Tag Archives: 3054

Aer Lingus swings to the red for 2014

Aer Lingus (Dublin), adding to our previous story, reported a net loss of €95.8 million ($107.8 million) for 2014, reversing the €34.1 million ($38.3 million) net profit for 2013.

Christoph Mueller Aer Lingus’ CEO commented: “The year 2014 proved the strength of our “value carrier” business model across both our short and long haul businesses. We profitably expanded our long haul network utilizing our cost advantage and favorable geographic position and helped establish Dublin as the 7th largest European hub for trans-Atlantic connections. Our short haul business continued to demonstrate its resilience despite a highly competitive market. Commercial initiatives, in addition to cost control, led to the highest operating profit since the financial crisis and 17.8% above last year.

The focus on our business is unabated and in the coming months we will invest in our customer proposition and distribution model in addition to reducing costs. Now that the complex IASS pension funding issues have been addressed, we are re-launching our CORE program, starting with the introduction of a new voluntary severance scheme at the beginning of this year.

I am delighted to hand the reins to Stephen Kavanagh at the end of this week. I know that the entire Aer Lingus team has a lot of work planned for 2015 and I am confident that they will drive further improvements in profitability, customer satisfaction and employee engagement.”

International Consolidated Airlines Group, S.A. (IAG” offer update:

1. Board willing to recommend the financial terms of IAG’s offer to shareholders

2. Compelling strategic rationale and significant benefits for Aer Lingus, its current and future employees, its customers and for Ireland. The combination would:

A. Enhance Ireland’s position as a natural hub for Europe on the North Atlantic; Accelerate Aer Lingus’ transatlantic, long haul growth plans;

B. Grow employment;

C. Enhance short haul growth;

D. Strengthen Ireland’s connectivity; and Provide access to a global cargo network

3. Aer Lingus has confirmed IAG’s intentions to preserve Aer Lingus as a separate operating business within the group with its own brand, management, head office and operations

Colm Barrington, Aer Lingus Chairman, said: “Our performance in 2014 was strong, with significant growth in long haul and resilient short haul operations. To enhance these excellent results and to accelerate Aer Lingus’ growth, it is the Board’s strong belief that the company should now take the opportunity to combine with IAG. In this combination Aer Lingus will operate as a separate business while gaining access to IAG’s extensive network and benefiting from its scale. These significantly positive benefits will de-risk Aer Lingus’ future, strengthen its operations and enhance the future success of the company .”

The Irish government as we previously report, still has reservations about the sale of the flag carrier to IAG and has requested additional clarification.

Read the full report: CLICK HERE

Copyright Photo: SPA/AirlinersGallery.com. Airbus A319-111 EI-EPT (msn 3054) arrives in London (Heathrow).

Aer Lingus Aircraft slide show: AG Airline Slide Show

AG Each photo carefully selected

Ryanair attacks Aer Lingus’ staff compensation increases, will appeal the Competition Commission’s preliminary decision to divest its 29.4% share of Aer Lingus

Ryanair (Dublin) is appealing the UK’s Competition Commission’s preliminary decision to force the carrier to divest its 29.4 percent share of rival Aer Lingus (Dublin). The ultra low cost carrier could drag out the decision for at least two years appealing the decision according to The Independent. The Competition Commission ruled in its preliminary ruling that Ryanair exerts “material influence” over Aer Lingus due to this minority share.

The airline issued this fiery statement (as it normally does) in response:

Ryanair on May 30 criticized the UK Competition Commission’s (CC’s) provisional decision that Ryanair, through its 6½ year old minority (29.8%) shareholding in Aer Lingus, “has influence’ over Aer Lingus and that this “could reduce competition”. This unfounded claim is disproven by the European Commission’s recent (February 2013) ruling that competition between Ryanair and Aer Lingus has “intensified” since 2007.

Under EU law, the UK CC has a duty of “sincere cooperation” with the EU, and cannot contradict or reach different conclusions to the European Commission’s findings. Inexplicably, this provisional decision by the CC infringes this duty of sincere co-operation by ignoring the recent findings of the European Commission that:

“Aer Lingus and Ryanair compete on a greater number of routes compared to the 2007 Decision” and “there is significant competitive interaction between the Parties” and “evidence collected by the Commission in the market investigation has also confirmed that the competitive relationship between Ryanair and Aer Lingus has at least persisted, if not increased, since 2007”.

