Italy watchdog probes Ryanair cancellation chaos

Ryanair is bracing for reputational damage and up to 20 million euros ($24 million) in compensation claims after suddenly scrapping flights across Europe over staffing issues.

In Italy, where Ryanair carries more passengers a year than any other airline, the antitrust agency is now looking into whether it has violated consumers' rights. If found at fault, the airline faces a maximum fine of 5 million euros.

The cancellations may have been "largely due to foreseen organizational and management reasons ... not random, external causes outside of (the company's) control," the antitrust agency said in a statement.

The antitrust agency is also looking into whether Ryanair clearly informed its customers of their rights to compensation.

Italian Transport Minister Graziano Delrio said this week customers' rights had to be protected, adding: "We cannot make allowances for anyone who creates so much inconvenience."

But Delrio said the Irish airline was nonetheless a "healthy" company, and could go ahead with a bid for Italy's insolvent flag carrier Alitalia, which has received several state bailouts.

Ryanair Chief Executive Michael O'Leary said last week his firm was finalizing a bid to buy Alitalia.

O'Leary admitted to a "mess up" over the recent wave of cancellations, saying they were caused by a transition to a new system of allocating leave to pilots.

He denied suggestions from a pilot group that Ryanair has a deeper problem in hiring and retaining pilots. ($1 = 0.8333 euros)

(Reporting by Isla Binnie; Editing by Adrian Croft)