Aer Lingus - 5
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Apologies if I am less than knowledgeable on this, but what's stopping AF from stepping on this, or even the Irish Govt subtly encouraging AF to make a bid ? Not the best option purely on 'Irishness', but to ensure long term competition in Irish aviation I can't think of a better solution.
Last edited by bia botal; 5th Dec 2008 at 14:26.
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FR has been clear they intend to ensure EI exists
HUZZAH for Ducksy!!
** google Micheal O'Leary and Ducksy if you want to know more. It never fails to make me smile
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Airline Industry Insight:
Why Aer Lingus Shareholders are Right to Rebuff Ryanair
03 December 2008
Executive Summary
* Ryanair's latest hostile takeover bid has been rejected by Aer Lingus shareholders
* The EU Competition Commission is not likely to have changed its view on EI/FR, even in the new economic climate.
* This latest offer is financially competitive for the shareholder, but ultimately not for the Irish and EU Consumer.
* Consumer choice would be limited even under plans to operate Aer Lingus as a separate brand
* New market entrants may have challenges establishing viable routes into/out of Ireland
* Any deal for Aer Lingus needs to include cash for the ailing pension plan
* Will the Irish Government have to examine the Italians' Alitalia playbook for alternate answers?
* The Aer Lingus union Siptu has already voted to accept concession, IMPACT representing cabin crew is set to vote 07 December.
LONDON: On Monday, Aer Lingus (EI) rejected the latest hostile takeover bid from its largest rival Ryanair (FR). Michael O'Leary and his team had offered €748m, which represented a € 0.25 per share premium over the previous closing price of €1.12. Some onlookers called Ryanair's timing "opportunistic."
Currently, Aer Lingus operates a schedule of 111 daily arrivals and the same number of departures from Dublin. They compete with Ryanair on a total of 41 routes (19 directly, with a further 22 in the same region).
While Aer Lingus does face some serious difficulty in the near future, this can also be said of many other carriers, of varying size and network. Aer Lingus, the Irish Government, and EU Competition regulators should be wary of Ryanair's cash, proximity, and sheer size. This latest offer is financially competitive for the shareholder, but ultimately not for the Irish or EU consumer.
One fresh twist to the deal has been that Ryanair would run the EI operations as a separate entity, and add aircraft, which it claims would add over 1,000 new jobs. When viewed against the backdrop of Aer Lingus unions holding votes to examine the future of its 4300 strong workforce, this prospect seems unlikely. Given the current financial and operating climate, our analysis shows that while the intention to add staff and aircraft may be sincere, there remain some key facts and figures that cast some doubt on their ability to deliver on the deal in its current form.
The EU Competition Commissioners would also have to approve any new deal, and again study the impact on the consumer and competition, and potentially suggest a new set of remedies for Ryanair to meet prior to winning any approvals. Historically in airline cases these have included the substantial disposal of slots, routes, and gate access. We advocate the healthy free movement of markets, and market-driven pricing.
When the Aer Lingus staff were told potential reductions could be as high as 1300 staff, the ground handling staff union, Siptu et al, held a vote to work with the struggling carrier to avoid such a large number of layoffs. At the time of this writing, union members should just be advising the carrier on how many people wish to accept redundancy and wish to be re-employed under different terms and conditions.
Aer Lingus and its unions Siptu and IMPACT should be applauded for their efforts to work together during this latest downturn. Divisions between airlines and their union- represented staff often run deep, no where more so than in America where you do not always see this same spirit of co-operative self-preservation between management and those represented. On Sunday December 7, IMPACT, the union representing Cabin Crew are set to vote on their ballot measures. We can only wait to see if Aer Lingus gains the further support from its Cabin Crew union for its restructuring plans.
What makes these union votes so remarkable, and also causes the recent Ryanair claims of 1000 new jobs seem unlikely, is the large obstacle of pension costs. Aer Lingus shares a pension plan with the Dublin Airport Authority and SRT Technics, with the bulk of retirees in the past five year period coming from the Aer Lingus side. What is at issue here is any pay reductions or outsourcing of staff which does not address the estimated €300M - €600 needed to stabilise the pension plan. Early retirement plans such as those being discussed may add an even further burden to the pension plan. Even if some of Siptu's, and eventually IMPACT's, agreed-to cuts include early retirement options, this may save the airline money on labour costs, but will also cause a cost at the pension level.
