interesting..from todays Sunday Business Post
Ryanair now poised to win Shannon vote
19 August 2007 By David Clerkin and Niamh Connolly
Aer Lingus could still be forced to maintain its services between Shannon and Heathrow if the government or the airline’s Employee Share Ownership Trust (Esot) abstain in the crucial vote on the airline’s plan to end the route.
Ryanair could now win a knife-edge vote, forcing Aer Lingus to maintain the route, unless the government or the Esot use their shareholdings to support management’s plan.
Reports that the budget airline had increased its stake in Aer Lingus from 25 per cent to 28 per cent assumed crucial importance this weekend, following signals from the government that it was considering abstaining in the vote.
A decision by the government, which holds a 25.3 per cent stake in Aer Lingus, to abstain would leave the door open for Ryanair to block the transfer of the Heathrow route from Shannon to Belfast.
The vote will take place at an extraordinary general meeting (egm) called last week by Ryanair, which under company law must be held by early October.
An analysis of the Aer Lingus shareholder register suggests that the board can only count on the support of around 28 per cent of shareholders, mostly made up of institutions and pension funds that bought into the company when it floated.
Most fund managers operate under instructions that require them to follow the board’s recommendation when resolutions are put to shareholders for a vote.
Ryanair, however, would need only a handful of extra votes from other significant shareholders, including a pilots’ investment group and the pilots’ pension fund that between them own 4 per cent of Aer Lingus, to increase the pro-Shannon vote above 28 per cent, if both the government and the Esot decided to abstain.
Ryanair can also buy more Aer Lingus shares and increase its stake to a maximum of 29.9 per cent.
Aer Lingus management, however, would need the additional support of telecoms billionaire Denis O’Brien, who holds 2.3 per cent of the company, to come close to matching the voting power of Ryanair and the 4 per cent held by the two pilot groups.
In the event that the Esot opted to side with Ryanair, however, Aer Lingus’s management would then be forced to call on the government not to abstain and instead to vote in favour of its plan to scrap the Shannon routes.
Fianna Fail politicians in the mid-west and west are to lobby the government to abstain. The political lobby representing Oireachtas members in the region are expected to make the proposal in order to be consistent with the government’s stated intention not to intervene in commercial decisions.
The government moved to consolidate its position of nonintervention in Aer Lingus’s commercial freedom last week with statements issued from ministers Mary Hanafin and Dermot Ahern supporting Minister for Transport Noel Dempsey.
‘‘The logic of what the government is saying now in relation to ‘not intervening’ means that they can pursue a policy of abstaining at the egm,” said a mid-west Oireachtas member.
‘‘It would mean the government maintains its position of not interfering in the market. By voting in favour, they would be proactively intervening and leaving Ryanair and Esot in a minority position.”
Defeat of Aer Lingus management at an egm would have serious implications for its chief executive Dermot Mannion.
Mannion’s decision not to notify the board about the Shannon strategy was described in political circles as ‘‘peculiar’’, considering its far-reaching implications for the airline.
‘‘Mannion has certainly left himself wide open on this one if it does go back to the board,” one source said.
Minister for Defence Willie O’Dea said last week: ‘‘The way not to run a private company is to have the shareholders overrule management in relation to vital commercial decisions. It would certainly place management in a very difficult position so it would be a matter of last resort.”