Ryanair demands Aer Lingus egm over executive contracts

RYANAIR YESTERDAY demanded that an extraordinary general meeting (egm) of Aer Lingus shareholders be held to debate recent changes to the employment contracts of Aer Lingus chief executive Dermot Mannion and chief financial officer Sean Coyle.

Ryanair also extended its €1.40-a-share offer for Aer Lingus until February 13th. Ryanair said yesterday it had received 29.83 per cent acceptances of its €748 million cash bid for Aer Lingus by its original closing date of January 5th, well short of the 90 per cent it had sought.

This included Ryanair’s 29.82 per cent stake in Aer Lingus. Just 0.01 per cent of other shareholders have accepted the offer.

In a notice issued to the stock exchange yesterday, Ryanair claimed the changes to the terms of the employment contracts of Mr Mannion and Mr Coyle breached takeover rules and company law.

It emerged recently that Mr Mannion and Mr Coyle are entitled to receive compensation on loss of office of two times their total remuneration from the previous year. In Mr Mannion’s case, the compensation could hit €2.8 million. This would be payable if he left Aer Lingus following a successful takeover by Ryanair.

These terms were agreed with the executives in October by former Aer Lingus chairman John Sharman, just before he stepped down. This was almost two months before Ryanair made its latest bid for Aer Lingus.

Ryanair has submitted three egm resolutions seeking shareholder support to have the terms of the contracts revoked and to have the board of Aer Lingus censured for “breaching Irish company law by failing to seek shareholder approval for the above employment contract amendments prior to their signature by the company”.

Aer Lingus declined to comment on the request last night and is thought to be taking legal advice.

Aer Lingus is not expected to accede to Ryanair’s request for an egm. It previously rejected a Ryanair request for an egm to reverse its 2007 decision to close the Shannon-Heathrow route.

Aer Lingus yesterday provided an update on its fuel hedging and financial position.

It said its fuel requirement for 2009 was 72 per cent covered at $911 per tonne and 22 per cent covered for 2010 at $876 per tonne.

Aer Lingus said its profit guidance for 2008 was unchanged.

“We expect to report a profit despite an operating loss of approximately €20 million,” it added.

Aer Lingus also expects to report a profit in 2009. The airline acknowledged it had guided in August 2008 that it would have a net cash balance of €550 million for 2009. This was at a time when it anticipated a “significant loss” this year, when fuel was expected to be $117 a barrel and before any cost savings were achieved. “Aer Lingus now expects significantly higher cash balances,” it said.