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CAPA strikes list: Ryanair sparks spike Europe strike news

Ryanair faces the threat of coordinated strikes by cabin crew in Spain, Portugal, Italy and Belgium. The LCC officially recognised unions for the first time in Dec-2017 after crew rostering problems and Ryanair's need to win employee support to resolve them gave the upper hand to labour. It managed to avert strikes at the time and has held talks with several unions in different countries across its network to reach new collective agreements.

Cabin crew industrial action will add to Ryanair's labour relations challenges, since the airline's Irish pilots have announced a strike for 12-July-2018. Ryanair's strike worries come after damaging pilot strikes at Air France earlier this year, which led to the resignation of Air France-KLM CEO Jean-Marc Janaillac.

CAPA has tracked the number of articles on its website that mention the word 'strike'. This metric has broadly followed the airline profit cycle in the past – not surprising, since labour is typically more demanding when the profit cycle is at its peak. However, a surge in the number of strike-related articles in 1H2018 is running ahead of the cycle.

Summary

  • There was a 22% rise in strike-related CAPA articles in 1H2018, after a 28% fall in 2017. This metric has broadly followed airline profit margins in the past.
  • Ryanair faces strike threats from crew and pilots. Air France pilot strikes this year cost it up to EUR350 million and cost Air France-KLM its CEO.
  • Air traffic control has been a significant source of aviation strike news in Europe.
  • Labour is more demanding around the top of the profit cycle, but the surge in strike news in 2018 is running ahead of the cycle.

Increase of 22% in strike-related CAPA articles in 1H2018, after a fall in 2017

Ryanair's induction into the world of industrial action is contributing to an increase in number of strike-related articles recorded on CAPA's website this year.

Previous CAPA analysis has tracked the number of articles on its website that mention the word 'strike' and noted that 2016 represented a peak, with 1,228 articles mentioning 'strike'. This was a 30% increase on 2015 and higher than in any year going back to 2009.

See related reports:

In 2017 there was a 28% drop in the number of strike-related articles to 880. However, 1H2018 has recorded a resurgence of growth, with a 22% increase to 481 articles versus 395 in 1H2017.

If this growth rate were to continue for the whole of 2018, that would lead to a total of 1,072 for the year – the second highest over the past decade (after the 2016 peak).

Number of CAPA articles mentioning the word 'strike' (left hand axis) 2009 to 2016 and for 1H2017 and 1H2018

 

Ryanair Crew Charter launched

Ryanair crew held a crew summit on 3-Jul-2018 to launch a Ryanair Crew Charter, attended by cabin crew from 80% of Ryanair's bases and ground crew from all of its bases (according to unions). It was organised by the International Transport Workers’ Federation (ITF) and European Transport Workers’ Federation (ETF).

The charter contains demands on economic conditions, safety and rostering, a fair and supportive work culture, agency employment, the right to sick pay, and sales targets.

A key demand is that employment contracts explicitly recognise national law and jurisdiction in the country where a worker is based, rather than just Irish law.

Crew are unhappy with the improvement in their working conditions since union recognition in Dec-2017.

See related reports:

Ryanair cabin crew unions in Spain, Portugal sand Belgium plan industrial action on 25 and 26-Jul-2018, while those in Italy plan action on 25-Jul-2018.

Ryanair's Irish pilots voted 99% for strike action

Members of the Irish Airline Pilots' Association, a branch of the Fórsa trade union, voted 99% in favour of a 24 hour strike over Ryanair's approach to transferring pilots between its bases in Europe and Africa.

Ryanair has said that it has invited Fórsa to discuss the proposals on 18 separate occasions, without reply. Ryanair added that Ireland accounts for less than 7% of its services and that the airline expects 93% of passengers will be unaffected by the strike.

Ryanair pilots in Germany's Vereinigung Cockpit union are planning a strike ballot following the failure to reach a new collective agreement with the airline.

Air France pilot strikes cost the airline up to EUR350 million

Industrial relations problems at Air France cost former Air France-KLM CEO Jean-Marc Janaillac his job in May-2018, when he resigned after pilots rejected a new pay deal. The group has said that Air France pilots strikes earlier this year cost it EUR300 million to EUR350 million.

