Budget airlines – currently encountering turbulence

5 October, 2017

Employees in the budget airline industry have suffered a bumpy ridewhite airplane in recent weeks after Monarch’s recent collapse left nearly 2,000 staff redundant, while Ryanair staff are publicly voicing complaints about opaque employment structures and unsatisfactory working conditions. In tackling cost pressures within the industry, what has been the impact on employees and how does their treatment affect the employer’s reputation and brand?

Monarch Airlines goes into administration

Following the AirBerlin and Alitalia insolvencies this summer, Monarch Airlines has become the most recent budget airline to collapse. On 2 October, 1,858 of the 2,100 staff employed by Monarch were immediately made redundant after the company went into administration. It is also reported that the administrators, KPMG, instructed some staff to call a premium-rate phone line to hear news of their redundancy, but have since promised to reimburse the costs of these calls.

The Unite union has now launched legal proceedings on behalf of the Monarch staff for the failure to comply with collective redundancy consultancy requirements, under which the administrators should have started consultation about the proposed redundancies at least 45 days before the redundancies were announced. These claims could result in compensation of up to 90 days’ pay for each employee, and a bill for the tax-payer running into millions.

Crises at Ryanair

Meanwhile at Ryanair pilots have demanded improved pay and employment terms under direct employment contracts with the company, and are reported to have formed an unofficial trade union to support their campaign. This dispute continues alongside the recent “mess-up” in how Ryanair rosters time off for its pilots, resulting in the company cancelling thousands of flights up until March 2018. The pilots rejected the company’s recent offer of bonus payments to forfeit their holidays and instead renewed their demands for full employment contracts. Interesting times lie ahead as the disputes between Ryanair and its pilots look set to escalate.

There have also been reports this week of lengthy HMRC investigations into the sophisticated indirect employment structures which Ryanair currently imposes upon its pilots, and which have landed them in substantial liabilities for underpaid tax. On joining Ryanair, pilots are required to set up a limited company in Ireland under the supervision of the company’s accountants. Pilots become directors of the newly formed company which supplies the pilots to agencies, who then supply them to Ryanair.

Food for thought

There are lessons for all employers to learn from these situations, ranging from how redundancy processes are managed, through the legal risks around complex and potentially bogus self-employment relationships, to the practical challenges in balancing holiday leave entitlements and arrangements against business needs.