Ryanair loses altitude

Staff revolt: Ryanair has had a turbulent year

"We expect more failures this winter," warned Michael O'Leary this week. Ryanair's CEO predicted that some of the Irish airline's smaller airline rivals will go bust. He pointed to a number of recent collapses, including Danish airline Primera Air and Britain's Monarch. That certainly seems "a reasonable bet", says Nils Pratley in The Guardian. Most of the "usual ingredients" for a crisis among small European airlines are in place.

First, oil prices are rising, which means more expensive jet fuel, and many airlines "haven't sufficiently hedged the financial risks". Second, oil is priced in dollars, and the greenback has strengthened amid US interest-rate hikes. And finally, fares are falling thanks to overcapacity in the European airline market. But O'Leary's "prophecy of doom wasn't issued for its own sake". He was trying to get shareholders to look beyond the "noise" of the past few months.

O'Leary's announcement followed an extremely turbulent year for the Dublin-based airline. After a pilot shortage fiasco in 2017, when it had to cancel 20,000 flights, 2018 has seen repeated staff strikes, prompting further flight cancellations, notes Joanna Bourke in the Evening Standard. Coupled with higher fuel costs, this led to profits falling by 7%. In the six months to the end of September, Ryanair earned a net €1.3bn. Passenger numbers rose but fares dropped by 3%.

Homegrown problems

"Self-inflicted turbulence" has been the order of the day at Ryanair ever since 2017's "major boo-boo" with the pilot holiday-rota, says Alistair Osborne in The Times. O'Leary has attempted to pin the fall in profits on the "worst summer of air traffic control disruptions on record". While "strike-happy controllers" and "the resulting EU compensation costs didn't help", neither did O'Leary's "run-ins with pilots and cabin crew" all over Europe.

No wonder the shares have fallen by a third in the past 14 months. Still, they ticked up by 4% this week as investors concentrated on the "opportunities in its rivals' misery", says Oliver Gill in The Daily Telegraph. The City sees Ryanair as a high-margin "profit-making machine" likely to be the main beneficiary of further airline failures this winter.

It certainly should do fine in the winter, says Osborne, but "here's the puzzler for investors". Half-year staff costs jumped by a third. How much more of Ryanair's margin will have to be expended on mollifying the workforce and addressing other cost pressures? There was a 35% increase in maintenance and repair costs in the last half too. The fuel bill, despite being hedged, is going up by €460m. Then there's the steady drumbeat of bad publicity to factor in. This week the company was under fire for handling an alleged racist incident poorly. Ryanair should keep in mind that "there's more to an airline than low fares".

Glencore's Glasenberg hard act to follow

Ivan Glasenberg built the mining company Glencore into a dominant force and became the face of the industry. Now he has announced that he plans to retire in three to five years. He said he is training three to four front-runners who could take over from him.

For many investors a Glencore without Glasenberg "had long seemed unthinkable", says Bloomberg. The "brash, workaholic South African" started his career at Glencore three decades ago, and has held the top job since 2002. He is seen as "synonymous" with the company's identity and is its "driving force", agrees Alan Tovey in The Daily Telegraph.

Earlier this year questions were raised about whether the billionaire should continue to lead the company following the announcement that the US Departmentof Justice is looking into bribery and corruption allegations against Glencore. Analysts at Jefferies told The Daily Telegraph they expected the investigations into Glencore's activities in the Democratic Republic of Congo, Nigeria and Venezuela to take up to five years and to loom over the share price in the meantime.

While the commodities giant posted record earnings in the first half of this year, says Reuters, it is now grappling with higher production costs and lower prices for cobalt and other by-products, which undermine profits. In any case, a new Glencore boss could find his or her position at the helm circumscribed by Glasenberg's 8.5% stake in the company. Indeed, as Bloomberg notes, a fifth of the group is controlled by him and a handful of senior managers.

City talk

Fiat Chrysler Automobiles has agreed to sell component maker Magneti Marelli to a rival parts maker owned by private equity group KKR, says Peter Campbell in the Financial Times. The combination with KKR's portfolio firm Calsonic Kansei will create one of the world's largest parts manufacturers, employing around 65,000 people.

The deal comes at a time when the automotive industry is facing structural shifts with the advent of electric and self-driving technologies, and traditional business models are under threat. It's the latest in a series of "buy-and-build" deals by private equity groups, "allowing them to graft synergies and bulk up companies before selling them on".

McDonald's is aiming to make its packaging 100% recyclable worldwide by 2020. In the UK, it aims to replace the 650 million plastic straws it uses each year with paper ones by March 2019. It is now planning to replace plastic drinks lids with biodegradable material. A global seaweed shortage is hampering thelaunch of biodegradable sauce sachets, says Oliver Gill in The Daily Telegraph. Using seaweed means the little packages decompose "as fast as a piece of fruit".

Logistics group Stobart announced first-half results this week, but almost nobody noticed. The City was instead focused on a boardroom bust-up, details of which have emerged from court documents, says Joanna Bourke in the Evening Standard. Stobart is suing former CEO Andrew Tinkler for allegedly trying to damage the business.Tinkler, meanwhile, had tried to oust the current chairman and insists a potential cash bonus for the current CEO was not properly revealed to shareholders.