Timing of McGann loss hits airline

The departure of Aer Lingus group chief executive, Mr Gary McGann, is a serious blow for the State-owned airline. As it handles the sensitive issues surrounding the sale of TEAM, investigates strategic alliance opportunities and the ongoing drive to push down costs and increase turnover, uncertainty is the last thing the group needs.

With Mr McGann's departure announced the disclosure was brought forward because news of his move had leaked out he could not continue to function effectively as group chief executive. One market source said: "He would have no credibility. His ability to deliver would be seen as gone." But the suddenness of the move and the timing, as the critical TEAM voting nears conclusion, was a shock.

One fund manager said: "We would be very annoyed if that had happened with any publicly-quoted company. It is not good to see a chief executive waltzing off in the middle of things and there does not appear to have been a succession plan in place. That would be a black mark against any publicly-quoted company." Political sources expressed concern yesterday at the poaching of a top executive from a State company by a private sector group which has two of its directors on the Aer Lingus board. The possible role of Smurfit group president and chief operations officer, Mr Paddy Wright, in the appointment of Mr McGann to Smurfit was questioned. Mr Wright was appointed to the Aer Lingus board in December 1992. As a director of the airline along with Smurfit non-executive director, Mr David Austin, he would have access to Mr McGann and have become aware of his business strengths.

Mr Wright offered his resignation to the chairman of Aer Lingus, Mr Bernie Cahill, on informing him of Mr McGann's appointment. But Mr Cahill declined to accept the resignation.

With Aer Lingus in a sensitive phase in trying to arrange a strategic partnership with a major international airline to secure its medium to long-term survival, the role of the chief executive is crucial. Potential strategic partners will look closely and critically at the top management team and particularly at the abilities of the chief executive.

Aer Lingus is now in the difficult position of having to find a replacement for Mr McGann. With the management team strengthened in recent years by a number of new appointments, his replacement could come from their ranks. But it will be important for the airline to have a chief executive who will be acceptable to potential partners and, in the longer term, to possible investors.

"With strategic alliances and at least partial privatisation on the cards, Aer Lingus will need someone the market could be excited about," one analyst said.

The imminent arrival of Mr McGann to the chief financial officer's post at the Jefferson Smurfit Group has been generally welcomed by fund managers and market analysts. Most commented that while he was not well known in the market "the feeling is that he was doing a good job at Aer Lingus". One analyst said that, for Smurfit, it was important "to slot in a good guy in this important role. He shook up Aer Lingus and that would have impressed Smurfit". Another raised the question of whether Mr McGann could transfer from Aer Lingus and Gilbey type structures, where he was in charge, into the Smurfit structure where he will not be "head man".

"At Smurfit he is starting below a lot of others so he cannot have chief executive ambitions for a number of years at least. He is a solid citizen for the financial function which will be a comfort to investors, but I regard this as a finance appointment not anything more," he said. The McGann appointment is part of the Jefferson Smurfit Corporation/Stone Container merger deal. Smurfit Group finance director, Mr Ray Curran was a key player in the merger and the group wanted him to be involved in the follow-through operation which will involve cost-cutting and restructuring in the US.