Until a deal for Aer Lingus can be reached- with Ryanair, or another suitor- these pension issues must be examined and proper pension plan top-up provision must be front and centre in any true deal. Otherwise, the Irish Republic could lose a great airline, while at the same time gaining a potential pension nightmare.
Why Aer Lingus Shareholders are Right to Rebuff Ryanair
03 December 2008
Executive Summary
* Ryanair's latest hostile takeover bid has been rejected by Aer Lingus shareholders
* The EU Competition Commission is not likely to have changed its view on EI/FR, even in the new economic climate.
* This latest offer is financially competitive for the shareholder, but ultimately not for the Irish and EU Consumer.
* Consumer choice would be limited even under plans to operate Aer Lingus as a separate brand
* New market entrants may have challenges establishing viable routes into/out of Ireland
* Any deal for Aer Lingus needs to include cash for the ailing pension plan
* Will the Irish Government have to examine the Italians' Alitalia playbook for alternate answers?
* The Aer Lingus union Siptu has already voted to accept concession, IMPACT representing cabin crew is set to vote 07 December.
LONDON: On Monday, Aer Lingus (EI) rejected the latest hostile takeover bid from its largest rival Ryanair (FR). Michael O'Leary and his team had offered €748m, which represented a € 0.25 per share premium over the previous closing price of €1.12. Some onlookers called Ryanair's timing "opportunistic."
Currently, Aer Lingus operates a schedule of 111 daily arrivals and the same number of departures from Dublin. They compete with Ryanair on a total of 41 routes (19 directly, with a further 22 in the same region).
While Aer Lingus does face some serious difficulty in the near future, this can also be said of many other carriers, of varying size and network. Aer Lingus, the Irish Government, and EU Competition regulators should be wary of Ryanair's cash, proximity, and sheer size. This latest offer is financially competitive for the shareholder, but ultimately not for the Irish or EU consumer.
One fresh twist to the deal has been that Ryanair would run the EI operations as a separate entity, and add aircraft, which it claims would add over 1,000 new jobs. When viewed against the backdrop of Aer Lingus unions holding votes to examine the future of its 4300 strong workforce, this prospect seems unlikely. Given the current financial and operating climate, our analysis shows that while the intention to add staff and aircraft may be sincere, there remain some key facts and figures that cast some doubt on their ability to deliver on the deal in its current form.
The EU Competition Commissioners would also have to approve any new deal, and again study the impact on the consumer and competition, and potentially suggest a new set of remedies for Ryanair to meet prior to winning any approvals. Historically in airline cases these have included the substantial disposal of slots, routes, and gate access. We advocate the healthy free movement of markets, and market-driven pricing.
When the Aer Lingus staff were told potential reductions could be as high as 1300 staff, the ground handling staff union, Siptu et al, held a vote to work with the struggling carrier to avoid such a large number of layoffs. At the time of this writing, union members should just be advising the carrier on how many people wish to accept redundancy and wish to be re-employed under different terms and conditions.
Aer Lingus and its unions Siptu and IMPACT should be applauded for their efforts to work together during this latest downturn. Divisions between airlines and their union- represented staff often run deep, no where more so than in America where you do not always see this same spirit of co-operative self-preservation between management and those represented. On Sunday December 7, IMPACT, the union representing Cabin Crew are set to vote on their ballot measures. We can only wait to see if Aer Lingus gains the further support from its Cabin Crew union for its restructuring plans.
What makes these union votes so remarkable, and also causes the recent Ryanair claims of 1000 new jobs seem unlikely, is the large obstacle of pension costs. Aer Lingus shares a pension plan with the Dublin Airport Authority and SRT Technics, with the bulk of retirees in the past five year period coming from the Aer Lingus side. What is at issue here is any pay reductions or outsourcing of staff which does not address the estimated €300M - €600 needed to stabilise the pension plan. Early retirement plans such as those being discussed may add an even further burden to the pension plan. Even if some of Siptu's, and eventually IMPACT's, agreed-to cuts include early retirement options, this may save the airline money on labour costs, but will also cause a cost at the pension level.
Until a deal for Aer Lingus can be reached- with Ryanair, or another suitor- these pension issues must be examined and proper pension plan top-up provision must be front and centre in any true deal. Otherwise, the Irish Republic could lose a great airline, while at the same time gaining a potential pension nightmare.
What is at issue here is any pay reductions or outsourcing of staff which does not address the estimated €300M - €600 needed to stabilise the pension plan.
In effect even if EI stays independent then it cannot afford to continue in business with a potential liability longer term of this and there is no state aid.