Should the CC maintain this untenable position in its final decision (due in July), Ryanair will appeal that decision to the UK Competition Appeals Tribunal and thereafter, if necessary, to the Court of Appeal. Until the outcome of this UK appeal, and the completion of Ryanair’s appeal against the European Commission’s February 2013 prohibition decision, the CC cannot impose any remedies, however unlawful, on Ryanair.

Ryanair’s Michael O’Leary said:

“This provisional decision by the UK CC is bizarre and manifestly wrong. The CC’s finding that Ryanair’s shareholding obstructs Aer Lingus’ ability to attract other airlines was disproved by Etihad’s purchase of a 3% stake and the evidence submitted by other large EU airlines, which confirmed that Ryanair’s shareholding was not a barrier to other airlines acquiring a stake in Aer Lingus. 

In February 2013 the European Commission found that competition between Ryanair and Aer Lingus has “intensified” since 2007. A decision by the Competition Commission that Ryanair’s 29.8% stake in Aer Lingus may lead to a lessening of competition will clearly breach the EU Treaty duty of sincere cooperation between the EU and the UK. Ryanair therefore calls on the Competition Commission to abide by this overriding legal principle and end this bogus and baseless enquiry into a 6½ year old minority shareholding between two Irish airlines.

While Ryanair is one of the UK’s largest airlines, Aer Lingus has a tiny presence in the UK, serving just 6 routes to the Republic of Ireland, a traffic base that has declined over the past 3 years and now accounts for less than 1% of all UK air traffic. This case, involving two Irish airlines where one (Aer Lingus) accounts for less than 1% of the UK’s total air traffic, is yet another enormous waste of UK taxpayer resources on a case which has little if any impact on UK consumers. 

UK taxpayer interests would be better served if the UK Competition Commission investigated (rather than ignored) BA’s recent takeovers of BMI, Iberia and Vueling, instead of wasting time pursuing this Irish case, which is of no consequence to UK consumers.”

Read the full report by The Independent: CLICK HERE

Meanwhile to re-emphasize it does not have much control over Aer Lingus, Ryanair issued this scathing statement on recent Aer Lingus employee compensation increases:

Ryanair, a 6½ year old minority shareholder in Aer Lingus on May 31 condemned the spineless Board and Management of Aer Lingus which has accepted the latest crazy Irish Labour Court recommendation that another €170m to €200m of shareholder funds be squandered to compensate Aer Lingus staff for a pension deficit which Aer Lingus has repeatedly assured shareholders is a defined contribution (‘DC’) pension scheme, and for which Aer Lingus has no further liability. If, as Aer Lingus’ IPO prospectus (and every subsequent annual report) confirmed, neither Aer Lingus nor its shareholders have any liability towards this ‘DC’ pension scheme, then why is yet another €170m to €200m being wasted on yet another pay off for Aer Lingus’ staff.

