Wednesday 21 November 2018

A beast of the aer

After 41 years in the aviation industry, he returns to the airline where his career took off

Colm Barrington's appointment as Aer Lingus chairman confirms his status as one of the big beasts of Irish aviation. After a 41-year career in the aviation sector, Barrington is well-positioned to pilot the former State-owned airline through the turbulence that lies ahead.

Over the past 41 years Barrington has amassed a formidable body of experience. He first joined Aer Lingus in 1967 as a financial analyst after graduating from UCD with a BA and MA in economics.

The Aer Lingus of the 1960s and 1970s served as a kind of staff college for Irish business executives. Our equivalent of France's ENA where the leaders of tomorrow were groomed and nurtured.

In those days when flying was glamourous, and very expensive, the national airline attracted the brightest and best young graduates who, after cutting their teeth at Aer Lingus, went on to populate the upper echelons of Irish business.

The young Barrington was a typical example of the breed. The son of senior civil servant Tom Barrington, who founded the Institute of Public Administration, and a nephew of former Supreme Court judge Donal Barrington, the young Colm received his education at Gonzaga, the exclusive Jesuit day school in the leafy south Dublin suburb of Ranelagh, and UCD.

Contemporaries

One of his contemporaries at both Gonzaga and UCD was Peter Sutherland, the former EU Commissioner and WTO Director and current chairman of BP, the largest quoted company in the UK. The two have remained good friends ever since, dining together on a regular basis.

At Aer Lingus the young Barrington quickly demonstrated his ability. By 1972, aged just 27, he was appointed vice president of the Omni Hotels group which had recently been acquired by Aer Lingus.

However, Barrington's big break came when he quit Aer Lingus and joined aircraft leasing firm Guinness Peat Aviation (GPA) in 1979.

Many tributes were paid to GPA founder Tony Ryan following his death last year.

The obituaries, rightly, praised his vision, his drive and ability to recruit the very best available talent.

There was, however, another side to Ryan.

Outside of a narrow circle of friends and acquaintances with whom he felt totally at ease, Ryan was hard going socially, as anyone who ever tried to interview him or even engage him in polite conversation quickly found out.

Often abrupt to the point of rudeness, he needed executives with better-developed social skills than his own to go out and lease the dozens and then hundreds of aircraft that GPA was buying every year.

The gregarious Barrington fitted the bill perfectly. With his matey manner disguising a razor-sharp intelligence, he was well-equipped to help GPA find leasing customers for its aircraft as he schmoozed airline bosses.

Barrington rose quickly through the ranks at GPA, eventually becoming chief operating officer where he was responsible for purchasing, leasing and selling aircraft.

As we approach the second decade of the 21st century it is sometimes difficult to recall the phenomenon that was GPA.

World class

In the grim and depressed Ireland of the 1980s and early 1980s, here was an Irish company that was truly world class. In 1990 it placed a $17bn order for 700 new aircraft, easily making it the largest aircraft leasing company in the world.

And then it all went horribly wrong. GPA's crowning glory was to be its stock market flotation in June 1992. Unfortunately with the world economy mired in recession after the first Gulf War, GPA's timing couldn't have been worse.

To make matters worse, Ryan ignored his advisers and insisted on selling $1bn worth of new and existing shares at $25 each into the flotation instead of restricting the flotation to just $500m worth of new shares priced at $17.50.

As a result most investors gave the shares a wide berth and the flotation had to be pulled at literally the last minute.

The botched flotation immediately triggered a crisis of confidence in GPA, which owed its bankers $10bn.

Within a year, the company had been sold to GE and the shareholders were almost completely wiped out. Barrington was among those who were financially burned by the GPA debacle.

However, when the going gets tough, the tough get going. He had borrowed $1.5m from Bank of Ireland secured against GPA shares. When the GPA share price collapsed, Bank of Ireland froze money that Barrington had deposited in a separate account, a practice which was then not uncommon in Irish banking.

Instead of meekly accepting what it had done, Barrington sued Bank of Ireland and won. Barrington's victory is one for which all Irish business people should be grateful.

Following its purchase by GE, Barrington left GPA and set up his own aircraft leasing company, Aviation Capital Management, which he later sold to Australian investment bank Babcock & Brown.

The company, now known as Babcock & Brown Air, has a fleet of 59 aircraft and was floated on the New York Stock Exchange last September. Babcock and Brown retains a 14.2 pc stake in Babcock & Brown Air.

While its share price has not suffered as badly as that of Babcock & Brown, it has still taken a battering in recent months. Floated at $23, Babcock & Brown Air shares were trading at $11.72 yesterday, a fall of almost 50pc in just 11 months. Barrington is not listed as having any shares in Babcock & Brown Air but has 1.8 million Babcock & Brown shares.

Following this week's dramatic events, which saw the departure of both its chairman and chief executive, the Babcock & Brown share price fell to just AUS$2.48 yesterday, down from AUS$27 at the beginning of this year, cutting the value of Barrington's shares from AUS$48.6m to only AUS$4.5m in the process.

With the markets having lost confidence in the Babcock & Brown investment model the odds are shortening on the company being broken and its assets, including its stake in Babcock & Brown Air, being sold.

If, or more likely when, that happens, the likelihood is that Barrington will front an MBO to take back control of the company he founded 14 years ago.

Barrington also faces major challenges at Aer Lingus. With the Ryanair stake stuck at 29.3pc, the Government with 25.3pc, the staff with a further 14.3pc and neither side prepared to yield to the other, the Aer Lingus shareholders' register is deadlocked.

Meanwhile, record oil prices have wiped out Aer Lingus' profitability with most analysts reckoning that the airline will do well to break even this year.

Further complicating matters is the feeling that chief executive Dermot Mannion lacks his predecessor Willie Walsh's ruthless cost-cutting focus.

TWO years after the company announced proposals for job cuts and staff reductions the unions have still not agreed to the cost-cutting plan. Walsh would never have tolerated such shilly-shallying.

These doubts are reflected in the Aer Lingus share price, which currently languishes at just €1.52, only a little over half of the €2.80 that Ryanair was prepared to pay for the airline less than two years ago.

As he steps into the chair at Aer Lingus Barrington has his hands full.

If he successfully navigates it through the coming storm then he will have more than vindicated those at the airline who first identified his talent more than 40 years ago.

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