Barrington’s letter stated:
· That Aer Lingus (on 22 Dec) is and will be a profitable business.
· Aer Lingus has (22 Dec) unmatched financial strength - net cash of €803 million
· Aer Lingus has a clear strategy for profitable growth
· That the board of Aer Lingus has delivered on its promises and has a vibrant independent future
Less than 80 days later, on 11 March 2009, Aer Lingus published its 2008 full-year results. These revealed a loss of €107.8 million and net cash of €653.9 million. But this is after burning €340 million last year.
Ryanair claims that Aer Lingus is condemned to a future constrained by losses, sub-optimum scale, regional airline and declining traffic with a high cost base. Aer Lingus speak of “exceptionally challenging trading conditions, falling consumer demand and a weakening outlook for the dollar and pound sterling”.
Aer Lingus has a labour force of over 6,800 in 2001. It spent in the region of €300 million bringing this number down to fewer than 4,000 and is to spend a further €52 million from April 2009 on further streamlining. This had the effect of increasing the staff-passenger ratio from 923 in 2001 to almost 2,400 in 2007.
While job numbers were culled directors’ emoluments were not. Fees paid to non-executive directors, who are obliged to attend a handful of meetings, were increased from €18,000 to €45,000 in 2007. The remuneration package of Dermot Mannion, chief executive of Aer Lingus, since August 2005, increased from €530,000 to €1,115,000 in 2007 but was pared to €652,000 last year . His predecessor at Aer Lingus and current chief executive of British Airways, Willie Walsh, earned a comparable package in for running an airline with a turnover of £7.5 billion and profits of £694 million, after tax.
One of the consequences of the job cull is that the 25% shareholder, the Irish Government, is collecting €10 million less in social insurance and pro-rata less income taxes.
Ryanair has the ambition to become one of the Big-4 European airlines. The rate of airline closure and consolidation in the European airline industry has been accelerating. Air France / KLM has taken a 25% stake in Alitalia and the Lithuanian airline FlyLAL is bankrupt. Ryanair’s market capitalisation is currently €4.88 billion – comparable to Lufthansa and Delta Airlines but significantly higher than British Airways. It returned a Q3 (31 December 2008) loss of €106 million attributable to higher fuel costs in 2008. Ryanair carries more passengers in a single month than Aer Lingus do in a year.
The former chairman of Aer Lingus, John Sharman left this position last October. The guiding hand and wisdom of Seán FitzPatrick disappeared last December when it was disclosed that he concealed personal loan transactions at Anglo Irish Bank, which he founded, from its shareholders. Mannion left more recently. A reformed management team has been announced whose mission has been formed, whose role is to do what the 2006 defence document highlighted – to deliver value!