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You can find the current article at its original source at https://www.theguardian.com/business/2017/sep/28/ryanair-crisis-michael-oleary-flight-cancellations-city-scrutiny
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| Ryanair is in crisis, but Michael O'Leary is barely facing any City scrutiny | Ryanair is in crisis, but Michael O'Leary is barely facing any City scrutiny |
| (6 days later) | |
| Michael O’Leary is a lucky man. As the Ryanair cancellation crisis has gone from bad to worse, despite the chief executive’s insistence that it wouldn’t, almost nobody is asking whether he is still the right person for the job. | Michael O’Leary is a lucky man. As the Ryanair cancellation crisis has gone from bad to worse, despite the chief executive’s insistence that it wouldn’t, almost nobody is asking whether he is still the right person for the job. |
| The question would be asked at most listed companies in Ryanair’s position. The second round of cancellations will affect 18,000 flights on 34 routes between November 2017 and March 2018, which suggests the original rostering plans weren’t merely wrong, but miles off target. | The question would be asked at most listed companies in Ryanair’s position. The second round of cancellations will affect 18,000 flights on 34 routes between November 2017 and March 2018, which suggests the original rostering plans weren’t merely wrong, but miles off target. |
| The company has also provoked the fury of the Civil Aviation Authority, which has said Ryanair misled passengers about their legal rights. The regulator set a deadline for compliance of 5pm on Friday. And Ryanair has made a major strategic U-turn by walking away from its pursuit of the bankrupt Italian airline Alitalia. | The company has also provoked the fury of the Civil Aviation Authority, which has said Ryanair misled passengers about their legal rights. The regulator set a deadline for compliance of 5pm on Friday. And Ryanair has made a major strategic U-turn by walking away from its pursuit of the bankrupt Italian airline Alitalia. |
| Up to a point, O’Leary’s protected status is understandable. He’s been the CEO since 1994 and his talent for publicity is undeniable and valuable, at least it has been until now. He has a near 4% shareholding worth about £670m, so he ought to be motivated. Profit forecasts for this year are also largely intact. | Up to a point, O’Leary’s protected status is understandable. He’s been the CEO since 1994 and his talent for publicity is undeniable and valuable, at least it has been until now. He has a near 4% shareholding worth about £670m, so he ought to be motivated. Profit forecasts for this year are also largely intact. |
| For all that, you’d still expect a company undergoing some soul-searching – on the board, or among its shareholders – about accountability. Yet David Bonderman, the private equity veteran who chairs Ryanair, has been silent through the crisis. In normal circumstances, you might expect a chairman to be asking whether a group of non-executives that includes Ryanair’s former deputy chief executive, its former chief pilot and a stockbroker who helped float the airline in 1997, is sufficiently independent. | For all that, you’d still expect a company undergoing some soul-searching – on the board, or among its shareholders – about accountability. Yet David Bonderman, the private equity veteran who chairs Ryanair, has been silent through the crisis. In normal circumstances, you might expect a chairman to be asking whether a group of non-executives that includes Ryanair’s former deputy chief executive, its former chief pilot and a stockbroker who helped float the airline in 1997, is sufficiently independent. |
| As for the City, you will struggle to find much debate over the years about whether Ryanair’s lean-and-mean operating model could generate operational risks, such as a shortage of backup pilots. Ryanair is worth €20bn (£17.5bn). Is it too much of a one-man show? You’d hope somebody in the City or Dublin would want answers. | As for the City, you will struggle to find much debate over the years about whether Ryanair’s lean-and-mean operating model could generate operational risks, such as a shortage of backup pilots. Ryanair is worth €20bn (£17.5bn). Is it too much of a one-man show? You’d hope somebody in the City or Dublin would want answers. |
| To find sceptical voices, you have to go further afield. The US pension fund Calstrs voted against the re-election of nearly the entire board, including O’Leary, at the annual meeting earlier this month, and the Dutch investor NN Investment Partners said in a recent report that it had “growing concern about how the airline pays its staff and interacts with unions”. | To find sceptical voices, you have to go further afield. The US pension fund Calstrs voted against the re-election of nearly the entire board, including O’Leary, at the annual meeting earlier this month, and the Dutch investor NN Investment Partners said in a recent report that it had “growing concern about how the airline pays its staff and interacts with unions”. |
| UK and Irish fund managers, who have lapped up O’Leary’s charm, should give them a call. Distance lends perspective, they say. The outsiders may have useful thoughts. | UK and Irish fund managers, who have lapped up O’Leary’s charm, should give them a call. Distance lends perspective, they say. The outsiders may have useful thoughts. |
| Will insurance be at a premium after natural disasters? | Will insurance be at a premium after natural disasters? |
| A short summary of the past five years’ progress in the insurance and reinsurance markets would run as follows. | A short summary of the past five years’ progress in the insurance and reinsurance markets would run as follows. |
