This war pits Michael O’Leary against everyone he has fought in the past 15 years. It’s time to sit back, get front row seats and enjoy the scrap.
We are about to see a battle for the heart and soul of corporate Ireland. O’Leary versus the establishment signals that we have come full circle since the days of Ireland being run by cosy corporations, trade unions, politicians and favoured middle men. Doubtless Ryanair is a big company, but O’Leary is an outsider.
He might be enormously wealthy, but he is still a maverick. He remains – of his own choice – firmly outside the tent. This is what will make the confrontation fascinating. In a country of prevaricators, spoofers, spinners and people in high places who won’t admit something is plainly wrong, Michael O’Leary is a straight-talker who is honest and tells it as he sees it, in plain English. Whether you like what comes out of his mouth or not, you have to admit that, with Ryanair, you know where you stand.
Contrast this refreshing, if not always welcome, bluntness with the pathetic, lily-livered carry-on we witnessed in the Dail last week where our so-called ‘leaders’ – from the Taoiseach down – came out with manure like it was “not incorrect”, “ill-advised” or “inappropriate”, instead of just wrong. Do they think we are fools? On one level, the battle is about these people versus O’Leary. The government has said it won’t sell its stake in Aer Lingus now that the airline is in play. Why not?
What leverage will, or should, the government have over an airline? You can’t have it both ways. Once you put your house up for sale,you have no business vetting the buyer. It amazes me that the overwhelming reaction to Ryanair’s bid is surprise. What is even vaguely surprising about the biggest airline in the country being a possible buyer of the next biggest? I would have thought that Ryanair was the most likely buyer. It is hard to image what the government’s advisers thought O’Leary and his top brass might have said to each other the day when the privatisation was first mooted.
Oh Mick, you see Aer Lingus is up for sale? Really? I didn’t see that. Tea? What page of the paper? Two sugars or one? What’s that got to do with us?
Nothing really, after all, it has eight million passengers who fly from this island, the best facilities in the airport we use, a good fleet, it’s just paid for its costly restructuring, it has just lost its chief executive and senior management team and it’s valued at a sixth of our outfit. Milk?
In fact, with our two billion of funds in the bank, we could buy it for cash. Is that a fact? But you’d never dream of buying it, Mick, would you? Nah. Do something useful and pass me the Racing Post. What’s the ground like at Galway for the 2.30?
Of course Ryanair would have been interested! It is probably the only interested party and, now that it has made its bid, it’s unlikely anyone else will jump.
For someone else to be found, the second suitor would have to be prepared (just like the Valentia consortium at Eircom) to do another sweetheart deal with unions, the government and the employees. When you have a near-monopoly like Eircom, that may be financially do-able; in a small airline like Aer Lingus, it would be commercial suicide. I could be wrong, but it’s fair to say that Ryanair is the only game in town.
The next obstacle for Ryanair is to get close to 94 per cent of the free float. The free float is the amount of shares that are out in the market with willing sellers. So given that the government and the unions and possibly employees won’t sell to O’Leary, 42 per cent of the shares are illiquid. This means he has to buy 51 per cent of the 58 per cent that are left. But this should not be too much trouble.
The question for fund managers is not why you would sell to Ryanair but why wouldn’t you? In a notoriously difficult business for an investor to make money, show me the fund manager who is today being offered a 30 per cent return on investment in two weeks who would dare to have Aer Lingus shares in his portfolio by next March. After all, it was Warren Buffett – the finest investor of all time – who remarked that no one had made money in the airline industry in the full century since the first manned flight. So only a fool will not sell.
Interestingly, the stockbroker community was unusually lukewarm in its response to the news. This is because the Ryanair bid effectively rules out further privatisations from which brokers make great money. The reason is simple: the unions are going ape. They will never allow a state asset to go to the market again. This means that no government run by Bertie Ahern will privatise anything again. Bad news for the brokers.
So now it’s over to the Competition Authority to stop O’Leary. Ryanair says this is a European, not an Irish, issue, and will argue – with validity – that history indicates that Ryanair cuts fares no matter whether it has a full monopoly or is in competition on routes. It is hard to argue with that position.
There is another angle. The government, unions and employees could offer a sweetheart deal (to use Bertie’s own 1993 expression) to Willie Walsh to come in and buy the airline for British Airways. When Eircom was privatised for the second time, the Valentia consortium accepted such a pill, guaranteeing conditions and so on.
However, sweating the assets of a fixed line telephone monopoly is a lot more feasible than sweating the assets of a small carrier with an angry Ryanair breathing down your neck. Equally, even if he was interested, Willie Walsh might enjoy the spectacle of Bertie squirming, given Bertie’s assassination of Walsh under Dail privilege not so long ago. The battle is on between the outsider and the insiders, the cosy and the jagged edge, for the heart and soul of corporate Ireland. If O’Leary wins, the ‘partnership alliance’ will be shattered.
