Thursday 17 October 2019

Walsh swoops to conquer at Aer Lingus

REVENGE IS SWEET: Willie Walsh might well take some little pleasure from forcing Michael O'Leary's Ryanair to reduce its holding in Aer Lingus
REVENGE IS SWEET: Willie Walsh might well take some little pleasure from forcing Michael O'Leary's Ryanair to reduce its holding in Aer Lingus

Shane Ross

Willie Walsh never really left Ireland. Indeed, as a people we are proud that the current global predator hovering over Aer Lingus was once a local business hero.

Back in 2004 Willie competed with Ryanair's Michael O'Leary for the accolade as our finest business leader. The man who turned round the bankrupt national airline - from basket case to a business phoenix - was greeted as a genius.

Then we lost him. Almost exactly a decade ago Willie, along with his chief operations officer Seamus Kearney and his chief financial officer Brian Dunne, resigned. They had made an unsuccessful bid to take over Aer Lingus in a surprise management buy-out. It failed, obstructed by a government determined not to allow the national airline to fall out of political, as opposed to State, ownership.

Not long afterwards Willie was abused in the Dail by Taoiseach Bertie Ahern. The Fianna Fail leader, whose North Dublin fiefdom included vast numbers of Aer Lingus staff, accused the former airline boss of attempting to "steal state assets and shaft members of staff".

Willie left Ireland. He was appointed chief executive of BA, an airline that dwarfed Aer Lingus. Not good enough to run Aer Lingus but good enough for BA. After a rocky start, he thrived in the job. Today he heads up IAG, the giant airline group that owns BA. On December 18 he made his second bid for Aer Lingus. This time he is likely to succeed.

Willie must be smiling. Revenge is sweet.

Yet Willie's bid is hardly motivated by a nostalgic yearning to return to former pastures. Nor by a desire to capture the airline that escaped his clutches a decade ago. There are solid reasons why Aer Lingus is a tempting prey. This time he may be on the point of "stealing" the crown jewels. This time the Government is less likely to stand in his way.

Willie's timing is excellent. Aer Lingus may be overshadowed by Ryanair - but its departing chief executive, Christoph Mueller, has pulled it out of the commercial mire. Many of the peculiarly Irish problems that might frighten away a foreign predator have gone. Aer Lingus has buckets of cash on the balance sheet. It regards its awkward pensions issue as resolved.

Its biggest shareholder, Ryanair (29.8pc), is probably a forced seller as the UK Court of Appeal is likely to order chief executive O'Leary to sell his stake down to 5pc in the coming weeks. This time Willie is eyeing an airline completely transformed from the one he failed to land in 2004.

It is lean and profitable. It is no longer an albatross around the State's neck. It has attractive assets to exploit, most notably the Heathrow slots.

Walsh made a bid believed to be around €2.20 a share, a healthy premium on the market price. In time-honoured style, the board rejected it as derisory. The market is signalling that Walsh will launch another bid shortly. The €2.20 offer is forecast to rise to at least €2.40.

The next bid may be the killer punch. Even the board seems to believe it. On Wednesday it was announced that Mr Mueller would now leave earlier than expected. No mention was made of the date of the arrival of his successor, but current chairman Colm Barrington would take charge of "strategic matters". Barrington would even assume executive powers on March 1, if necessary until a new boss was appointed.

The board's reluctance to signal that a new chief executive is on the way suggests that it anticipates a higher, possibly successful, bid from Walsh. It is even hinting that it will not necessarily dismiss it out of hand. Aer Lingus is on the block. A keen buyer has met a willing seller.

The only question mark, as usual, hangs over the Government's intentions. Political sensitivities are once again overshadowing commercial realities.

First, no one should forget that the current Transport Minister, Paschal Donohoe, has slipped into Bertie Ahern's airline-sensitive Dail fiefdom in Dublin Central. There are the same intense local political pressures on Paschal in his marginal city centre constituency, as were felt by Bertie.

Paschal will be a key figure in deciding which way the Government casts its 25.1pc of votes when judging the merits of the takeover bid.

A key non-commercial ingredient in the minds of ministers when weighing up the bid will include their interpretation of Willie's intentions. Ministers will ask if Willie will agree to continue to allow the Heathrow slots to be used exclusively for Irish traffic or if he wants them for non-Irish IAG routes.

They may even seek assurances from Walsh that he will not reduce the direct flight routes from Ireland to the US. The broader interests of tourism and of foreign investment will be uppermost in the mind of Finance Minister Michael Noonan when he considers the bid. After all, this time, Noonan does not need the money.

Happily, the Finance Minister has a high opinion of Walsh. In 2013 Michael appointed Willie to be chairman of the National Treasury Advisory Board. And then with impeccable timing - just before Christmas 2014 - Willie became chairman of the NTMA, the creme de la creme of Ireland's quangos.

For once it was a good political appointment. Willie had earned his spurs working outside the bubble of Irish insiders.

Just two months earlier, Willie had given an interview to the Irish Independent's John Mulligan, praising the Government's economic performance while simultaneously insisting that he had no designs on Aer Lingus.

That was October 16. By December 18 he had changed his mind and made his move. Totally coincidentally, Noonan announced his ascension to the top job in the NTMA the same day as Aer Lingus revealed the existence - and preliminary rejection - of his €2.20 offer.

Luckily for government ministers, when it comes to their attitude to Walsh's bid they will be able to pick up the phone to the boss of their beloved NTMA and suggest that he (wearing his other hat, of course) look benignly on the airline's needs when he has taken it over at last.

They may even ask him to give the airline favourable terms of operation in return for a sale of their shares.

And if that happens, another shareholder, Michael O'Leary, will be in like a lion, crying "foul".

If Walsh returns home in a commercial guise to be the arms-length boss at Aer Lingus, we could witness a familiar dogfight. The airline duels of the Noughties will be refought. Two men who have matured into the bosses of grown-up companies will re-engage. Unfinished business on home turf is set to be completed. It will be fun.

This weekend, the scenario is looking strikingly predictable. Walsh will make a knock-out bid, probably in the €2.50 to €2.60 range. The board - including its three government nominees - will recommend his offer to the shareholders. A special deal on the slots and the routes will be sought by the Government in the interests of tourism and foreign investment. They will receive a sympathetic ear from Irishman Walsh although the legalities could be challenged. O'Leary will be forced to sell his 29.8pc stake to his old rival.

The unsung businessman who reluctantly left Ireland in 2006, forced to take a much better job overseas because of political opposition at home, will return in triumph.

Willie Walsh is back.

The politically favoured, but immensely able, chairman of Ireland's biggest quango looks destined to absorb the outfit once known as the national airline into his empire.

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