Ryanair drops bid for Alitalia to focus on pilot roster difficulties

Ryanair will not go ahead with a planned bid for troubled Italian flag carrier Alitalia as it continues to grapple with problems that have forced it to cancel flights through the winter.

The airline’s shares surged 3.87 per cent to €17.06 on Wednesday, adding €600 million to its value, despite news that it planned to cancel flights and slow growth during the winter to allow it to deal with difficulties over pilots’ rosters and holidays.

In an effort to focus management efforts on its current problems, Ryanair said that it would “not be pursuing our interest in Alitalia or submitting any further offers for the airline”.

The Irish carrier was one of 10 circling Alitalia, declared insolvent earlier this year with debts of €3 billion. Last week Ryanair chief executive Michael O’Leary said it would make a binding offer for its rival.

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Ryanair’s statement said it has already told the three bankruptcy commissioners appointed by Italy’s government to oversee Alitalia that it would not make further bids.

Investors initially greeted Wednesday’s announcement as more bad news but Ryanair shares gained momentum through the afternoon. Stock exchange traders noted that the announcement on Alitalia and what looked to be a final clarification on cancellations were ultimately well received.

Profits

Ryanair is not altering its estimate that profits for the 12 months ended March 31st, 2018 – its financial year – will be around €1.4 billion to €1.45 billion.

This is despite a likely €25 million bill for the cancellations announced last week and another €25 million cost linked to Wednesday’s announcement.

Ryanair intends to ground 25 more craft than originally planned between November and March. The move will result in flight cancellations during those months likely to hit about 400,000 passengers.

It now expects to fly 129 million people in its current financial year, down from its original projection of 131 million. The figure will be 7.5 per cent up on its 2017 financial year instead of closer to 10 per cent.

Ryanair will cut the expansion of 2018’s summer fleet to 435 craft from an original 445. Passenger numbers in the 12 months ended March 31st, 2019, will be 138 million instead of a hoped for 142 million.

The airline told pilots of these changes on Wednesday. Mr O’Leary originally said a mix up over their leave prompted the initial wave of cancellations announced almost two weeks ago.

Pilots’ lettter

However, an internal document circulated on Wednesday to pilots maintained that that company’s offer of extra cash to pilots from some bases was not helpful.

Ryanair is paying those based at Dublin and three other airports up to €10,000 extra to deter them from leaving.

“To solve the problems we now face will require a different management attitude and mindset,” the pilots’ letter said.

However, Ryanair maintained that it would not answer anonymous demands made via unsigned emails.