EI Operating loss was €50m in first half and initially projected loss of another €20m in second half, probably worse given the passenger drop as a result of strike threats.
2009 is not going to get much better and even the €25m in cuts offers little as redundancy cost will exceed this figure by quite a margin and you have to hope that you can actually realise all the €25m in savings in the first year......i.e. no chance.
Assumming they are responsible for 50% of the pension deficit then they will have to come up with up to €300m maximum. All of this plus operating losses has to come out of cash as clearly not producing any operating profit.
In effect you have someone willing to negotiate a price or do you hold out for a bigger player.
Exactly what does EI offer up to the 3 big European groupings of AF/KLM - LH or BA/IB to warrant interest.
Slots at LHR ?.....nope as number is not sufficient to warrant minimum €1.5bn
(€1.5 made up of current market price offer valuation of company + pension deficit)
Access to US market.....hardly as all already part of alliance
Increased Pax numbers......not for that spend when losing that much money.
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racedo why are you so keen to force EI into the hands of M'OL. Your passion is extraordainary on this matter, you're like a wee terrier. Do you work for Ryanair, or even work within the industry?
Your amazing inside knowldedge is incredible ( ! )
Do you think Ryanair is the white knight to save the pension deficit at Aer Lingus?
Really? Ducksy on a big white horse? Dreamy isn't it?
Your amazing inside knowldedge is incredible ( ! )
Do you think Ryanair is the white knight to save the pension deficit at Aer Lingus?
Really? Ducksy on a big white horse? Dreamy isn't it?
Last edited by Skipness One Echo; 6th Dec 2008 at 22:31.
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MOL Strikes back
MOl was on one of the Irish chat shows last night. And was almost mellow by all standards. The usual ryanair is the savour of the world commentary.
However, it is clear, EI need either another WW at the helm or go ahead with the FR takeover. If you are going to be a niche operator, you need to be good at your niche and EI Are not. in recent years the product has become tired, on transatlantic/NYC routes Continental are beating them senseless. Delta won't take long to improve their offering which is on par with EI. With the potential BA.IB.QF.AA tie up you have another super large airline matched by KLM.AF and LH/BD/Austrian.
In a strange way, perhaps MOL has become a bit more seasoned and maybe it is time he lead the charge on EI and maybe they are the management team to lead the airline foward. The sad part about all of this is the consumer will suffer.
Slan,
Shamrogue
However, it is clear, EI need either another WW at the helm or go ahead with the FR takeover. If you are going to be a niche operator, you need to be good at your niche and EI Are not. in recent years the product has become tired, on transatlantic/NYC routes Continental are beating them senseless. Delta won't take long to improve their offering which is on par with EI. With the potential BA.IB.QF.AA tie up you have another super large airline matched by KLM.AF and LH/BD/Austrian.
In a strange way, perhaps MOL has become a bit more seasoned and maybe it is time he lead the charge on EI and maybe they are the management team to lead the airline foward. The sad part about all of this is the consumer will suffer.
Slan,
Shamrogue
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EI Operating loss was €50m in first half and initially projected loss of another €20m in second half
The savings from the so called PCI '07 were not going to be begin until the latter part of the year in conjunction with new maintenance agreements beginning in November. The overall cost of this 'compensation' payment was considered in the first half results and not over the course of the full financial year, possibly to help the negotiations with it's staff on the agreement just reached recently to help post a bleak outlook and force a more determined negotiation on the then draft proposal for contracts.. 50 million as a loss was never mentioned.
LINK TO HALF YEAR RESULTS
On the 22th November 2008 Aer Lingus issued an interim management statement to the Stock exchange which stated that their overall projected loss for the full financial year would be 20 million, and not 30 million as previously projected earlier in the year.
LINK
Everyone is entitled to their personal opinions on this subject but it would be nice if those posting could do a little research when posting wild figures which turn out to be completely wrong. It took only five minutes to research the above figures from the Aer Lingus website.
Last edited by Lord Lardy; 6th Dec 2008 at 09:02.
FR have been making a big thing of the benefits to EI of the proposed take over, but what are the benefits to FR?
FR do not need the extra aircraft, and even if they did, EI are all Airbus.
FR do no need EIs longhaul "connections", if FR want to do longhaul they can just source ac to start the services and go do it.
FR do not gain any foot holds in any particularly attractive (to FR) airports (with the exception of becoming an even greater irritant to the legacy carriers at those airports)
If FR wanted to to an "upmarket"/partial frills service, again, they could just start doing it with current a/c and some very slight staff training changes.
