Aer Lingus faces lot of turbulence

HE’S ONLY three weeks into the job but there’s plenty of fighting talk coming from Aer Lingus’s new chief executive Christoph Mueller in advance of the airline releasing its latest cost restructuring plan.

In briefings with staff, analysts and media since he started on September 1st, Mueller has talked of the “extraordinary brand” and the “dedication and education of staff” and the airline’s strong cash position. But he’s also stressed the need for “amputation” not “cosmetic surgery” to reduce its costs base.

This suggests the outsourcing of certain functions, with catering, cleaning and baggage handling once again in the spotlight.

Mueller has also highlighted the need to overhaul Aer Lingus’s IT systems and to take capacity out of its network. “The suit is too big,” is how the German describes it.

Aer Lingus’s long-haul flights to America will be in the line of fire, particularly from Shannon. Transatlantic services accounted for about €60 million of Aer Lingus’s €93 million loss in the first half of this year.

Mueller says he appreciates the “national importance” of the American routes, particularly to Shannon, but has stressed in briefings that Aer Lingus is “not a charity”. He is also reluctant to run loss-making services from Shannon at a time when staff are being made redundant or asked to take a pay cut.

The plan will be unveiled in mid to late October – the airline has waited until after the Lisbon referendum so as not to cause the Government any potential problems in the run up to the Treaty debate.

Much of the detail has been flagged. Up to 500 job cuts will be sought and cost savings of about €130 million are to be achieved. Pay cuts will be sought.

It is not clear what level of redundancy payment will be on offer. Chairman Colm Barrington has stated that the generous exit packages of former years are no longer affordable. That raises the spectre of compulsory redundancies and possible strike action this winter. Cue the launch of “rescue fares” from arch-rival Ryanair.

In spite of the constant chopping and changing at Aer Lingus, strikes have barely been a feature at the airline in recent years. The company has generally bought off the staff to achieve its cuts.

Mueller this week rated Aer Lingus’s odds of survival at “50-50”. If Barrington and Mueller are serious about transforming Aer Lingus and giving it a shot at survival then they will have to face down the unions.

Mueller also needs to take a knife to the board. It is too big for a company the size of Aer Lingus and there’s no good reason why the Government should have three representatives. All the indications are that Shannon-New York has only survived this long due to Government pressure.

This culture has to change.

Cove Energy raises £40m

AT A TIME when many Irish listed companies are finding it hard to raise capital, Dublin-based oil and gas exploration group Cove Energy (formerly known as Lapp Plats) is believed to be close to completing a fundraising of just over £40 million (€45 million).

This would make it probably the biggest fundraising by an Irish junior exploration company. Cove is listed on the junior AIM market in London, and details of the fundraising are expected to be announced in the coming days.

It is understood that the funding round was oversubscribed, with a number of leading institutional investors stumping up money, including Fidelity and Gartmore.

Cove has placed the shares at 20 pence apiece – a discount of about a third on its current share price. The fundraising comes just three months after Cove raised £4.2 million at 12p a share.

It has been a busy year for Cove. In May, a raft of board appointments were made, with Shell executive Michael Blaha becoming non-executive chairman, and former Petroceltic boss John Craven hired as chief executive.

In July, the explorer acquired an interest in three licences in Tanzania and Mozambique that are thought to have significant potential. The new money is likely to be focused on these prospects.

Insurer RSA to invest €3m and create 40 jobs at Galway base

AMID ALL the negativity surrounding job losses and company closures comes some good news for Galway.

Insurer RSA – formerly Royal Sun Alliance – has decided to invest €3 million in its Ballybrit, Galway, base and create 40 jobs to bring its headcount in the city to about 100, or 550 people across the country.

The jobs will be in business development and customer care, and are expected to be filled by the end of the year.

The investment is in updated technology systems and an upgrade of its facilities.

Philip Smith, RSA Insurance Ireland chief executive, said the expansion reflected its "long-term confidence in this market" and would help it to achieve "sustainable, profitable growth".

Two iRadio shareholders offload their holdings

PERHAPS BLOODIED by the credit crunch, financier Niall McFadden and senior lawyer and Arnotts lead shareholder Richard Nesbitt have decided to retreat from the commercial radio sector by offloading their holdings in iRadio, which last year began operating regional services in the northwest and northeast of the country.

McFadden's Boundary Radio and Nesbitt, one of the State's leading senior counsel, recently sold their 38.86 per cent in Wilton Radio, the parent group of iRadio.

The Broadcasting Commission of Ireland approved the sale of their holdings to Highcross Communications Ltd, which is wholly owned by Galway publican John Mannion. This brings Mannion's total stake in Wilton Radio to 42.3 per cent and makes him the biggest shareholder in the company. Wilton is led by Dan Healy.

Mannion's interests include the well- known Front Door super-pub in Galway city.

It is not clear how much McFadden, who had a 35.04 per cent stake, and Nesbitt, who owned 3.82 per cent, received for their shares, but they are thought to have invested more than €2 million between them in the radio venture. The pair are thought to have wanted to liquidate what was a non-core asset.

Accounts just filed for iRadio show that Galway-based i102-104 and Athlone-based i105-107 incurred combined losses of just under €2.6 million in 2008.

Little Things

-Nine months after it was nationalised, Anglo Irish Bank retains the capacity to surprise. On September 3rd, auditor Ernst Young filed its resignation letter with the Companies Office here.

"We confirm that there are no circumstances connected with our resignation which we consider should be brought to the notice of the members or the creditors of the company," partner Kieran Kelly said on behalf of EY. EY's role in Anglo's near-death experience is currently being scrutinised by its supervisory body.

Then there is Anglo Irish Assurance, the life and pensions arm of the bank. Its accounts for the year to the end of September 2008, filed this week, include a standard note about "events after the balance sheet date" (post- September 2008).

"There were no subsequent events which require amendment to or disclosure in these financial statements," it said. Eh, how about nationalisation, lads?

-Beer sales here might be flat, but Heineken Ireland was still able to pay its Dutch parent a tasty dividend of €36 million in 2008, according to its latest accounts. It paid €33 million in 2007.

-Dublin-based Heneghan PR Ltd, run by Nigel Heneghan, turned a profit of €111,500 in 2008, judging by its latest abridged accounts. This left it with accumulated profits of €611,736 at the end of December last.