Saturday 24 March 2018

Ryanair has 'no interest' in ever flying to the US - Bonderman

Chairman David Bonderman yesterday gave a view about US services which contradicted past statements by Michael O’Leary on the transatlantic sector
Chairman David Bonderman yesterday gave a view about US services which contradicted past statements by Michael O’Leary on the transatlantic sector
Ryanair chief Michael O'Leary. Photo: Damien Eagers
John Mulligan

John Mulligan

Ryanair won't ever fly transatlantic services, the airline's billionaire chairman David Bonderman insisted yesterday.

"We have no interest in flying transatlantic," he told shareholders at the airline's annual general meeting at Dublin Airport yesterday.

Ryanair also announced that it intends to return €398m in proceeds from the sale of its near-30pc stake in Aer Lingus to shareholders before the end of the calendar year. It sold the Aer Lingus shares to IAG, which has acquired the former State-owned carrier.

Mr Bonderman's seemingly definitive comment comes despite chief executive Michael O'Leary saying that a low-cost transatlantic service would be a medium-term aim for the company.

Mr Bonderman is the co-founder of US private equity giant TPG, formerly Texas Pacific Group. He and TPG backed Ryanair in 1996, the year before it floated on the stock exchange.

Mr O'Leary has always stressed that a transatlantic service would be a separate business to Ryanair, unlikely to even use the Ryanair brand.

He has also said that launching it would be dependent on securing long-haul aircraft at cheap prices - something that's impossible right now due to bulging order books at both Airbus and Boeing.

In January, Mr O'Leary said he would be disappointed if the low cost long-haul service wouldn't be able to offer one-way fares to the US from Europe for an average of under €100. He said the aim of the service would be to fly from about 15 European cities to 15 US cities.

Mr O'Leary said yesterday that the airline's previous aim of trying to buy Aer Lingus wasn't to secure ownership of its long-haul operations.

"Aer Lingus' long-haul was the bit we were least interested in," he said. "The attraction nine years ago was to use it to serve primary airports in Europe. We're now doing it with Ryanair."

Ryanair chief financial officer Neil Sorahan also said the airline remains focused on its existing strategy and delivering improvements under its so-called 'Always Getting Better' campaign. "We're very busy working away in the short-haul, which we're very good at," he said. He added that a long-haul service would also have to have a different management team. "Our skill set is very much in the low-cost area. It's pie in the sky stuff. The board is very clear: this is not on our agenda."

Mr Sorahan said Ryanair intends to distribute the €398m in Aer Lingus sale proceeds to shareholders by issuing a 'B' share that, subject to approval by the Revenue Commissioners, will enable shareholders to only pay 33pc capital gains tax on the money rather than income tax.

The amount payable on each existing ordinary share is approximately 29.4 cent. About 8pc of Ryanair's shareholders are based in Ireland.

Ryanair will issue a B share to shareholders. That B share will then be redeemed either as a dividend, or as a capital transaction. The B shares will be subsequently cancelled, and the shareholding is consolidated by issuing 39 shares to shareholders for every 40 they currently hold in the company.

"The reason for that is to make sure the share price remains steady," said Mr Sorahan. "The new share price should remain broadly comparable. On a net-net basis you'll have exactly the same value in your back pocket at the end of it."

He said that Ryanair had structured the payout this way because it did not want to give "mixed messages" about where the share price should go.

Following the distribution, Ryanair will have handed back €1.3bn to shareholders this year.

"If an expectation gets out there that Ryanair's good for €1.3bn a year in dividends, that's the wrong message to send to the market," said Mr Sorahan.

"We're not doing a traditional buyback, we're not doing a traditional dividend. By doing a one-off structure like this, we're sending clear message to people that this is an exceptional, one-off event."

Ryanair's chief marketing officer, Kenny Jacobs, also said that there's already evidence on some routes across Europe of a looming winter air fare war that's been predicted by Mr O'Leary as fuel prices continue to fall.

"Every airline has the benefit of cheaper fuel," said Mr Jacobs. "I think what you're going to see is cheaper fares everywhere."

Irish Independent

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