RYANAIR FINDS ITSELF IN AN AERIAL DOGFIGHT
12 December 2008
By Kevin Done, Aerospace Correspondent
Colm Barrington is on a mission. The new chairman of Aer Lingus fired the first salvo yesterday in his campaign to refute the "big lies" he claims are being told about his airline by Michael O'Leary, Ryanair's chief executive.
Ryanair launched its second hostile bid in two years for its smaller Irish rival last week. And in contrast to many of his previous battles, Mr O'Leary may have found an opponent more than willing to trade blows.
Mr Barrington, a leading yachtsman, is a grandee of the Irish aviation industry, which has supplied senior managers at some of the world's biggest airlines, including British Airway and Qantas.
Some 15 years older than Mr O'Leary, Mr Barrington knows his rival well from their days working for Tony Ryan, whose company, GPA, invented and became the world leader in aircraft leasing in the 1980s.
Mr Barrington is now chief executive of Babcock & Brown Air, a New York-listed and Irish-based aircraft leasing group, and was appointed chairman of Aer Lingus in September.
Mr O'Leary has named his former colleague as the only Aer Lingus director he would want to keep on. Nevertheless, Mr Barrington is determined to block Ryanair's ambitions to swallow Aer Lingus.
"Mr O'Leary wants . . . to get €800m ($1.1bn) net cash into his own bank," Mr Barrington says, before adding that the deal would not benefit "the 4m Irish people that have a 25 per cent stake in Aer Lingus through the government's holding".
The latest Ryanair offer of €1.40 a share is half its bid in October 2006, but still a 25 per cent premium to the Aer Lingus closing price of €1.12 before the bid was launched.
Mr Barrington, though, says a deal would leave Ryanair "in control of about 80 per cent of all air travel in and out of Ireland".
He attacked Ryanair's pledge to cut Aer Lingus fares by 5 per cent for three years as "a meaningless promise". Aer Lingus short-haul fares were already nearly 7 per cent lower than in 2007, he claimed, and were expected to fall a similar amount in 2009.
Aer Lingus is owned 29.8 per cent by Ryanair, 25 per cent by the Irish state and about 18 per cent by employee interests.
Mr Barrington was critical of Mr O'Leary's offer to guarantee trade union recognition for Aer Lingus's heavily unionised workforce. Such recognition is already secured in Irish law in a company being acquired. The assurance was "meaningless".
Mr O'Leary has fought fiercely not to recognise any unions at Ryanair itself and had compared them to "the Taliban, the Moonies and the Monster Raving Looney Party", says Mr Barrington. Mr O'Leary's need for government support for his bid meant he was presenting "a new face, a benign, loving and cuddly Michael O'Leary, rather than the aggressive Michael O'Leary we have known and loved for 20 years".
He dismissed Mr O'Leary's claim that Aer Lingus was a failing airline "tottering from crisis to crisis". "If people believe it, they are really naive."
If you believe Mr Barrington, Aer Lingus has one of the strongest balance sheets in the industry, with gross cash of €1.3bn and net cash of €800m. It has made profits, it has generated cash, it has a modern fleet and has expanded its network.
Mr Barrington rejected Mr O'Leary's claim that Aer Lingus would not survive the accelerating consolidation in the industry and was instead planning to expand outside Ireland.
Seconds out. The next round of a long, long fight has started.
Copyright The Financial Times Limited 2008
The Financial Times
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