Madam, - Ryanair's attempted takeover of Aer Lingus should not surprise anybody. Aer Lingus is one of the very few airlines in the world with a substantial net cash holding. In contrast, Lufthansa is cash neutral and British Airways has net debts of about €2 billion plus a pensions "black hole" of about €3 billion. Despite many allegations of inefficiency, overstaffing, disruptive trades unions, etc, Aer Lingus has a cash pile today of over €1 billion (almost 60 per cent of total assets) and debts of about €450 million.
This cash position is a major attraction for any predator. The only surprise (or is it?) is that the board of Ryanair, and not just Michael O'Leary, moved so quickly. The Ryanair chairman, David Bonderman, has an enviable track record in financial strategy and knows a good deal when he sees one.
In recent years, the political mantra has been that Aer Lingus needed funds to acquire aircraft and that only a stock market flotation would suffice. Bur the airline and Minister Cullen could have raised the necessary finance through loans or leases, guaranteed by the Government if necessary. I would bet that there are no EU restrictions to prevent such a move. It certainly would not have cost €35 million in arrangement fees and it would have avoided the current controversy. Had such a strategy been adopted, and had it worked, Aer Lingus would have been better positioned for a flotation in a few years' time with a stronger balance sheet that would have deterred takeover bids.
What we are now witnessing is another aspect of Mr Cullen's proven incompetence. He clearly fell for the siren songs of the merchant bankers. To counter the Ryanair "threat", we now await the arrival of an entity that is prepared to trump the Ryanair offer. On the European airline front, Lufthansa is in the best position to do it. Do not discount the possibility of another O'Reilly/Soros Eircom adventure as Aer Lingus could be worth more than its current market capitalisation in a break-up context. The institutions will sell to the highest bidder: that is their job.
Aer Lingus, as we know it, is gone. The brand may survive but, to paraphrase Yeats, all is changed, changed utterly. - Yours, etc,
BRIAN BERRY, Chalfont Road, Malahide, Co Dublin.
Madam, - If the attempted takeover of Aer Lingus by Ryanair surprised the chattering classes, then the follow-up should not.
Michael O'Leary is adept at micro-management of staff. Many work in fear of him. He is likely to manoeuvre hundreds out the door at Aer Lingus, change the culture and embark on a displacement policy of Irish working using low-cost eastern Europeans. This will greatly damage social cohesion, especially in north Dublin.
We are witnessing the transformation of Ireland from a society into a mere economy with the strong cannibalising the weak. Privatising Aer Lingus was not in the public interest and was simply wrong. - Yours, etc,
Dr BILL TORMEY, Glasnevin Avenue, Dublin 11.
Madam, - People seem to see Ryanair's Michael O'Leary as some sort of bogeyman who is going to raise prices once he achieves the so-called monopoly he is supposedly planning to create.
I couldn't believe what I heard on Monday night's Question and Answers on RTE 1, mainly from Siptu representative Jack O'Connor. His point in essence was that once Ryanair achieved a takeover of Aer Lingus prices would inflate and the consumer and worker alike would be at a loss.
Do people with such worries really expect Michael O' Leary to turn his back on the business techniques that saw him and Ryanair overtake Aer Lingus as the dominant tour operator in this country and grow into one of the largest in Europe? Do they think that Ryanair would act much in the same way that Aer Lingus did when it had the dominant market position?
Do they think a man of Michael O'Leary's business calibre would do something so foolish? Aer Lingus's abuse of its dominant position in the market was what allowed Ryanair to grow into a big player, so why change now?
Ryanair knows that as long as it keeps cutting costs it will add more and more to its €2 billion cash reserve. By contrast, if it raises prices there will be a new Ryanair with lower fares stealing its former customers. In free-market economics, the consumer always wins. - Is mise,
JAMES McKNIGHT, McKnight Solicitors, Fitzwilliam Place, Dublin 2.