Ryanair pointed out that this is not the 1st , not the 2nd, but the 6th time (in 7 years) that Aer Lingus’ staff have blackmailed the Government and trade union controlled Board of Aer Lingus, to enrich themselves at shareholders expense at a total cost of over €600m and rising as follows:
  Aer Lingus post IPO exceptional payments to staff & unions
Year
  Payment
Reason
2006
  €132m
Pension deficit & ESOT contributions
2008
  €138m
Staff restructuring and PCI payments
2009
  €89m
Staff restructuring and PCI payments
2010
  €55m
ESOT debt & leave/redundancy tax payments
2012
  €17m
Staff restructuring payments
2013
€170m – €200m
Pension deficit & employee payments
Total
€600m – €630m
This latest staff grab of €170m – €200m confirms Ryanair’s belief that Aer Lingus cannot be trusted to protect shareholder funds from repeated raids by its unions and staff. Over the past 7 years since Aer Lingus’ flotation, more than €600m in “exceptional payments” has been unjustifiably snatched by staff, while the Board and Management repeatedly promise shareholders that each time would be the “last time”. As recently as September 2011, Aer Lingus CEO Christoph Mueller and CFO Andrew Macfarlane assured shareholders at investor meetings that they would not make “any further contributions to the pension scheme above the current DC rate of 6.375%”. Just 18 months later they both roll over and shell out another €170m to €200m and agree an increased D.C. rate of 10%, thereby increasing Aer Lingus’ cost base, with no benefit for Aer Lingus shareholders.
The recent record of this Government appointed Board of Aer Lingus in safeguarding its shareholder funds from staff grabs is awful, as the following examples demonstrate:
1.  Following its 2006 IPO, Aer Lingus made a one off (not to be repeated) contribution of €104m to eliminate its pension scheme deficit on the basis that the scheme would thereafter be a defined contribution (D.C.) scheme and Aer Lingus would have no future obligations for any deficits.
2.  In December 2010, when the ESOT (Employee Share Ownership Trust) was unable to service its bank debts, Aer Lingus wrote a cheque (on Christmas Eve) for €26m – without shareholder approval – to pay off the ESOT’s debts, again with no benefit for shareholders.
3.  Also in 2010 when the Irish Revenue rejected Aer Lingus’ “leave and rehire redundancy scheme”, which gave rise to employee tax liabilities of almost €30m, the Board and Management again rolled over and paid more than €29m in “exceptional payments” – without shareholders approval – to pay off these personal tax liabilities of Aer Lingus staff.
4.  Now in 2013, when the Aer Lingus DC pension scheme has again racked up multi million euro deficits, the unions threaten industrial action, and the spineless Board of Aer Lingus again roll over and splash out between €170m to €200m in pension contributions, pay increases, annual increments and other benefits to Aer Lingus’ staff. This brings to over €600m the exceptional payments made to Aer Lingus staff since the company floated in September 2006.
Ryanair believes that these €600m staff pay-offs over 7 years shows that the Board of Aer Lingus (which is controlled by the Irish Government and trade union bosses) cannot be trusted with shareholder funds.  They roll over every time they are threatened. Ryanair believes that Aer Lingus will, with the connivance of the Irish Government, continue to squander shareholder funds every time they are threatened by the vested interests of staff.
Ryanair will vote against this unwarranted and unjustified pay-off of up to €200m to a ‘DC’ pension scheme which Aer Lingus has confirmed it has no liability for. However since Ryanair’s minority stake gives it no influence or control over Aer Lingus it will yet again be voted down by the Government and unions who control and run Aer Lingus. Ryanair believes that this €600m to €630m of exceptional payments to Aer Lingus staff over the last 7 years since its IPO is a scandal which must be exposed and ended. Ryanair calls on the Board of Aer Lingus to stand up for shareholders and resist this industrial relations blackmail by unions and staff.
Ryanair’s Michael O’Leary said:
“How many times are the Board of Aer Lingus going to roll over when their staff and unions threaten industrial action unless they get paid off again and again. The original pension pay-off of €104m in 2006 was sold to shareholders at the IPO on the basis that Aer Lingus would have no obligation to any future pension deficits. Now despite paying over €400m to its staff in exceptional payouts over the last 6 years, yet another €170m to €200m of shareholder funds is to be squandered on paying off a deficit in a D.C. pension scheme and providing for annual increments which don’t exist in any other privately run company! We believe this is blatant mismanagement by a Board which is controlled by, and panders to, Government and unions and does nothing to protect shareholder funds.
This decision is irreconcilable with the repeated assurances given by Christoph Mueller CEO and Andrew Macfarlane CFO at previous investor meetings that Aer Lingus would not make any further one-off contributions to this D.C. pension scheme. Today’s decision (which could only take place in a company that was controlled by the Government and trade unions) is yet another example of how shareholder funds are being squandered to buy off staff again and again. Ryanair will oppose this latest “daylight robbery” of up to €200m, which brings to over €600m the cash that the staff of Aer Lingus have grabbed in exceptional payments since 2006.
Ryanair does not believe that this latest exceptional payout will be the last. The Aer Lingus unions have repeatedly shown that whenever they threaten, the Board and Management will roll over. This will continue while Aer Lingus remains controlled by a Board of Directors which was appointed by and is controlled by the Irish Government and ICTU boss David Beggs and which has presided over wholesale destruction of Aer Lingus’ share price, a six year record of cumulative losses, 3 years of declining traffic and now over €600m in exceptional pay-offs to Aer Lingus’ 3,000 staff or over €200,000 a head. As a public company, Aer Lingus should be run for the benefit of its shareholders and not to repeatedly enrich its 3,000 staff.”

Top Copyright Photo: SM Fitzwilliams Collection/AirlinersGallery.com. Ryanair’s Boeing 737-8AS WL EI-EVF (msn 40291) with “Modlin Jest OK! – Modlin is OK!” sub-titles taxies at the Dublin base.

Ryanair: AG Slide Show

Aer Lingus: AG Slide Show

Bottom Copyright Photo: SM Fitzwilliams Collection/AirlinersGallery.com. Aer Lingus’ Airbus A319-111 EI-EPT (msn 3054) lands at Dublin.