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 Commissionโs (CCโs) provisional decision that Ryanair, through its 6ยฝ year old minority (29.8%) shareholding in Aer Lingus, “has influenceโ over Aer Lingus and that this “could reduce competition”.ย This unfounded claim is disproven by the European Commissionโs recent (February 2013) ruling that competition between Ryanair and Aer Lingus hasย โintensifiedโย since 2007.
Under EU law, the UK CC has a duty ofย โsincere cooperationโย with the EU, and cannot contradict or reach different conclusions to the European Commissionโs findings.ย Inexplicably, this provisional decision by the CC infringes this duty of sincere co-operation by ignoring the recent findings of the European Commission that:
โAer Lingus and Ryanair compete on a greater number of routes compared to the 2007 Decisionโย andย โthere is significant competitive interaction between the Partiesโย andย โevidence 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 2007โ.
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.ย Until the outcome of this UK appeal, and the completion of Ryanairโs appeal against the European Commissionโs February 2013 prohibition decision, the CC cannot impose any remedies, however unlawful, on Ryanair.
Ryanairโs Michael OโLeary said:
โThis provisional decision by the UK CC is bizarre and manifestly wrong. The CCโs finding that Ryanairโs shareholding obstructs Aer Lingusโ ability to attract other airlines was disproved by Etihadโs purchase of a 3% stake and the evidence submitted by other large EU airlines, which confirmed that Ryanairโs shareholding was not a barrier to other airlines acquiring a stake in Aer Lingus.ย
In February 2013 the European Commission found that competition between Ryanair and Aer Lingus has โintensifiedโ since 2007.ย A decision by the Competition Commission that Ryanairโs 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.ย Ryanair therefore calls on the Competition Commission to abide by this overriding legal principle and end this bogus and baseless enquiry into a 6ยฝย year old minority shareholding between two Irish airlines.
While Ryanair is one of the UKโs 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.ย This case, involving two Irish airlines where one (Aer Lingus) accounts for less than 1% of the UKโs total air traffic, is yet another enormous waste of UK taxpayer resources on a case which has little if any impact on UK consumers.ย
UK taxpayer interests would be better served if the UK Competition Commission investigated (rather than ignored) BAโs recent takeovers of BMI, Iberia and Vueling, instead of wasting time pursuing this Irish case, which is of no consequence to UK consumers.โ
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 6ยฝ 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 โฌ170m to โฌ200m 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 (โDCโ) pension scheme, and for which Aer Lingus has no further liability.ย If, as Aer Lingusโ IPO prospectus (and every subsequent annual report) confirmed, neither Aer Lingus nor its shareholders have any liability towards this โDCโ pension scheme, then why is yet another โฌ170m to โฌ200m being wasted on yet another pay off for Aer Lingusโ staff.
Ryanair pointed out that this is not the 1stย , not the 2nd, but the 6thย time (in 7 years) that Aer Lingusโ 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 โฌ600m and rising as follows:
ย ย Aer Lingus post IPO exceptional payments to staff & unions
|
Year
|
ย Payment
|
Reason
|
|
2006
|
ย โฌ132m
|
Pension deficit & ESOT contributions
|
|
2008
|
ย โฌ138m
|
Staff restructuring and PCI payments
|
|
2009
|
ย โฌ89m
|
Staff restructuring and PCI payments
|
|
2010
|
ย โฌ55m
|
ESOT debt & leave/redundancy tax payments
|
|
2012
|
ย โฌ17m
|
Staff restructuring payments
|
|
2013
|
โฌ170m – โฌ200m
|
Pension deficit & employee payments
|
|
Total
|
โฌ600m – โฌ630m
|
|
This latest staff grab of โฌ170m – โฌ200m confirms Ryanairโs belief that Aer Lingus cannot be trusted to protect shareholder funds from repeated raids by its unions and staff.ย Over the past 7 years since Aer Lingusโ flotation, more than โฌ600m inย โexceptional paymentsโย has been unjustifiably snatched by staff, while the Board and Management repeatedly promise shareholders that each time would be the โlast timeโ.ย As recently as September 2011, Aer Lingus CEO Christoph Mueller and CFO Andrew Macfarlane assured shareholders at investor meetings that they would not makeย โany further contributions to the pension scheme above the current DC rate of 6.375%โ.ย Just 18 months later they both roll over and shell out another โฌ170m to โฌ200m and agree an increased D.C. rate of 10%, thereby increasing Aer Lingusโ 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.ย ย Following its 2006 IPO, Aer Lingus made a one off (not to be repeated) contribution of โฌ104m 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.ย ย 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 โฌ26m โ without shareholder approval – to pay off the ESOTโs debts, again with no benefit for shareholders.
3.ย ย Also in 2010 when the Irish Revenue rejected Aer Lingusโย โleave and rehire redundancy schemeโ, which gave rise to employee tax liabilities of almost โฌ30m, the Board and Management again rolled over and paidย more than โฌ29m inย โexceptional paymentsโย โ without shareholders approval – to pay off these personal tax liabilities of Aer Lingus staff.
4.ย ย 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 โฌ170m to โฌ200m in pension contributions, pay increases, annual increments and other benefits to Aer Lingusโ staff.ย This brings to over โฌ600m the exceptional payments made to Aer Lingus staff since the company floated in September 2006.
Ryanair believes that these โฌ600m 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. ย They roll over every time they are threatened.ย 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 โฌ200m to a โDCโ pension scheme which Aer Lingus has confirmed it has no liability for.ย However since Ryanairโs 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.ย Ryanair believes that this โฌ600m to โฌ630m of exceptional payments to Aer Lingus staff over the last 7 years since its IPO is a scandal which must be exposed and ended.ย Ryanair calls on the Board of Aer Lingus to stand up for shareholders and resist this industrial relations blackmail by unions and staff.
Ryanairโs Michael OโLeary said:
โHow 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.ย The original pension pay-off of โฌ104m in 2006 was sold to shareholders at the IPO on the basis that Aer Lingus would have no obligation to any future pension deficits.ย Now despite paying over โฌ400m to its staff in exceptional payouts over the last 6 years, yet another โฌ170m to โฌ200m of shareholder funds is to be squandered on paying off a deficit in a D.C. pension scheme and providing for annual increments which donโt exist in any other privately run company!ย 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.ย Todayโs 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.ย Ryanair will oppose this latest โdaylight robberyโ of up to โฌ200m, which brings to over โฌ600m 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.ย The Aer Lingus unions have repeatedly shown that whenever they threaten, the Board and Management will roll over.ย 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 Lingusโ share price, a six year record of cumulative losses, 3 years of declining traffic and now over โฌ600m in exceptional pay-offs to Aer Lingusโ 3,000 staff or over โฌ200,000 a head.ย As a public company, Aer Lingus should be run for the benefit of its shareholders and not to repeatedly enrich its 3,000 staff.โ
Top Copyright Photo: SM Fitzwilliams Collection/AirlinersGallery.com. Ryanair’sย Boeing 737-8AS WL EI-EVF (msn 40291) with “Modlin Jest OK! – Modlin is OK!” sub-titles taxies at the Dublin base.
Ryanair:ย 
Aer Lingus:ย
Bottom Copyright Photo: SM Fitzwilliams Collection/AirlinersGallery.com.ย Aer Lingus’ Airbus A319-111 EI-EPT (msn 3054) lands at Dublin.
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