| After a year of heavy losses in 2011, caused by floods in Thailand and Australia, the New Zealand earthquake and the Japanese tsunami, the price of buying insurance against natural catastrophes soared. In the more benign years that followed, insurers made a packet. In 2013, Lloyd’s of London, the world’s biggest insurance market, recorded a heady return on capital of 16.2%. | After a year of heavy losses in 2011, caused by floods in Thailand and Australia, the New Zealand earthquake and the Japanese tsunami, the price of buying insurance against natural catastrophes soared. In the more benign years that followed, insurers made a packet. In 2013, Lloyd’s of London, the world’s biggest insurance market, recorded a heady return on capital of 16.2%. |
| In a world of low interest rates, more and more capital was attracted, putting downward pressure on premiums and provoking warnings, including from Lloyd’s, that risk was being mispriced. But claims remained subdued and Lloyd’s still produced returns of 9.1% in 2015 and 8.1% in 2016. | In a world of low interest rates, more and more capital was attracted, putting downward pressure on premiums and provoking warnings, including from Lloyd’s, that risk was being mispriced. But claims remained subdued and Lloyd’s still produced returns of 9.1% in 2015 and 8.1% in 2016. |
| That winning run for insurers is over now, of course. The horrendous run of natural disasters that have brought death and destruction is so many places is not yet reflected in Lloyd’s figures, showing pre-tax profits for the first six months of 2017 down 16% to £1.22bn, but the claims are now arriving. Lloyd’s estimates net claims of $4.5bn from Harvey and Irma in the US and Caribbean, and it’s too soon to put a cost on Maria, the Mexican earthquake and typhoons in Asia. | That winning run for insurers is over now, of course. The horrendous run of natural disasters that have brought death and destruction is so many places is not yet reflected in Lloyd’s figures, showing pre-tax profits for the first six months of 2017 down 16% to £1.22bn, but the claims are now arriving. Lloyd’s estimates net claims of $4.5bn from Harvey and Irma in the US and Caribbean, and it’s too soon to put a cost on Maria, the Mexican earthquake and typhoons in Asia. |
| The broker Jefferies reckons Lloyd’s combined ratio – how much premium income is paid out in claims and expenses – will be 112.5% over 2017. Anything above 100% means a loss. In 2011, the figure was 106.8%. | The broker Jefferies reckons Lloyd’s combined ratio – how much premium income is paid out in claims and expenses – will be 112.5% over 2017. Anything above 100% means a loss. In 2011, the figure was 106.8%. |
| The market is perfectly able to absorb the losses, being well capitalised, but a financial question is what happens to premiums now. In theory, they should soar again. The expectation, however, is that low interest rates will continue to attract a wall of money and thus limit increases. That would be good news for those buying insurance, but it would also be evidence that low interest rates are still distorting the price of risk with unknown long-term effects. | The market is perfectly able to absorb the losses, being well capitalised, but a financial question is what happens to premiums now. In theory, they should soar again. The expectation, however, is that low interest rates will continue to attract a wall of money and thus limit increases. That would be good news for those buying insurance, but it would also be evidence that low interest rates are still distorting the price of risk with unknown long-term effects. |
| Paddy Power Betfair chief’s U-turn on FOBTs is not all it seems | Paddy Power Betfair chief’s U-turn on FOBTs is not all it seems |
| There is joy in heaven over every sinner who repents, but the trumpets should not sound too loudly for Breon Corcoran, the soon-to-depart chief executive of Paddy Power Betfair, now that he thinks spin limits on those soulless fixed-odds betting terminals should be cut from £100 to £10 or less. | There is joy in heaven over every sinner who repents, but the trumpets should not sound too loudly for Breon Corcoran, the soon-to-depart chief executive of Paddy Power Betfair, now that he thinks spin limits on those soulless fixed-odds betting terminals should be cut from £100 to £10 or less. |
| As irate rivals argue, there is a whiff of opportunism here: Paddy Power Betfair is far less exposed to loss of guaranteed profits from machines because it has fewer of them. | As irate rivals argue, there is a whiff of opportunism here: Paddy Power Betfair is far less exposed to loss of guaranteed profits from machines because it has fewer of them. |
| Corcoran’s reason for advising the government ealier this week to proceed with a cut is also nuanced. He thinks the debate around the machines has become “so toxic” that only a substantial reduction in stake limits will address “societal concerns”, which is not the same as admitting that roulette, played in electronic form at souped-up speed, is a nasty product that can do particular harm. | Corcoran’s reason for advising the government ealier this week to proceed with a cut is also nuanced. He thinks the debate around the machines has become “so toxic” that only a substantial reduction in stake limits will address “societal concerns”, which is not the same as admitting that roulette, played in electronic form at souped-up speed, is a nasty product that can do particular harm. |
| Still, his intervention has made it harder for the government to continue to dither over stake limits. A cut is coming, and about time, too. | Still, his intervention has made it harder for the government to continue to dither over stake limits. A cut is coming, and about time, too. |