Ryanair Settles Lawsuit With Alabama Pension Fund

Ryanair has agreed to pay $5 million to settle a class action securities lawsuit filed by an Alabama pension fund that claimed it suffered investment losses due to alleged false and misleading statements made by the Irish airline about its operations.

The lawsuit, brought in U.S. District Court for the Southern District of New York in 2018 by the City of Birmingham Firemen’s and Policemen’s Supplemental Pension System, alleged that during the class period, which spanned from late May 2017 through late September 2018, Ryanair “made false and misleading statements and/or failed to disclose adverse information regarding Ryanair’s business and operations,” adding that “the state of the company’s labor relations was far worse than had been publicly represented.”

The pension fund claimed that as a result of the allegedly false statements, the airline’s American depositary shares traded at “artificially inflated prices.” In particular, the complaint alleged that Ryanair misled the market about the sustainability of its labor practices. It said that, “for years,” CEO Michael O’Leary “touted the airline’s low-cost business model and expressed antipathy to unionization.”

However, according to the complaint, the September 2017 cancellation of hundreds of Ryanair flights due to a pilot “rostering” error “caused some observers to question Ryanair’s labor practices and the sustainability of its anti-unionization stance.” The complaint noted that by December 2017, Ryanair had changed its position and announced it would accept the unionization of its employees.

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“During and after these events, Ryanair downplayed the effect on its bottom line,” the complaint said. “But subsequent announcements about increased personnel costs and decreased profitability caused Ryanair’s stock price to fall.”

The lawsuit also argued that O’Leary had a “motive and opportunity to commit fraud” because he had sold 6 million shares of Ryanair stock during the class period, which it claimed “establishes an incentive to inflate the stock price.” However, a court ruling shot down that argument, noting that O’Leary still retained the vast majority of his stock, which “substantially undermines” the claim that he was motivated to commit fraud.

A spokesperson for Ryanair said the airline “welcomed” the settlement, and the $5 million settlement amount is “considerably less than the legal costs that would have been incurred had this action gone all the way to trial.”

Ryanair issued a statement that the lawsuit had been settled following recent mediation between the airline and the pension fund and that it came after the court “dismissed many of the claims made by the plaintiff, considerably narrowing the grounds for action,” in June 2020.

The 2020 ruling by U.S. District Judge J. Paul Oetken stated that “Plaintiff has failed to establish falsity, materiality, and scienter for all of the potentially actionable statements listed in this complaint, with the sole exception of Defendants’ statements regarding the likelihood of unionization.”

Ryanair maintains that “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.”

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Tags: City of Birmingham Firemen’s and Policemen’s Supplemental Pension System, Class Action, Lawsuits, Litigation, Michael O’Leary, Pension Funds, Ryanair, securities lawsuit, settle, Settlement

Did not see that one coming.

Make that two, as in the number of additional quarter-point raises in the rest of 2023 that the Federal Reserve’s policymaking panel signaled Wednesday.

But there is significant skepticism among strategists and futures investors that this will happen. The benchmark rate, which the Fed left unchanged Wednesday, is now in a band from 5.0% to 5.25%.

The Federal Open Market Committee indicated that its short-term interest rate benchmark would be in a range of 5.5% to 5.75% by year-end, implying two separate increases of a quarter percentage point each, or one half-point boost. Of the 19 committee members, 12 projected the rate to hit that level—using a scatter-plot graphic called the “dot plots.” But their written statement was less hawkish.

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At his news briefing Wednesday, Fed Chair Jerome Powell said the committee expects further tightening would be appropriate “somewhat further” in 2023, although he did not detail by how much. Fed policymakers skipped an increase at their meeting this week to assess how their steady rate-raising campaign since March 2022 is playing out in the economy and in reducing inflation.

Come December, the futures market gives 45% odds of one hike, to a 5.25%-5.5% band, while 38% believe it will stay the same as now.

In a research note, Jeffrey Roach, chief economist for LPL Financial, noted that the FOMC statement said “policy firming that may be appropriate. They do not say more tightening will be appropriate.”

Bloomberg economists called the dot plots “a jawboning tool” designed to tamp down hopes for rate decreases. It anticipates that the actual increases will be lower than the dot plots suggest.

In the eyes of Ronald Temple, chief market strategist at Lazard, the dot plots may be misleading and any boosts unlikely to occur: “The Fed is clearly signaling that rate cuts are not on the near-term horizon. Reluctance to signal an end to rate hikes makes sense, given both the higher core inflation estimates.”

At most, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics, the Fed will do one more increase. He wrote: “By September, we think the case for further hikes will have weakened markedly, so a July hike will be the last.”

Beyond all this, the enormous surge in rates over the past 15 months is a lot more drastic than two more quarter-point rises, in the view of Charlie Ripley, senior investment strategist for Allianz Investment Management. He stated that “another one or two rate hikes should not do much to change the trajectory of the economy, and the bar to raise rates further down the road is likely to get even higher.”