Other European airlines that face the possibility of future strikes or already announced plans for strike action include Croatia Airlines (planned strike action on 09-Jul-2018).

Air traffic control has been a significant source of strike news in Europe

Not all of the mentions of the 's' word in CAPA's news briefs relate to industrial action by airlines.

Europe's air traffic controllers remain a significant source of strike-related news, and a spate of ATC strikes this summer has been a major cause of flight delays and cancellations. There have been disputes across Europe Vereinigung Cockpit – notably in France, but also in Norway, Italy and Spain.

Europe's airlines have called for regulatory action to reduce the impact of ATC strikes on their schedules. The trade body Airlines For Europe (A4E) said in Jun-2018 that there had been a 300% increase in ATC strikes this year versus 2017.

IAG CEO Willie Walsh said that IAG and Ryanair would submit a complaint to the European Commission, calling ATC strikes "the biggest challenge for our industry". A4E has called for a mandatory 72 hour notification period for employees wishing to strike.

However, EU Commission transport and environment, maritime affairs and fisheries spokesperson Enrico Brivio has said that the commission would not question the right to strike and would not adopt any measures regulating or limiting this right. Mr Brivio is hopeful for "non binding and non legislative best practices" to address the issue. (AFP, 21-Jun-2018).

There have also been strikes involving ground transport workers affecting aviation by disrupting passengers' travel to and from airports. For example: rail services to Brussels Airport and Athens Airport and bus services to Amsterdam Schiphol Airport were all disrupted by industrial action in Jun-2018.

Labour is more demanding around the top of the profit cycle

In recent years, the world airline industry has been achieving historically high profit margins and this appears to have encouraged labour groups to seek higher wages and improved working conditions.

For example, Austria's vida union has questioned Lufthansa Group's logic of growing the fleet at Austrian Airlines only if profitability targets are met. The head of the union's aviation department, Johannes Schwarcz, said in a statement on 27-Jun-2018: "Not high profit targets, but high working conditions will always come first for us".

However, faced also with rising fuel costs and a very competitive industry structure, European airline profitability could be threatened by growing industrial unrest.

LOT Polish Airlines president and CEO Rafał Milczarski, speaking at CAPA Airline CEOs in Sydney on 5-Jun-2018, noted the trend of industrial action among airlines in Europe and globally.

He said "it is actually quite amazing" that employees do not foresee or comprehend the "result of an industrial action, the costs involved" and the relationship between their actions, airline profitability and the future viability of airline and "potentially their jobs".

The broadly upward trend in the number of CAPA articles mentioning the word "strike" from 2009 to 2016 was accompanied by a broadly upward trend in the world airline industry's operating margin as the industry achieved new peak margin levels (see chart below).

Although the correlation between them is not wholly perfect, this supports the hypothesis that labour often becomes more demanding of an increased share of the rewards when the profit cycle nears the top.

Number of CAPA articles mentioning the word 'strike' (left hand axis) and world airline operating margin (%, right hand axis): 2009 to 2018e*

 

The surge in strike news in 2018 is running ahead of the airline profit cycle

CAPA's world airline industry margin model notes that 2016 was a peak in the margin cycle, followed by modest declines in 2017 and 2018.

See related report: CAPA airline profit outlook. Margins high, but below peak, as traffic growth slows & oil price rises

However, although the number of strike-related articles also fell in 2017, the increase in the use of the 's' word in 2018 is not consistent with the pattern of falling margins.

This could be because operating margins are still at historically high levels, remaining above previous cyclical peaks of around 6% for four years now (in the region of 8%-9% since 2015).

The gentle decline in margins from the 2016 peak is nothing like the precipitous plunge often seen in previous cycles and so, labour does not feel the kind of external threat that has dampened its enthusiasm for industrial action in previous downturns.

In addition, it appears that Ryanair's addition to the list of airlines affected by industrial action has given a structural (rather than cyclical) boost to the volume of strike-related news in 2018.

Either way, an increase in industrial action, alongside rising oil prices, could threaten the airline industry's ability to maintain profit margins at historically high levels.

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