Sun, Oct 22, 2006 - Page 11 News List

Ryanair chief eyes cuts at `bloated' Aer Lingus


Ryanair chief Michael O'Leary said on Friday he would cut jobs at rival airline Aer Lingus if the budget carrier's takeover bid succeeds.

O'Leary spoke as Ryanair Holdings PLC presented advance details of its formal takeover offer for Aer Lingus Group PLC, the formerly state-controlled airline that was floated on the British and Irish stock exchanges on Sept. 27.

In a surprise move, Ryanair quickly acquired 19.2 percent of the shares and offered 2.80 euros (US$3.55) for the rest -- a 27 percent premium over the IPO price -- in a hostile takeover bid unveiled Oct. 5. Europe's no-frills leader planned to publish its formal plans tomorrow morning.

But O'Leary offered details of the sales pitch at a Dublin news conference that contained equal measures of carrot and stick.

He criticized Aer Lingus' current 3,300-strong staff as bloated, particularly in its clerical and catering divisions. He said Aer Lingus employed 600 people in clerical positions, Ryanair just 40, and wondered why Aer Lingus employed caterers at all when it largely "buys in sandwiches like Ryanair."

"There is no doubt in my mind there would be significant job losses at Aer Lingus if Ryanair's bid succeeds," O'Leary said.

He also conceded that Ryanair's bid could hinge on whether the Aer Lingus employees' own share-ownership trust decides to back the bid.

The Employee Share Ownership Trust, or ESOT, owns more than 11 percent of shares but has declined to take a stand pending the publication of Ryanair's official takeover plan.

The government, an Aer Lingus pilots pension fund and Irish telecoms tycoon Denis O'Brien -- which together control about 33 percent of shares -- have already declared their opposition.

Takeover threshold

"If the ESOT rejects this offer, we're unlikely to get 50.1 percent," O'Leary said, referring to the threshold required for a successful takeover.

But he argued that Aer Lingus employees would be foolish not to take the offer because they would receive profits exceeding 60,000 euros (US$75,000) per employee. These profits would be tax-free, he said, if beneficiaries chose to put their money directly into Ryanair shares.

He said that, with the exception of catering and clerical positions, Aer Lingus employees could be confident that accepting Ryanair's bid would safeguard their jobs.

"A lot of you are not in danger of losing your jobs," O'Leary said, arguing that Ryanair's cut-throat strategies for expanding its routes and filling seats meant "Aer Lingus will actually grow."

He warned that Aer Lingus shares were likely to fall substantially if Ryanair's bid failed. They closed Friday down 0.7 percent at 2.86 euros (US$3.64).

The shares have remained above Ryanair's 2.80 euro offer for the past two weeks, blocking Ryanair hopes of building its stake. Takeover laws prevent Ryanair from buying Aer Lingus shares above its offer price.

O'Leary painted a bleak future for Aer Lingus if it didn't join forces with Ryanair. He said it would grow "increasingly irrelevant," and would "continue to lurch from crisis to crisis."

He said that it would be "dominated by government and trade union interests, which unfortunately means more strikes and stoppages and bad working practices."

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