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Ryanair shares: will pilot strikes damage profits?

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Ryanair shares have been slumping since the announcement of a pilot’s strike by pilots in Ireland, Sweden and Belgium. Opening at €13.29, the shares peaked at €13.51 before dropping in early afternoon trading and closing the day at €13.45.

Ryanair faces the threat that its striking pilots might be joined by pilots in the Netherlands and Germany. This will have a very severe impact on Ryanair’s ability to provide flights for in excess of 25,000 passengers on Friday.

The strike news follows on from a cabin crew strike in July. Ryanair has been hit by labour disputes since it recognised unions in December, and it is doing the Ryanair share price no favours.

The airline has been reacting aggressively, with the cutbacks to its fleet operating out of Dublin announced last month. Ryanair says it wants to spend more resources on growth markets like Poland.

Ryanair investors like tough talk

Shares have reacted positively every time Ryanair talks tough with the unions and threatens job losses, although the fact remains that it is now forced to deal with the same unions as its competitors and this will remove some of its competitive edge.

The strikes also come at a critical time of year when many holidaymakers are heading abroad. Last month’s cabin crew strikes affected important holiday routes to Spain, Portugal and Italy.

Tackling unions head on can be a very risky strategy – it can cause more employees to sign up with a union and ultimately lead to wider strike participation in the future. Employees are also aware of the terms and conditions that exist in the other cheap airlines, and Ryanair will still need to compete for skilled staff – e.g. pilots – against other European discount carriers.

Ryanair shares could be hit by hard Brexit

The elephant in the room for Ryanair is still Brexit, given its reliance on the UK as a market for many of its routes. Given there is still no agreement on how aviation will be managed in the event of a hard Brexit, Ryanair stands to suffer some further severe consequences here.

The disputes will weigh on earnings – last month Ryanair announced a 20% drop in first quarter profits. The current union problems will likely translate into further profit reductions for Q2.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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