FR get rid of a long standing competitor from one of their bases .....
FR increases their leverage with the DAA ....
FR converts EI shares into EI's cash reserves ...
JAS
FR do not need the extra aircraft, and even if they did, EI are all Airbus.
FR do no need EIs longhaul "connections", if FR want to do longhaul they can just source ac to start the services and go do it.
FR do not gain any foot holds in any particularly attractive (to FR) airports (with the exception of becoming an even greater irritant to the legacy carriers at those airports)
If FR wanted to to an "upmarket"/partial frills service, again, they could just start doing it with current a/c and some very slight staff training changes.
FR get rid of a long standing competitor from one of their bases .....
FR increases their leverage with the DAA ....
FR converts EI shares into EI's cash reserves ...
JAS
Eh, actually the first half loss was 22.3 million to be exact, not 50 million. 17.6 million of this 22.3 million was paid to staff under the PCI agreement of '07 to lower staff terms and conditions of employment under new work regimes. (Page 6 of the presentation to shareholders).
The costs of redundancies will now likely be borne in 2008, paid in 2009 and think you will be lucky to find that cost below €20m.
EI benefited by €20m from finance.
Key is Operating loss as benefits from other activities which are not part of its core activities hide the real picture. If you can't make an Operating profit then any other activity is superflous.
racedo why are you so keen to force EI into the hands of M'OL. Your passion is extraordainary on this matter, you're like a wee terrier. Do you work for Ryanair, or even work within the industry?
Your amazing inside knowldedge is incredible ( ! )
Do you think Ryanair is the white knight to save the pension deficit at Ryanair?
Your amazing inside knowldedge is incredible ( ! )
Do you think Ryanair is the white knight to save the pension deficit at Ryanair?
Since when has Ryanair had a pension deficit ?
EI is neither Low cost or full service.....what exactly is its position as a brand ?
It faces the issue of try and compete where you don't have a strong enough brand nor has a good enough offering that will ensure long term survival.
It can stay around another 5 years BUT what then ?
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That would be year six. It's what we call an arithmetic progression.
Never. A pension would be what in the civilised workplace is called a "benefit". Of course I was speaking of the Aer Lingus pension deficit, exscuse my hand spasm.
Since when has Ryanair had a pension deficit ?
EI is neither Low cost or full service.....what exactly is its position as a brand ?
It faces the issue of try and compete where you don't have a strong enough brand nor has a good enough offering that will ensure long term survival.
It can stay around another 5 years BUT what then ?
It faces the issue of try and compete where you don't have a strong enough brand nor has a good enough offering that will ensure long term survival.
It can stay around another 5 years BUT what then ?
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Do companies have 6 year plans?
I thought the norm is 5?
What is Ryanairs 6 year plan?
What will he do with 180 additional aircraft?
He just blew 180M in increased fuel bills this last quarter due to his hedging mistake.
I thought the norm is 5?
What is Ryanairs 6 year plan?
What will he do with 180 additional aircraft?
He just blew 180M in increased fuel bills this last quarter due to his hedging mistake.
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EI is neither Low cost or full service.....what exactly is its position as a brand ? It can stay around another 5 years BUT what then ?
It faces the issue of try and compete where you don't have a strong enough brand nor has a good enough offering that will ensure long term survival.
racedo, I ask again only out of personal interest. Do you work within the industry or for Ryanair?
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Yes, because we really need to put a big stamp on every airline "LOW COST" or "FULL SERVICE" and everyone picks which camp they want to cheer for... brilliant.
Aer Lingus/BMI are if you'll forgive the old expression, the dinosaurs that learned to dance. They know that competitive fares equal success and they have changed to meet those demands.
Aer Lingus have a base in Belfast... are British Airways watching? Could someone tell them that air travel actually works outside of a massive global financial centre with a population of millions if the airlines use a business model that isn't falling to pieces.
Aer Lingus/BMI are if you'll forgive the old expression, the dinosaurs that learned to dance. They know that competitive fares equal success and they have changed to meet those demands.
Aer Lingus have a base in Belfast... are British Airways watching? Could someone tell them that air travel actually works outside of a massive global financial centre with a population of millions if the airlines use a business model that isn't falling to pieces.
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Good old MOL is at it again:
O'Leary: 'Take them out and shoot them' - National News, Frontpage - Independent.ie
His tolerance of unions didn't last too long, did it?
