Working out the sums at Aer Lingus; the allure of Air India; Centrica’s Irish link; Seán FitzPatrick, property bubble victim

Takeover cost divides airlines

A RECENT claim by Aer Lingus chief executive Christoph Mueller that the recovery in its share price might make it too expensive for Ryanair, its largest shareholder, to make another bid has left Michael O’Leary a little bemused.

“We have become too expensive for them,” Mueller told Aviation Week in a recent interview.

O’Leary scoffed at this suggestion when I spoke to him last Friday, especially as Aer Lingus’s shares are currently trading at around €1.02. “Our previous offer was €1.40 [a share] and the first one was €2.80. I don’t know whether he has a problem with history or a problem with maths but they have a problem somewhere.”

Will Ryanair bid again? “I wouldn’t rule it out and I wouldn’t rule it in,” he said in a nod towards stock exchange rules.

But O’Leary “won’t sell”. That’s not to say that one of the big European flag carriers – Air France, Lufthansa or British Airways – couldn’t take majority ownership and assume management control at Aer Lingus.

“They are going to have to deal with us and dealing with us is not going to be pretty,” O’Leary said in reply.

Ryanair has written off about €400 million of its investment in Aer Lingus, which O’Leary describes as “chump change”.

He is adamant Ryanair has a “very strong vision for Aer Lingus. Ryanair has made two offers for Aer Lingus in the last couple of years, both of which offered to double the fleet, double the jobs, and double the traffic. What’s the new visionary strategy for Aer Lingus? Get smaller, increase the fares and sell ourselves to somebody else.”

O’Leary also gave an insight into how Ryanair’s audacious first bid came about in 2006. “The first time around we bought about 20 per cent in the grey market before it was listed. [But] we were never going to get it through.

“We surprised the Government, we surprised the board of Aer Lingus, and we surprised all their high-paid advisers. Why was it nobody saw what was to me the most obvious thing in the world – that if Aer Lingus was floated then we would buy it?”

And how much did the bids cost Ryanair in adviser fees? “I don’t think we spent €1 million between the two bids but then we’re a low-cost airline.”

Aer Lingus spent €24 million on the first bid alone.

“Maybe if we’d spent more on the bids we might have got it [through],” he mused. Not likely, Michael.

Centrica speculation sparks interest   

THERE HAVE been reports that British Gas owner Centrica has been investigating the Irish market, something that would be a boost for consumers and could even be read as an endorsement of Government policy in this area, which has taken a bit of a hammering of late.

It owns British Gas, and in common with most European utilities it supplies both gas and electricity to its customers, and also has a profitable home services business (installing and maintaining boilers, insulation etc).

Centrica’s businesses have not been going at all badly. In the first six months of this year, operating profits were up 65 per cent at €1.84 billion. Britain and the US account for the larger part of its activities, and the company has been saying it intends to focus on growing in those territories.

A spokesman would not comment on whether or not it had been running the rule over the Irish market, but it has reportedly gone as far as sending some staff over the water for a spot of reconnaissance.

Whether or not that leads to Centrica establishing a beachhead here remains to be seen. If the group were to do so, it would need to either buy an existing player or build power-generating assets of its own, but there is no indication it intends doing either just yet.

DAA bid for Indian contract up in the air

DUBLIN AIRPORT Authority boss Declan Collier braved the monsoon in New Delhi earlier this week in a bid to try to sign up Air India as a customer for the new Terminal 2 building, which opens in November.

Air India puts five aircraft a day through Frankfurt airport en route to the US and the airport authority is trying to win a multi-year contract for this business, which is out to tender.

Collier led a small delegation to New Delhi this week, with local media being told that Air India could save €14 million a year on passenger charges by using T2.

The US customs and border protection facility in T2 is a key selling point for the authority. It would allow Air India’s passengers to arrive into the US as domestic passengers, thereby avoiding the lengthy immigration queues.

It would also yield Air India a seven-figure cost saving annually.

The visit is believed to have gone well, but the Indians are keeping their cards close to their chest. Dublin is reported to be up against airports in Birmingham, Madrid and elsewhere for the contract.

Collier would no doubt like to have the contract in the bag to announce around the opening of T2 in two months. If nothing else, it would deflect some negativity that is likely to emanate from Ryanair HQ at that time.

The timing is up in the air, so to speak. The only indication is a decision will be made before the year end.

Bricks and mortar prove just as tricky as managing money

THAT THE people in charge of our banks during the boom were not experts in their field is a given but there was further evidence this week that they were also less than astute investors.

Earlier in the year, it emerged that former AIB chairman Dermot Gleeson was involved with partnerships that made two substantial investments at the height of the boom – including the €20 million purchase of a building on Dublin’s Dawson Street that houses Carluccio’s restaurant.

Now we have the news that the former chairman of Anglo, Seán FitzPatrick, would have a monthly after-tax income of €3,693 from an annuity but for the losses on three relatively modest properties he rents out.

He gets rent of €4,325 per month from the apartments in Smithfield and Killiney, Dublin, and a house in Bray, Co Wicklow, but the costs are €7,830. Maybe the figures will come as a comfort to the many who got burned in the bubble FitzPatrick did so much to create.