Colm Barrington is adamant that the flagship airline should steer clear of Ryanair, writes Ciarán Hancock
FOR THE past fortnight, Ryanair chief executive Michael O'Leary has made all the running on his latest offer to acquire Aer Lingus.
He's schmoozed the press, cosied up to Minister for Transport Noel Dempsey, and worked his charm on the Late Late Show.
By contrast, Aer Lingus has largely kept its own counsel . . . until now.
Aer Lingus chairman Colm Barrington, who only assumed the role on October 6th, gives a robust defence of why it should remain independent and why the Government should reject Ryanair's bid.
On the latest €1.40-a-share offer from Ryanair, which values Aer Lingus at €748 million, Barrington is very clear.
"First of all, the bid was outrageous," he said during an interview this week at his Babcock Brown Air office overlooking Dún Laoghaire harbour. "So he gets the remaining 70 per cent of Aer Lingus for €525 million?"
Barrington then highlights the fact that Aer Lingus has a net €800 million in cash on its balance sheet.
"He's not going to get Aer Lingus for anything like €1.40," he says defiantly. "That [€800 million] cash is on top of the Heathrow slots and 42 aircraft. It's on top of 60 years of industry experience, on top of the brand name, which is terribly important.
"There's a hell of a lot extra there. My job is to look after the interests of all shareholders and I wouldn't be recommending accepting an offer of anything like €1.40."
So what offer price would he support? "I'm not going to tell you that," he says with a smile. "The sum of the parts come to well over €4 a share."
That might be, but Aer Lingus's shares have traded below €1 a pop this year and were at just €1.12 on the morning of the Ryanair bid.
"The stock market is in distress and Aer Lingus's share price hasn't done as badly as some others," he says.
The Ryanair bid has given the stock a bounce, with Aer Lingus shares trading this week at more than €1.50 a share.
"I think we would have got a bounce anyhow because of the staff issue," Barrington says.
The issue he refers to was Impact's acceptance of a cost-cutting plan that will help save the airline €50 million a year and reduce its workforce by about 200. Significantly, it will not result in the outsourcing of ground handling or cabin crew positions.
Barrington says this is hugely significant for Aer Lingus. "You couldn't do anything without a wave of costs following you around. It'll be a lot better now."
Barrington says there are other reasons why the Government should say no to Ryanair.
"It would be a total rip-off for the consumer. If Ryanair controls 80 odd per cent of the traffic in and out of Ireland, what's that going to do to consumer choice?" he asks.
"He [O'Leary] said he's going to operate the two airlines independently . . . that never happens. We'll have one yellow-pack airline operating in and out of Ireland."
Why should the chairman of Aer Lingus care about consumer choice? Surely his duty is to act in the best interests of his shareholders?
"My job is to look after the shareholders but remember that four million Irish people are my shareholders through the Government, which owns 25 per cent of Aer Lingus.
"I've got to point out to them that if they accept this offer it's going to mean higher fares, it's going to mean the desolation of our airports. The Government would lose much more on their huge investment in the airports than they would ever gain on selling their shares in Aer Lingus."
Ryanair's guarantees to cut Aer Lingus short-haul fares, axe the transatlantic fuel surcharge and restore Shannon-Heathrow also cut little ice with Barrington.
"He might do it for a week, he might do it for a month, but one of the great things about Ryanair, and you have to admire them for it, is how quickly they can move in and out of places. If it doesn't suit them, they'll walk away. Look, you can't believe a word he says.
"If he had control of Aer Lingus there would be no one to keep him honest."
Wouldn't other airlines come into the Irish market to fill the void? "You can't assault all Irish routes overnight. As they'd come in, he'd pick them off and drive them out. That's what history shows," he says, adding that Ryanair has run EasyJet and Go out of Ireland in recent years.
Barrington isn't buying Ryanair's line that Aer Lingus will inevitably get gobbled up by one of the big airline groups.
"Airline consolidation is a bit like sex, there's more talk about it than actually takes place," he says.
