Shareholder Letter to Aer Lin
ab/MOL/12046
18 December 2008
Mr Colm Barrington
Chairman
Aer Lingus Group plc
Head Office
Dublin Airport OPEN LETTER
Dear Chairman,
We refer to Aer Lingus' recent interim management statement dated 11 Nov 08 and the subsequent comments and claims made by Aer Lingus group management following the launch of Ryanair's recent merger offer. We, as a large shareholder, are concerned about some of these apparently contradictory claims and forecasts, and their impact upon Aer Lingus' forecast post exceptional net profit (loss) after tax for 2008 and 2009.
We believe all shareholders would appreciate and are entitled to receive a detailed clarification of the impact of the following items on Aer Lingus' forecast post exceptional net profit (loss) after tax, and net cash balances, for 2008 and 2009.
1. How much cash compensation and exceptional costs have been, or will be, incurred to deliver the recently announced 'transformational deal'? Is the reported cost of €100m an accurate one, or is the final cost greater than this figure? Please confirm for all shareholders that this 'transformation' will only reduce Aer Lingus' costs by as little as €5 per passenger.
2. We note that a similar team (to that in 2006), led by Goldman Sachs, has been appointed by Aer Lingus to defend Ryanair's current merger offer. Since Aer Lingus previously spent over €24m of shareholder funds defending a higher offer (in Oct 2006), can the company confirm for all shareholders the amount of the cap, referred to by you before the parliamentary committee today, which has been placed on Aer Lingus' defence costs this time around.
3. Can the company confirm for all shareholders the current (Dec 2008) deficit in the Aer Lingus defined benefit pension schemes? In light of the recent collapse in Irish pension scheme valuations, can the company confirm that its pension schemes are fully funded or will a further exceptional cost increase (in the form of pension contribution top ups) be required by Aer Lingus Group plc to fund the hole in its pension schemes?
4. Since the company last week announced that it would eliminate long haul fuel surcharges with immediate effect, can the company please confirm for all shareholders the impact of this revenue loss on Aer Lingus' forecast post exceptional net profit (loss) after tax for 2008 and 2009.
5. Since Aer Lingus Group plc has previously forecast an operating loss of approx. €20m in 2008 (11 Nov interim statement) and another operating loss of approx. €70m in 2009 (investor conference call 28th Aug 2008), can the company, in light of the above substantial cost increases and revenue reductions, please confirm its forecast post exceptional net profit (loss) after tax for both 2008 and 2009.
6. During the course of Aer Lingus' most recent investor conference call (28th Aug 2008), the company forecast that its net cash balance would decline to 'about €550m' by the end of 2009. In light of the impact of: (i) the substantial cost increases outlined above, (ii) the loss of revenue arising from the elimination of fuel surcharges, (iii) the impact of the company's current fuel hedges, (iv) the compensation cost for the recent 'transformational deal', and (v) the company's expected defence fees, can the company please confirm for all shareholders its revised forecast net cash balances at year end 31 December 2008 and 31 December 2009.
7. Can the company please explain to all shareholders the apparent contradiction between Aer Lingus' interim statement of just 5 weeks ago (11 Nov 2008) (in which Aer Lingus announced capacity reductions on its long haul and short haul network) with its recent statements to the media and at today's parliamentary committee of a campaign of growth in 2009. Can the company please confirm for all shareholders its revised capacity and capex forecast for 2009 and its impact on the company's forecast net cash balance of 'about €550m' by the end of 2009.
Like all other investors in Aer Lingus Group plc, we would appreciate a detailed clarification of the above issues and their impact on forecast post exceptional net profit (loss) after tax in 2008 and again in 2009, for all shareholders, in your forthcoming defence document. As I'm sure you will appreciate, the above issues will be of utmost importance to all stakeholders in maximising shareholder value in Aer Lingus Group plc.
Yours sincerely,
______________
Michael O'Leary
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.
Mr. Mannion's reference to a 'transformational programme' was contained in the announcement issued by Aer Lingus entitled 'Aer Lingus confirms SIPTU staff cost savings' dated 5 December, 2008.
This information is provided by RNS
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