Locking Horns With the Law

Ryanair’s philosophy of “cutting costs right, left, and centre” allowed them to aggressively dominate an emerging market while maximizing profits. But what happens when such a corporation tries to cut costs in the wrong places?

Europe’s largest low-cost airline Ryanair was recently slapped with hefty lawsuits amounting to over €9m for skirting France’s labour laws. By hiring workers in Marseille under Irish contracts rather than French ones, Ryanair avoided high French social charges and saved 30%. But, of course, the French government made a move when they realized that the workers were paying no taxes in France.

Despite Ryanair arguing that these workers were working on registered Irish aircrafts and had already paid their taxes to Ireland, the court’s judgement held the fine for Ryanair. However, the interesting thing here is that large corporations fight for their profits and make their own moves, rather than just adhere meekly to the rule of law. Ryanair pledges to appeal the verdict, while in the meantime, they have already pulled their operations outside of Marseille, and relocated about 200 jobs to rival airports in Spain, Italy, and Lithuania in protest.

Ryanair stated that traffic for the month of September had risen three percent from the year-ago period to 8.10 million passengers. Annual traffic to end September grew two percent to 80.4 million passengers. But the question is, how will these allegations affect Ryanair in the long-term?

References:

http://www.theguardian.com/business/2013/oct/02/ryanair-fined-french-court-labour-laws

http://invezz.com/news/equities/5847-ryanair-share-price-discount-carrier-hit-by-euro-8m-penalty