Ryanair (FR, Dublin Int'l) and its CEO Michael O'Leary have been sued in a court in New York by an American pension fund who alleges that the low-cost carrier lied to shareholders about its ability to manage labour costs, Reuters has reported.

The plaintiff further alleges that the carrier effectively inflated its share price and, by doing so, defrauded the investors. Ryanair allegedly did so by underlying its "labour stability" and "industry-leading contracts" for years prior to the labour meltdown in late 2017, which forced the carrier to recognise unions, enter into negotiations with them, and adopt new labour conditions.

"Unbeknownst to investors, the company's historical profit growth was built on an undisclosed and unsustainable foundation of worker exploitation and employee turnover. The decline in the price of Ryanair ADSs was the direct result of the nature and extent of defendants' fraud finally being revealed to investors and the market," the Alabama fund said.

The fund, in a filing with the US District Court in Manhattan, is seeking a class-action status and damages for US-based investors for the period from May 30, 2017, through September 28, 2018. If the lawsuit receives a class-action designation, many more investors would be eligible to join the proceedings.

Ryanair dismissed the lawsuit, saying it was "doomed to fail" and underlying that most of the disruptions experienced by the airline were due to ATC strikes and other issues, not due to labour issues.

Ryanair's share price at NASDAQ dropped from over USD105 per share in September 2017, when the labour problems started, to less than USD90 per share currently.

The Irish LCC recently lowered its annual net profit guidance for the financial year 2019 by 12% from an earlier estimate of EUR1.25-1.35 billion euros (USD1.45-1.56 billion) to EUR1.1-1.2 billion euros (USD1.27-1.39 million) due to a higher cost environment, mostly related to labour disputes and strikes at the LCC.