The low-cost airline Ryanair has reached a settlement in a multi-million-dollar class action lawsuit brought by a U.S.-based pension fund that had accused the European carrier of securities fraud when it downplayed the extent of labor unrest that led to mass flight cancellations in 2017.
Ryanair has agreed to settle the lawsuit for $5 million, although the airline continues to deny all of the allegations of fraud that were levelled by the City of Birmingham Firemen’s and Policemen’s Supplemental Pension System.
The lawsuit was filed in a New York district court back in 2018 and alleged that Ryanair and its outspoken CEO Michael O’Leary had put out ‘false and misleading’ statements which broke the company’s obligations under the Securities Exchange Act.
The City of Birmingham pension fund had purchased U.S. shares in Rynair through its NASDAQ listing, but the lawsuit alleged that those shares were artificially inflated and started to drop “precipitously” when “the truth about Ryanair’s misconduct was revealed”.
Attorneys alleged that prior to 2017, one of the secret’s to Ryanair’s success in Europe had been its “aggressive anti-employee practices” which finally unwound when employees started to demand the right to form unions.
The lawsuit claimed that employees who were sick of being mistreated by Ryanair started to leave the airline en masse, creating a worker shortage that damaged Ryanair’s ability to operate its schedule and grow as planned.
During a six-week period in 2017, Ryanair had to cancel 50 flights per day due to their mounting employee issues, but the lawsuit alleged that the airline and O’Leary continually misled investors about the extent of the issues.
The issues continued into 2018, forcing Ryanair to reduce its quarterly profits by 20% due to ‘ballooning’ costs associated with employee strikes and flight cancellations. By October 2018, Ryanair’s U.S. shares had dropped 36% compared to a high point prior to the wave of industrial action.
In 2020, the grounds of action were narrowed by the court in a victory for Ryanair, and the two sides had been locked in mediation in an attempt to settle the dispute.
“The total settlement amount is $5m, which is considerably less than the legal costs that would have been incurred had this action gone all the way to trial,” a Ryanair spokesperson said on Thursday.
“Ryanair contends there was no lawful basis for this claim, but that the settlement is in the interest of all shareholders due to the very modest settlement amount,” a statement from the airline continued.
