Ryanair Seeks Cuts In Aer Lingus Bloated Directors Fees

Ryanair, which is the largest minority shareholder in Aer Lingus (with a 29.8% stake), today confirmed that it has written to all of Aer Lingus’ shareholders including the Minister for Transport and the Aer Lingus Employee Share Option Trust (ESOT) seeking their support for the three resolutions which Ryanair proposes to raise at Aer Lingus’ forthcoming AGM on 05-Jun-2009 next.

 

 Ryanair believes that these resolutions are reasonable and appropriate in light of (a) the recent collapse of Aer Lingus’ share price (from over EUR1.30 in January to under EUR0.60 in May), (b) the enormous losses reported by Aer Lingus for 2008 (EUR108m after tax), (c) its forecast increased losses in 2009, (d) the decline in Aer Lingus’ short-haul traffic (down 6% in Q1) and long-haul traffic (down 15% in Q1) and (e) the recent (11 March) admission by Aer Lingus that its net cash of EUR803m last December is “expected to be circa €400m” by the end of 2009.
 
Ryanair believes that the Chairman and Board of Aer Lingus cannot credibly lead any cost reduction or efficiency programme without first reducing the bloated Non Executive Directors fees (over EUR700,000 in 2008), which are excessive and unjustified in a small company whose market capitalisation has fallen to just over €300m, and where these Directors already enjoy the considerable benefit of free first class air travel on Aer Lingus and other worldwide airlines.
 
Ryanair believes that the fees of some EUR200,000 p.a. payable to Aer Lingus’ Non Exec Chairman are unwarranted and unjustified and pointed out that Ryanair’s Chairman receives no fee whatsoever for his non-exec role. Ryanair also pointed out that the EUR45,000 Non Exec fee paid to other Aer Lingus Directors including David Begg (Boss of the ICTU trade union) is EUR13,000 more than the average industrial wage in Ireland.
 
Ryanair has proposed 3 resolutions at the 5th June AGM as follows:

   That Mr Barrington’s Non Exec Director fees be reduced from some EUR200,000 to the EUR35,000 fee paid by Aer Lingus to its previous Non Executive Chairman in 2006.

That the EUR45,000 Non Exec Directors fee be reduced to the EUR17,500 per person paid by Aer Lingus to its Non Exec Directors in 2006. That the multi million euro resignation bonuses agreed in late 2008 for Aer Lingus’ Chief Executive (Mr Mannion) and 5 other Senior Executives should not be repeated for future Senior Executives without seeking the prior approval of Aer Lingus shareholders in general meeting.

 
Aer Lingus have agreed that resolutions 1 and 2 may be put to the 5 June AGM. However Aer Lingus have to date refused to allow resolution 3 to be put to the AGM. Ryanair believes this is an attempt to deny shareholders openness and transparency. Ryanair will be calling on other Aer Lingus shareholders including the Minister for Transport and the ESOT to support these resolutions which would reduce bloated Directors fees, would promote transparency, shareholder democracy and good corporate governance on the issue of future multi-million euro bonuses for Senior Executives. It is important in a company like Aer Lingus, which has gone through 10 Chief Executives over the past 16 years that the company and its shareholders do not suffer large bonus payments to (frequently) departing Senior Managers simply because they choose to resign.
 
Ryanair will also be using the forthcoming AGM to ask Aer Lingus Chairman, Mr Barrington for a progress report on his campaign announced on 11 December last, when he “vowed to find a friendly investor who will take a majority stake in the airline”. Shareholders will wish to know whether Mr Barrington (who has presided over a 50% collapse in Aer Lingus’ shareholder value over the past 4 months) has any credible plans to restore Aer Lingus’ share price and increase shareholder value.
 
Speaking today, Ryanair’s Michael O’Leary announced
 
“We believe that the three resolutions we have proposed are in the best interests of Aer Lingus, its stakeholders and shareholders. If there are to be more cost cuts and efficiency at Aer Lingus, then the Non Executive Chairman and Directors should lead from the front. The current level of Directors fees are bloated, excessive and unjustified in a small company which has a market capitalisation of just over EUR300m and where those Directors already receive the substantial benefit of free first class travel on Aer Lingus and other airlines worldwide.
 
“We believe that the Minister for Transport, the ESOT, as well as other Aer Lingus shareholders will also support Ryanair’s call for reduced Directors fees as well as transparency and openness in any future resignation bonuses for Senior Executives. Since both the Minister for Transport and the ESOT were vociferous in their objection to the recent multi million euro resignation bonuses payable to Messrs Mannion and others when they were exposed in January, we believe there is an overwhelming majority of shareholders who support our resolution that any similar resignation bonuses should not be agreed without first being approved by shareholders.
 
“We will also be using the AGM to ask the Chairman and Board of Aer Lingus to explain why they were guiding “a profit overall in 2008” and “enhanced profitability in 2009” at the end of December, when just 10 weeks later on 11th March they reported an enormous loss of EUR108m for 2008 and warned of significantly increased losses in 2009. Mr Barrington and his Board have much to do if they are to restore shareholder trust and confidence and improve shareholder value in Aer Lingus, and we hope they’ll use the forthcoming 5th June AGM and these three simple resolutions as a good place to start”.



 (c) Centre for Asia Pacific Aviation. Date posted: 22-May-09
 
For in-depth analysis of the low cost airline sector worldwide, subscribe
now to the peerless Peanuts! Weekly