Statement re: Aer Lingus
Ryanair Holdings PLC
26 September 2007
Mr John Sharman JC/9065
Chairman
Aer Lingus Group plc
Head Office
Dublin Airport
Co Dublin 26th September, 2007
Dear Mr Sharman,
We refer to your letter of 17 September which contains a second unlawful
rejection of a legitimate and legal request from a 10% plus shareholder of Aer
Lingus to hold an EGM to discuss the closure of the profitable Shannon-Heathrow
route. Your letter also makes a series of claims which are factually untrue and
legally untenable.
1. The Directors of Aer Lingus do not have any discretion in this matter. Aer
Lingus's Articles of Association and the Companies Act clearly oblige the
Board of Aer Lingus to comply with any request from a shareholder owning 10%
or more of Aer Lingus, to hold an EGM, at any time. The Board of Aer Lingus
has no legal power to reject this request.
2. This second unlawful rejection of a legitimate EGM request is a further
breach of Irish company law by the Board of Aer Lingus. The Directors are in
continuing breach of their statutory duty and remain personally liable for
this breach.
3. Your claim that the holding of an EGM would infringe competition law is of
course absurd. Aer Lingus will shortly call an EGM to approve your long-haul
aircraft order. Ryanair will be perfectly entitled to attend and vote at
this EGM without in any way compromising competition law. Indeed, to follow
your ridiculous line of argument, you and your fellow directors of Aer
Lingus would have already breached competition law by having permitted
Ryanair to participate and vote at this year's AGM. Aer Lingus appears to
invoke competition concerns only when it suits your purposes, regardless of
how absurd or legally untenable these claims are.
4. The fact that our proposed EGM motion would promote competition between
Ryanair and Aer Lingus on the Shannon-London citypair removes any question
or possibility of an infringement of competition law. Since Ryanair only
owns 29.4% of Aer Lingus, we can easily be outvoted by other shareholders at
any such EGM. Furthermore since Ryanair has never sought, nor seeks any
agreement with Aer Lingus, the issue of competition law does not at any time
arise.
5. Your claim that 'Aer Lingus will not engage in illegal conduct' is a false
one, when your rejection of two separate legitimate requests for an EGM is
in itself illegal conduct. Your unlawful refusal to allow shareholders to
discuss the withdrawal of the profitable Shannon-Heathrow route at a time
when the Company's interim profits have collapsed by 58% from €16m in 2006
to just €6m in 2007 is inexplicable. Perhaps this rejection has more to do
with Aer Lingus's desire to avoid any shareholder discussion of these
lamentable interim results or this precipitous decline in profitability? The
fact that Aer Lingus would have reported an interim loss, had it not been
for the €9m increase in interest income (earned from the funds raised
directly from shareholders at last September's IPO) highlights how awful Aer
Lingus's trading has become. This collapse in profits has been accompanied
by a similar collapse in your share price from over €3.00 to currently less
than €2.40. Some of your own employees used their pension funds to acquire
Aer Lingus shares at over €3.00 and are now suffering losses of over 20%. Do
you feel no obligation towards your shareholders?
6. Ryanair's criticisms of Aer Lingus's interim results is entirely valid and
your attempt to avoid comment on this collapse in profitability is
noteworthy. Since your rejection of Ryanair's offer of €2.80 per share last
October, the Board and Management of Aer Lingus have presided over:
+ A 20% decline in Aer Lingus's share price from over €3 to under
€2.40.
+ A 58% collapse in interim profits from €16m to just €6m.
+ An interim loss (if one excludes the additional interest income from
shareholder receipts at last September's IPO).
+ A 7% decline in your cargo business which you previously claimed you
had 're-energised'.
+ A 12% increase in staff costs and a 6% increase in staff numbers when
traffic only grew by 6%.
+ A 10% increase in airport charges when traffic only rose by 6%.
+ A 16% increase in Ground Ops costs when traffic only grew by 6%.
+ An astonishing €24m - four times Aer Lingus' interim profits - has
been wasted to date defending Ryanair's €2.80 offer which was in any
event doomed to failure since mid October last when the Government, the
ESOT and other employee groups rejected it.
Aer Lingus's repeated refusal to hold a lawfully requested EGM (as required
under Section 132 of the Companies Act 1963) constitutes illegal and unlawful
conduct by the Board and Directors of Aer Lingus Group plc. This unlawful action
shows clear oppression and disregard of the interests of Ryanair as a minority
shareholder in Aer Lingus. The fact that the Board and Directors of Aer Lingus
will go so far as to engage in unlawful activity and commit a breach of their
statutory and fiduciary duty conclusively demonstrates that Ryanair has no
control nor influence over the management and conduct of the business of Aer
Lingus.
We have referred this unlawful behaviour to our legal advisors and will consider
with them whether we should pursue our shareholder rights under the Companies
Act 1963 or through the Courts. In the interim we will continue to closely
monitor the actions of the Board and Management of Aer Lingus Group plc.
Yours sincerely
Jim Callaghan
Company Secretary
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