Friday, November 03, 2006

Aer Lingus and one board member with anything of worth to win or lose

Politicians are not the only practitioners of the art of spin and while the well-paid advisers to Aer Lingus would be expected to view the opening bid price from Ryanair as inadequate, the choice of the adjective "derisory" for the offer is quite bizarre.

Derisory - meaning: incongruous; inviting ridicule - absurd, cockeyed, idiotic, laughable, ludicrous, nonsensical, preposterous, ridiculous - for an offer price of €2.80 that was 27.3% above the recommended IPO price made by the same folk, two weeks before!

It's no surprise that there would have been a discount in the IPO price to reduce risk and ensure success given what US Defense Secretary Donald Rumsfeld might term known unknowns.

So presumably to get beyond the zone of the laughable or ridiculous, the bid price two weeks after the IPO should have been say 100% on the IPO price of €2.20 i.e €4.40 rather than a jump of 27.3%.

In truth, the guns-for-hire would laugh up their sleeves if they were on the other side of the fence.

It's all part of the game and nobody really has to seriously defend the issue.

John Sharman, Chairman of Aer Lingus said today: Our product offering is differentiated from our peers. It is superior to Ryanair’s and passengers prefer to fly with Aer Lingus.

Ryanair CEO Michael O'Leary said last August: This year Ryanair will carry 42 million passengers across its network. This is five times more than the annual, 8m traffic of Aer Lingus. Ryanair also carries 50% more passengers than Aer Lingus to/from Ireland. The Irish people have voted with their feet and made Ryanair Ireland’s number one airline. In the process Aer Lingus has been displaced as Ireland’s national airline and now survives as just a distant number 2.

In 2007, Ryanair will deliver 9m passengers through Dublin airport, sustaining 9,000 jobs in Dublin and generating a tourist spend of €2.5bn.

Both cannot be right. Maybe Sharman means if the price is right but that challenge lies ahead.

Aer Lingus Chief Executive Dermot Mannion's remark that it would be inconceivable that the board of Aer Lingus would approve any offer from Ryanair is also bizarre in more ways than one.

Mannion is the one potential big loser from a successful bid. He would be out of a job after 15 months.

The rest of the board would potentially lose some travel freebies and fees. Unlike most boards, there is no member of the board who has the prospect of a big killing from the Ryanair bid.

There simply is no real ownership interest on the board but there are strong voices of vested interest, including the political interest in the North Dublin area .

Aer Lingus now calls itself “Low Fares, Way Better” while Ryanair terms itself "Ireland's national airline."

Aer Lingus said today that since 2001, unit costs have fallen by 47% and the total operating cost base has fallen by 40%. In the same period, staff productivity has more than doubled. Aer Lingus is committed to driving more unit cost efficiencies out of the business.

There was no mention of Willie Walsh former Aer Lingus Chief Executive who is now Chief Executive of British Airways.

Walsh was earlier airbrushed out of the Aer Lingus story when Taoiseach Bertie Ahern pandered to the trade unions when he accused Walsh and two other former senior managers at the airline of having tried to "steal the assets" of Aer Lingus.

Fine Gael leader Enda Kenny compared the "perverse" attack on Walsh with Ahern's "fawning and facilitating" attitude towards Gerry Adams.

He called on Ahern to withdraw his remarks immediately, saying they were a "gross abuse" of parliamentary privilege, while Labour's Pat Rabbitte called them "extraordinary, outrageous and defamatory".

"The perverse nature of the Taoiseach's astonishing approach to two high-profile individuals in Irish public life is astonishing," said Kenny.

"It is worth considering the contrast between the Taoiseach's attitude to a man that is generally regarded to have saved the national airline from extinction, and his attitude to the leader of a political party with continuing links with organised crime and a history of paramilitary violence. Willie Walsh gets accused of attempting to steal a national asset. Gerry Adams gets a spare set of keys for St Luke's (the Taoiseach's constituency office) despite events like the Robert McCartney murder and the robbery of the Northern Bank.

One turns a loss-making company around, and is defamed; the other leads a movement that stole €32m and is embraced by the Taoiseach," said Kenny.

He added: "Of course, the real problem is Willie Walsh totally outclassed this Government with his ability, leadership and vision."

"Willie Walsh's remarkable instinct for solving problems and getting things done showed the Government up. In terms of Irish business, Willie Walsh is not just one of our best exports, he is one of our worst losses."

It's a funny world. Everyone now sees the virtue of aviation competition but without EU airline deregulation and Ryanair, what arguments would the same people use to defend a vested interest?

It shouldn't be too hard to guess, because we've still plenty of vested interests left.