Ryanair letter - Does Aer Lingus Really Have a ...
LETTER FROM THE CEO OF RYANAIR
Mr Colm Barrington
Chairman
Aer Lingus Group plc
Head Office
Dublin Airport
8 January 2009
Does Aer Lingus Really Have A Viable Independent Future?
Dear Chairman,
We refer to your 22 December letter to all Aer Lingus
shareholders in which you (wrongly) claimed that European airline
consolidation is not really happening and that Aer Lingus'
"independence" strategy is a viable alternative to airline
consolidation. Since we believe these claims are patently untrue
perhaps you could explain to your shareholders why you are ignoring
the following facts:
1. Airline consolidation is accelerating across Europe. Air
France has in recent years acquired (among others) Cityjet, KLM, VLM,
Martinair and is now in talks to consolidate with the merged
Alitalia/AirOne combine in Italy. Likewise, Lufthansa has acquired or
agreed to acquire substantial stakes in Swiss, Austrian, British
Midland and SN Brussels. Lufthansa has also expressed its interest in
consolidating with Alitalia/AirOne and is currently in talks with
SAS. BA has a significant stake in Iberia and both airlines are in
active merger discussions. Why then has Aer Lingus been bypassed and
ignored by this pan-European airline consolidation?
2. Aer Lingus' own advisor (Goldman Sachs) doesn't believe it
has an independent future. In its latest airline research paper (3
Dec. 2008) Goldman Sachs confirmed its belief that "it seems
inevitable that all European carriers will belong to one of the big
three groups (BA, Lufthansa and AF-KLM) either through direct
ownership or deeper alliances". Is there any independent expert
outside of Aer Lingus who has any faith that your independence
strategy will be successful?
3. Aer Lingus' Chairman doesn't believe it has an independent
future. In your interview with the Irish Times (12 Dec. 2008) you
"vowed to find a friendly investor who will take a majority stake in
the airline". You also went on to claim that from a "consumer point
of view" and a "country point of view", Air France-KLM "would be a
better option than Ryanair" but "I haven't got a call yet". Aer
Lingus' shareholders are entitled to a progress update on your "vow"
to find a friendly majority investor and an explanation as to how a
friendly majority investor reconciles with a strategy of
"independence"?
4. Aer Lingus' Chief Executive doesn't seem to believe it has an
"independent future". In his "keynote address" (to the ISTT Annual
Conference (30 Sept-2 Oct 2008) in Dublin) "On the Future of the
Travel Industry" Dermot Mannion suggested that by 2015, there could
be just 5 large European airlines left, namely Air France-KLM,
BA/Iberia, Lufthansa, easyJet and Ryanair. Can you explain to Aer
Lingus shareholders why your Chief Executive believes that Aer Lingus
may not exist as an independent airline in just 6 years time?
Perhaps this is why Mr Mannion has recently negotiated an agreement
with Aer Lingus, which will allow him to trigger the payment of a
"failure fee" of up to ¤2.8 million to himself if there is a change
in control of Aer Lingus and he chooses to resign. Why would Aer
Lingus or Mr Mannion discuss, negotiate or agree such a large
"failure fee" if either you or Mr Mannion really believe that Aer
Lingus has an "independent future"?
Yours sincerely,
Michael O'Leary
Chief Executive
The following statements and information are included in this letter
in accordance with the requirements of the Irish Takeover Rules.
The directors of Ryanair and Coinside (a wholly owned subsidiary of
Ryanair and the company making the Offer) accept responsibility for
the information contained in this letter, save that the only
responsibility accepted by the directors of Ryanair and Coinside in
respect of the information contained herein relating to Aer Lingus
and the Aer Lingus Group, which has been compiled from published
sources, has been to ensure that such information has been correctly
and fairly reproduced or presented (and no steps have been taken by
the directors of Ryanair or Coinside to verify such information). To
the best of the knowledge and belief of the directors of Ryanair and
Coinside (having taken all reasonable care to ensure that such is the
case), the information contained herein for which the directors of
Ryanair and Coinside accept responsibility is in accordance with the
facts and does not omit anything likely to affect the import of such
information.
European Airline Consolidation - Reference to:
Air France acquisition of Cityjet sourced from Air France website -
http://corporate.airfrance.com/en/the-airline/subsidiaries/cityjet/index.html
Air France acquisition of KLM sourced from AF-KLM letter to
shareholders December 2008
Air France acquisition of VLM sourced from OFT decision of 28 October
2008
Air France acquisition of Martinair sourced from AF-KLM announcement
dated 17 December 2008
Lufthansa acquisition of Swiss sourced from Lufthansa 2007 annual
report
Lufthansa agreed acquisition of stake in Austrian sourced from
Lufthansa press release 5 December 2008
Lufthansa agreed acquisition of stake in BMI sourced from Lufthansa
Q3 report 2008
Lufthansa agreed acquisition of stake in SN Brussels sourced from SN
Airholding announcement 25 September 2008
Lufthansa in talks with SAS sourced from AFP report dated 3 January
2009 entitled "Lufthansa acknowledges talks with SAS management:
media"
Air France and Lufthansa talks with Alitalia/AirOne sourced from AFP
report dated 12 December 2008 entitled "Italian investor group
formally takes over Alitalia"
Reference to an "independent future" based on Mr Barrington's
statement that Aer Lingus has a "vibrant future as an independent
airline" made in his letter to Aer Lingus shareholders dated 22
December 2008 and Mr Mannion's statement that "we have a bright
future as an independent carrier" made to the Joint Oireachtas
Committee on Transport on 18 December 2008
Reference to Mr Mannion's termination compensation payment is
calculated by reference to (i) 2008 basic salary of ¤440,000; plus
(ii) 150% (of basic salary) annual performance related bonus
totalling ¤660,000; plus (iii) pension contribution totaling ¤312,000
for 2007; plus (iv) car bonus of ¤32,500; all sourced from Aer
Lingus' defence document dated 22 December 2008 (pages 36 and 37)
---END OF MESSAGE---
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