Ryanair CEO admits mistakes amid cancellations crisis

Ryanair CEO Michael O'Leary admitted mistakes to disgruntled shareholders Thursday as the airline struggles to overcome a scheduling crisis that is costing the company millions of euros.

Speaking at Ryanair's annual general meeting, O'Leary said he planned to force pilots to give up a week of vacation time this year to prevent further flight cancellations. Pilots will be told that the airline will "make it up to you."

"We make mistakes," he said. "This time we made a major boo boo."

Ryanair, a no-frills airline based in Dublin that is Europe's biggest carrier by number of passengers, is cancelling 2,100 flights over the next six weeks because it "messed up" the allocation of annual leave as it shifts to a new holiday scheduling system. Compensation for passengers forced to re-book could reach 25 million euros ($30 million). Passengers, meanwhile, are reporting problems in gaining compensation, inundating the firm's Facebook page with complaints.

O'Leary's statement comes amid reports that flight captains and first officers have rejected Ryanair's offer of bonus payments in exchange for taking on more hours. The Guardian newspaper also reported that Ryanair pilots are trying organize a protest under which they would refuse to do any work beyond what is required by their contracts, which would cause more scheduling headaches for the airline.

O'Leary later insisted there were no problems between the company and the pilots and that if they misbehave "that will be the end of the goodies."

"I don't even know how there would be industrial action in Ryanair," he said. "There isn't a union."

The Irish Air Line Pilots' Association says the real problem is that Ryanair failed to plan for the implementation of new European safety regulations that take effect Jan. 1 and require all airlines to use a regular calendar year for calculating pilot flight hours and working days. Until now, Ryanair has used a 12-month period beginning April 1, which gave it a competitive advantage in scheduling pilots during the busy summer season because hours accumulated from January to March didn't carry over into the new scheduling year, the IALPA said in a statement.

"Since there is no requirement in aviation regulation to provide annual leave per se, it is unclear what is compelling Ryanair to provide any leave to their pilots at this time," the association said. "It seems clear that Ryanair has failed to plan properly for the implementation of the regulations."

The association also says Ryanair is struggling to cope with a high turnover rate among pilots as the airline expands its fleet.

Loizos Heracleous, a professor of strategy and organization at Warwick Business School, said it is surprising that a company so focused on optimizing operations "could be caught out like this," and that it is mushrooming into a much bigger problem.

"The bigger issue is that this debacle is opening the floodgates for pilots to demand better pay and working conditions," Heracleous said. "Ryanair is recruiting new pilots and will probably have to sweeten the deal to reduce pilot turnover, in particular countries where the package is less competitive."

Former Ryanair pilot James Atkinson, writing in the Guardian, said the airline uses divide and control tactics to keep pilots on different kinds of contracts and to prevent them from organizing.

"There's an underlying problem at Ryanair, which is quite simply that the company cannot replace pilots as fast as they quit," he wrote. "The head of the company, Michael O'Leary, openly insults his pilots, and has consistently maintained a policy of heading off any attempt to achieve a collectively bargained contract."