If the partnership alliance wins, swashbuckling, brash enterprise will be knocked back. This is a turning point. Game on. Take your seats.
I Hope Michael wins. We need business leaders like him to run Irish businesses productively. As far as I can see most Irish businesses are run by gobshits and there idiocy costs jobs e.g look at Iona, Trintech etc. The list is endless. The Irish goverment is corrupt with bribes flying left and right and it didn’t just happen with one party there all doing it. We need new meat in goverment. We need stronger leaders to lead the country not gobshits and sheep. Aer Lingus under the goverment was a disaster. It was a loss making enterprise for decades… Read more »
The neational interest is to have a competitive aviation sector. Not some fat pseudocommies from the union dictating a slow pace. I think Ryanair should fly all the Union “leadership” out to North Korea or to Kazahkstan and leave them there with their brothers. The pig ignorance of the unions and their petty money grabbing ways needs to go the way of the T-Rex. I have had personal experience of the unions during a dispute and the swaggering bully boy tactics of the senior trade unionists is the most breathtaking show of ignorance and brute force I have ever seen.… Read more »
In response to Billy’s comment. I too had some personal experience with unions in a dispute, although i was way down the food chain i took part as an observer who just had a vote on strike or no strike. It seemed to me that the unions main objective and goal was to destroy the company and put it out of business. Most people that voted for the strike had several years experience as aircraft mechanics and were hoping for a redundancy pay off. No mention whatsoever about the fact that shareholders had to have their needs catered for also,… Read more »
As far as I can see the unions represent the workers in this country who already have the best working conditions notably public servants and semi state employees. Then they fight to get even better conditions for these already favoured workers. However the workers at the bottom earning the lowest wages with the worst conditions are by and large not represented and are largely ignored. Why the big hu ha over Aer lingus workers. Why should these workers be given preferential treatment over and above other workers in the state. I think the focus should be switched to raising the… Read more »
Ryanair’s bid for Aer Lingus is certainly very interesting, but I wouldn’t agree that this is somehow a battle for the “heart and soul of corporate Ireland”. I think David is exaggerating here. He made it sound like the government is somehow against a free market. This government has favoured business, big business, more than any other, with its driving down of corporation taxes and its soft regulatory touch. Further, the fact that we are having a debate about privatised Aer Lingus after a privatised Telecom Eireann, both executed by this coaltion, makes it clear that these guys are prepared… Read more »
The problem isn’t that the government owns Aer Lingus. It’s that Aer Lingus own the government. Really I’m talking more generally about the semi-state sector but it’s true in general. Aer Rianta and Aer Lingus have dictated government policy for years instead of the other way around. They got whatever they want. The final sale price of Aer Lingus is a disgrace. The government wanted lots of money from the sale of Eircom. With the sale of Aer Lingus however they wanted to get rid of Aer Lingus before the airline industry went sour again. They didn’t care one little… Read more »
The discussion is about irish enterprise. no one ever asked about the businesses that rely on air travel. In the nu perfect Éire, every business relies on air travel to conduct their operations. If Ryanair buys AerLingus then Ryanair effectively becomes the NTR of the air line industry. No business can move goods/people along the M50 without experiencing time delays and tolls because of NTR. Very soon every business/customer will only have one option to travel by air. Remember, Ryanair doesn’t sell all their seats on the cheap. As for the long haul carrier, I’m sure businessmen are hoping that… Read more »
Funny thing is that without Micheal O’Leary, this ‘valuable state asset’ (often an oxymoron) would probably have been taken over by Emirates or EasyJet. And the staff would end up replaced anyway. What this latest conflict shows is the faultline in Irish society that was exposed in the SAIPAN Incident between Roy Keane and the FAI Bosses. For many years most conflicts/scandals/allegations have developed along the lines of Reason vs. Authority. If you think I am making this up, I sugest that you read Ronan Fanning’s landmark article following the Roy Keane Saipan Incident in 2002. In the historical perspective… Read more »
Amused by your mention about Warren Buffet saying that airlines are a bad investment. I think I remember one of the trade union bosses saying that the government should instruct the National Pension Fund caretaker organization to buy shares in Aer Lingus. In effect he was trying to make it a state owned organization by the back door. He clearly was not one bit concerned about the pensions of the rest of us (that would be the rest of us workers there comrade). And like any good socialist who knows nothing about return on investment, he never consulted with Warren… Read more »
games…
The real lesson from……