"The last big merger in Europe was Air France-KLM and that was in 2003. BA talks one day about merging with Iberia, but that now doesn't seem to be working. Now they're talking to Qantas."
He lists a number of independent airlines that he believes are doing well by flying solo, including Finnair, Icelandair, Hungary's Wizz and Norwegian Air Shuttle.
Fending off Michael O'Leary's latest advance will, however, take more than fighting talk.
Barrington met Minister for Transport Noel Dempsey yesterday to outline Aer Lingus's case to remain independent.
Is he concerned that the Government has said it will carefully consider Ryanair's offer - a different stance to 2006 when it immediately opposed the bid for Aer Lingus?
"I think the Government is taking a more measured approach this time around," he says. "Last time, there was a lot of heat on them about doing the IPO, so it would have been impossible to support the Ryanair bid. I think they probably behaved a little bit rashly the last time and they're behaving quite reasonably now."
Barrington, who only joined the Aer Lingus board in October, was also critical of the way Ryanair was allowed to build its stake in the first place.
"I think the IPO was a botch job, it wasn't done very well," he explained. "The fact that Ryanair suddenly emerged took everybody by surprise as I recall. I frankly don't know how they did it because I applied for a lot of shares in Aer Lingus at the time and I got 5 per cent of what I asked for. As an ex-employee and somebody who is reasonably prominent in aviation, I couldn't believe how I was given so few."
This time round, Ryanair is playing a more strategic game, hoping to win political approval for a deal. "I think Michael O'Leary realises he can't get the deal done unless he gets the Government onside. So now he's become a chatter-upper of Government. But leopards don't change their spots. The stuff on the Late Late Show was, I thought, outrageous. He told lies about Aer Lingus.
"He said we were loss-making, which we're not. Since our IPO [in 2006], we've made a €200 million net profit."
While Aer Lingus is expected to post a near €20 million operating loss for 2008, when interest income from its healthy cash pile is factored into the equation, Barrington says the airline will be in the black this year in terms of its bottom line.
That's presuming the €100 million cost of its latest restructuring plan is not booked until 2009.
"Ryanair's own broker [Davy] said last June there's no way Aer Lingus can go broke," Barrington adds. "For O'Leary to go on with this big lie that Aer Lingus has failed, is losing money and is going to go broke is just not true. We're not going to go broke."
Barrington is an aviation veteran, with more than 30 years experience. He previously worked for Aer Lingus; was a lieutenant for Tony Ryan at aircraft leasing group GPA and now heads Babcock Brown Air, which leases aircraft around the world. He is also a former board member of the Dublin Aviation Authority.
He claims to be an "admirer" of Ryanair, but "hates" to travel with the airline. "I mean it's grungy - I hate the naked aggression that you will see from Ryanair staff. I hate the filth of their aeroplanes. I think it's cheap but it's not even cheerful.
"But I'm an admirer of how they built up the company and how they've expanded all over Europe and so forth. They've done a good job. With all due respects, when they came into the Irish market they did a great deal of good for the Irish consumer by bringing down fares. But now this champion of competition wants to become the monopolist."
Barrington is also unimpressed by Ryanair's offer of a seat on its board of directors for the Aer Lingus chairman.
"I'm sure if I join his board I will add some credibility to him," he says. "But I think if, at the end of this process, Ryanair is the winner, there will be enough bad blood between us that the offer won't be there. And in any event I wouldn't join the Ryanair board because I don't want to be a yes man on a board where if you disagree with the chief executive you won't be invited back the next morning."
Background
Colm Barrington was born in Dublin on January 1st, 1946 and is chairman of Aer Lingus and chief executive of Dublin-based quoted aircraft leasing company Babcock Brown Air.
He began his aviation career in 1967 at Aer Lingus, where he was a financial analyst and then director of hotel acquisitions.
In 1979 he joined Tony Ryan's Shannon-based aircraft leasing group GPA, ultimately becoming its chief operating officer.
He has spent the past 14 years with Babcock Brown, taking up his current role with them in May 2007. Last year he oversaw BB Air's stock market flotation. He is also a non-executive director of Irish financial group IFG.