With regard to bmi and Aer Lingus, I think there are significant differences, chiefly the fact that no matter how badly it did/does (and it hasn't been doing too well of late), it would always have suitors, because of its LHR slots. EI is not the same; it is - as you say - a dinosaur that learned to dance and given that it has the world's most aggressive airlines as its next door neighbour, it had to do so pretty quickly.
O'Leary: 'Take them out and shoot them' - National News, Frontpage - Independent.ie
His tolerance of unions didn't last too long, did it?
With regard to bmi and Aer Lingus, I think there are significant differences, chiefly the fact that no matter how badly it did/does (and it hasn't been doing too well of late), it would always have suitors, because of its LHR slots. EI is not the same; it is - as you say - a dinosaur that learned to dance and given that it has the world's most aggressive airlines as its next door neighbour, it had to do so pretty quickly.
Do companies have 6 year plans?
I thought the norm is 5?
I thought the norm is 5?
What is Ryanairs 6 year plan?
What will he do with 180 additional aircraft?
What will he do with 180 additional aircraft?
Carry in excess of 100 million passengers and compete against the 3 biggies within Europe.
He just blew 180M in increased fuel bills this last quarter due to his hedging mistake.
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I don't remember any example where a reduction in competition generated a decrease of fares. Maybe, if MOL takes control of EI, EI's fares will decreased, but not Ryanair ones...
Dublin is already the biggest cash maker of Ryanair, and if they have a monopoly (they are both competing on almost every european routes), it will be even better for them. If he doesn't want to make more money in Dublin (by higher yield), why is he doing this offer???
- eco of scales: non sense, he said that he will keep every EI employees etc
- eco in aircraft acquisition: non sense, aircraft are already ordered
The only reasons he gave are: restored SNNLHR route and give 200m to stop fuel surcharge and reduce yields by 5%. Guys, is that a joke? Does MOL that generous??? He just want to take control of EI in an act of generosity for irish customers????
What a bull****!!!
MOL wants EI to increase yields in DUB, and have more power in the negociations against DUB airport, that's it
Another possible explanation: does ryanair is not just trying to sell all is shares that are a big financial burden for them? They know they will never take control of EI (europen commission refused, and will highly probably again refuse it) so they announce another bid, EI share price increases, and then they sell all their shares at a higher price...
MOL always did a similar thing with Ryanair, generally announcing bad news at one point of the year, then share price decreases, then he could buy it at a cheap price. Then announcing it won't be as bad as expected, share price increase and he could sell it and make a profit
I am also very surprise that nobody speak about lazy Sean Coyle in any press release. This guy was at Ryanair 6 months ago, and joined (very surprisingly) Aer Lingus as the CFO just few months ago. What is his position rekated to the take over? is he not MOL Trojan horse in EI???
Dublin is already the biggest cash maker of Ryanair, and if they have a monopoly (they are both competing on almost every european routes), it will be even better for them. If he doesn't want to make more money in Dublin (by higher yield), why is he doing this offer???
- eco of scales: non sense, he said that he will keep every EI employees etc
- eco in aircraft acquisition: non sense, aircraft are already ordered
The only reasons he gave are: restored SNNLHR route and give 200m to stop fuel surcharge and reduce yields by 5%. Guys, is that a joke? Does MOL that generous??? He just want to take control of EI in an act of generosity for irish customers????
What a bull****!!!
MOL wants EI to increase yields in DUB, and have more power in the negociations against DUB airport, that's it
Another possible explanation: does ryanair is not just trying to sell all is shares that are a big financial burden for them? They know they will never take control of EI (europen commission refused, and will highly probably again refuse it) so they announce another bid, EI share price increases, and then they sell all their shares at a higher price...
MOL always did a similar thing with Ryanair, generally announcing bad news at one point of the year, then share price decreases, then he could buy it at a cheap price. Then announcing it won't be as bad as expected, share price increase and he could sell it and make a profit
I am also very surprise that nobody speak about lazy Sean Coyle in any press release. This guy was at Ryanair 6 months ago, and joined (very surprisingly) Aer Lingus as the CFO just few months ago. What is his position rekated to the take over? is he not MOL Trojan horse in EI???
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What will be the attitude of the new FR/EI airline to Cork given Ryanair's antipathy towards the airport? Maybe they could do us all a favour and leave it to Easyjet, Wizz, Jet 2 and others and let BMI or BA operate to LHR. They won't be missed
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Aer Lingus have a base in Belfast... are British Airways watching?