Ryanair will ground recently acquired subsidiary Buzz for a month and cut staff by two-thirds in a bid to stem weekly losses of €1 million. It also warned it may shut the carrier permanently unless it proves viable.
Describing Buzz's finances as "extremely precarious", Ryanair said radical restructuring - including the halving of routes to 12 and the reduction of the fleet to eight aircraft from 12 - is required to make sustainable an airline that posted a €60 million deficit over the past two years.
Four hundred jobs are to be shed following the April 1st shutdown, during which Buzz will be effectively phased out of existence, with planes and airport facilities rebranded under the Ryanair flag, and online booking transferred to the Irish company's website.
One-quarter of Buzz pilots and up to 80 per cent of cabin crew are expected to be made redundant.
Fares will be reduced by 50 per cent in a bid to double passenger numbers to four million next year. Flight frequency along the 12 routes to be preserved will be increased to at least one flight a day.
Holding firm to the uncompromising stance it has adopted since buying Buzz from Dutch flag-carrier KLM for €5 million in January, Ryanair said it would "communicate", but not negotiate, its demands to employees ahead of suspending flights.
Workers have been give until March 12th to assent. Ryanair warned it would close Buzz should the unionised staff resist new work practices.
Yesterday deputy chief executive Mr Michael Cawley presented workers with an ultimatum - agree to radical restructuring or watch Buzz go out of business.
"You can't negotiate in a situation where you're losing €1 million a week. We're offering 200 very good jobs to people in a viable entity going forward or the prospect of complete shutdown of an entity which, frankly, isn't commercially viable," he said.
Should the staff resist, the airline would be shut down and "Ryanair will take the aircraft and the slots and will start flying at a future date", he said.
The announcement prompted a swift response from the British Airline Pilots' Association (BALPA), which said it would appeal to the British government.
"We are angered by Ryanair's proposals. The merger with Buzz is being approached as if it were a fire sale," a BALPA spokesman said.
The Transport & General Workers' Union (T&G), representing Buzz cabin crew, said Ryanair was obliged to consult staff.
"Ryanair is pulling the Buzz strings but the T&G are no puppets. We will make sure we stand up for the rights of our workers," said Mr Tim Lyle, the union's national secretary for civil aviation.
Analysts were surprised at the severity of Ryanair's actions. "It's a lot sharper than the cuts that had been originally expected, but they need to take more radical surgery," said Mr Shane Matthews of NCB Stockbrokers.
Davy Stockbrokers said yesterday's announcement did not affect its earning-per-share forecast.
"From the year to March 2003, we expect the acquisition to be earnings-accretive but margin-dilutive. In year two... the potential for upturn in margins could be significant," it said.
