faced labour actions like Lufthansa in the first quarter of this year, and Air France: did Ryanair just consequently profit from that situation or were they behind the strike? The tug of war between Ryanair and the unions and the unsuccessful attempt to impose a win-lose strategy seems not to have brought the same results obtained in the past by the company.
Cancellation of flights had repercussions on the economic activity of the destination countries even if it is probably difficult to quantify the impact. Tourism was probably one of the most affected sector, seeing reservations in hotels, restaurants, etc. cancelled, although the company said they chose to cancel business meetings instead of family holidays, but it was not really clear how they did it. The recent strike put Irish labour law in the spotlight. Irish employment law is more liberal than in many other European jurisdictions, and it makes easier to fire workers and harder to sue employers. In an attempt to avoid further strikes, it appears that Ryanair also threatened their pilots with repercussions on their performance bonus and career progression, which would be in breach of labour law. Once again, Ryanair’s attitude regarding labour law is quite aggressive and as an example of this, we could mention the company’s decision to closing their only French base in Marseille in 2011 to avoid a deal with unions. Although the strike has resulted in seeing recognised the trade unions last December, and have increased pilots’ wages by 20%, the company is still far from recognising the labour law of the country where their employees are based.
As previously mentioned, Ryanair suffered financial losses during their fight with IALPA, seeing a reduction in revenues despite an increase in number of passengers. According to the EU261 regulation, the company is obliged to refund or reroute passengers: Ryanair however immediately denied the application of the compensation, stating that no compensation is payable when the union is acting unreasonably and totally beyond the airline’s control. The company has also incurred in substantial costs in paying for hotels and meals for stranded passengers, as well as losing millions in peak-season revenue. Ryanair’s intangible losses, like the damage to their reputation and brand, do not seem to be significant: paradoxically, customers have still chosen (or have little choice but) to fly with Ryanair.
O’Leary showed that he has never cared if the strike has brought him into conflict with customers, suppliers or other stakeholders. Any bad publicity has been seen instead as an opportunity to emphasise that Ryanair would do whatever requires to keeping its costs and fares lower than those of its competitors. Ryanair have very little regard for the wellbeing and satisfaction of their employees, ignoring the needs of their staff in order to maximise profit. Nonetheless, this has produced evident results, with revenues of over $7 billion in 2017-2018. At the end of the day, the primary role of the owners is to please shareholders whilst keeping to international regulations. However, the low-cost model – or more precisely obsession – adopted by Ryanair and their strategy in managing conflicts need to be readapted if they want to keep the pace with a global new vision of businesses that focus on customer satisfaction.