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Ireland's airline war deepens as Ryanair demands shareholder meeting with rival Aer Lingus

iht.com

DUBLIN, Ireland: The war of words between Ireland's rival airlines deepened Tuesday as Ryanair demanded that Aer Lingus convene an emergency shareholders meeting.

Ryanair, which has become the biggest Aer Lingus shareholder as it seeks to take over the previously state-owned airline, said Aer Lingus had 21 days to respond.

On Friday, Aer Lingus directors rejected Ryanair's initial request for an extraordinary general meeting. It would be asked to vote on the directors' recent, deeply controversial decision to transfer key air links with London's Heathrow Airport from Ireland's major western airport, Shannon, to a new hub in the British territory of Northern Ireland.

But in a statement, Ryanair said its position as the major shareholder meant that Aer Lingus must respond positively to its new, formal "notice of requisition of an extraordinary general meeting."

Ryanair published the text of its proposed motion seeking a reversal of Aer Lingus' plan to axe services between Shannon and Heathrow, Europe's busiest airport.

The Ryanair motion noted that Aer Lingus' half-year results, published Thursday, reported a drop in pre-tax profits — but ignored the fact its net profits rose.

It calls on Aer Lingus directors "to preserve the company's existing profitable Shannon-Heathrow services and explore the €4 million (US$5.5 million) per annum additional cost reductions recently identified by the Shannon Airport Authority to enhance shareholder returns."

Aer Lingus said it was "noting the content" of Ryanair's message and would "respond if required."

Ryanair chief executive Michael O'Leary said his airline would convene a shareholders meeting itself if Aer Lingus rejected or ignored Tuesday's appeal. He said, under Irish corporate law, Aer Lingus directors would be liable for the meeting's cost.

O'Leary said he was considering booking the most expensive hotel in Dublin and offering shareholders free drinks at the bar, and the cost would be deducted from the income of Aer Lingus directors. "One can but dream," he said.

O'Leary called Aer Lingus' decision to axe a profitable Shannon-Heathrow route "bizarre." He said the smarter course was "to stay on the route and maximize profits."

Ryanair currently owns 29.4 percent of Aer Lingus, which the government floated on the British and Irish stock exchanges 12 months ago. The government retained a 25 percent stake.

Analysts say Ryanair's push for a shareholder vote on the issue is designed to embarrass the government, which would like to preserve the Shannon-Heathrow routes but doesn't want to be seen to be meddling in Aer Lingus affairs.

"We wish they (Aer Lingus directors) didn't make that decision. But that's what they did, and that's a commercial decision whether we like it or not," Prime Minister Bertie Ahern said.

Aer Lingus says it wants to move the use of its strategic Heathrow slots from Shannon to Belfast because the latter is likely to be more profitable.

But the plan, to begin in mid-January, has whipped up anger in western Ireland, which is the scenic centerpiece of Ireland's tourism industry but struggles to attract foreign investment away from Dublin.

Business leaders in the west's two major cities, Galway and Limerick, say the region will lose thousands of jobs if foreign companies cannot keep international connections through Heathrow.

European Union competition chiefs in June rejected Ryanair's takeover terms for Aer Lingus as likely to create an Irish monopoly. The takeover bid was already foundering because both the government and Aer Lingus employee-controlled trusts, holding more than 20 percent of shares, opposed Ryanair.

But the employees are largely opposed to Aer Lingus' plan to cut jobs in Shannon and hire pilots and others under new, non-union contracts in Northern Ireland. Analysts say Ryanair could be trying to demonstrate to individual employees, if not labor union chiefs, that a Ryanair-run Aer Lingus would be more professionally operated. Ryanair refuses to recognize unions.

 Printable Version  | published Sep 05, 2007