Flying too close to the sun - how poor management and greed downed GPA

BOOK REVIEW: CIARÁN HANCOCKreviews Crash Landing: An Inside Account of the Fall of GPAby Christopher Brown; Gill MacMillan; €24.99.

THIS BOOK is a rather curious affair. It’s been more than 15 years since the collapse of Tony Ryan’s Shannon-based aircraft-leasing company GPA. So why has former executive Christopher Brown waited until now before publishing a book about its “crash landing”?

Brown, an Englishman who spent 11 years with GPA, addresses the question in his author’s note, citing the threat of litigation and a sense of loyalty to his former colleagues.

In its heyday, GPA (Guinness Peat Aviation) was the great success story of Irish business. In a time before the Celtic Tiger, and from a virtual rural backwater, Tony Ryan and his lieutenants built GPA from nothing into one of the biggest aircraft-leasing groups in the world. Ryan, as we well know by now, was a brilliant entrepreneur, both driven and visionary. His was a “rags-to-riches” story of a Tipperary man made good, as Brown acknowledges.

But by 1990, there were signs of major stresses in GPA’s business model. The first Gulf War and other external economic factors were buffeting the airline industry to the point where it was on the cusp of a major recession. In spite of this, Ryan gambled that GPA should continue to spend big on securing new aircraft and expanding the business. Multi-billion dollar orders for new aircraft were placed. GPA was on a collision course with reality.

It was around this time that Brown began to have concerns and started to keep a diary that forms the basis of this book. His first entry was April 30th, 1990. “Last Friday was a bad day,” he recounts. “I really felt there was no way out for GPA ultimately. What will bring us down? First, we have ordered a huge number of aircraft – too many. Some types will not be leased easily.

“Second, recession could well be coming, or at least enough of one to affects us. I am worried about our corporate debt facility, lately set up to fund our aircraft purchases. True, a huge sum of money has been raised – $2.5 billion – but the terms have been negotiated on our side by financial people with very little airline experience. The trouble with GPA is that we are greedy,” Brown notes.

By that stage, GPA was a business with annual profits of $250 million and more than 200 staff. Just five years before that, when Brown joined GPA, the respective figures were $12 million and 40 employees.

“Back then , the company was ruled by the iron hand and will of a very visible Tony Ryan. Decisions were easy to obtain. Today , Tony or rather Doctor Ryan (following the grant of an honorary doctorate) is unseen by the majority of the company.”

Slowly but surely, Brown documents the fall of GPA. Airlines around the world began to either merge or go bust, leaving GPA with aircraft it couldn’t shift. It was constantly on the brink of breaking one bank covenant or another. Within a short space of time, GPA was fire-fighting on a grand scale. Brown was dispatched to the Middle East or Africa, to close a deal or chase money, mostly without success.

In parallel, GPA’s streamlined management structure that had served it so well in its early days was unravelling. “No longer a place where everyone strives for the common good, it is now a place of division, camps, proteges, favour, kudos and brownie points,” Brown observed.

It all came a cropper for GPA and Ryan in 1992 when its plans for an IPO on the stock market, offering $850 million worth of shares, collapsed at the last minute. Confidence in the company evaporated and it was effectively a zombie company. At a stroke, employee shares, which had soared in the years leading up to the flotation attempt, were worthless, leaving many GPA staff to nurse massive bank loans that had been taken to buy stock.

GE Capital subsequently took over GPA but many of the old management team remained in situ and, as Brown tells it, the company continued to struggle. It was eventually sold in 2000 to Debis AirFinance, a unit of Daimler Chrysler, with Tony Ryan reportedly making $50 million from the sale.

Brown credits Patrick Blaney, a senior executive at GPA, with saving the company from complete closure and retaining many jobs. Others are less favourably reviewed. Jim King, one of Ryan’s most trusted lieutenants, is portrayed as a ditherer.

“What was never in the equation was that the board would be so foolhardy as to risk everything with no contingency plan, just when things were going so well, and then compound a potentially fatal error with poor management,” Brown says.

Sound familiar? For GPA, you could read Anglo Irish Bank today. Created from nothing, largely by the force of will of one individual – Seán FitzPatrick – it placed bigger and bigger bets on the basis that it could never lose; that the good times would never end.

Ryan survived the GPA debacle to re-establish himself as one of Ireland’s top businessmen, notably through Ryanair. There will be no comeback for FitzPatrick.

As for Brown, he “shared in the pain and my dreams were broken, too”. Maybe that’s why he waited so long to write the book.