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Aer Lingus Reaches For A Star

Posted on: August 5th, 2008 1 Comment

HAS the board of Aer Lingus gone walkabout?

The wobbly old airline, just out of the warm womb of public ownership, carrying baggage galore, has betrayed its semi-state ancestors. Burdened by a bombed-out share price, struggling with soaring fuel costs and rooted in a crumbling island economy, Aer Lingus faces a grim future. Worst of all, its steadfast chairman, John Sharman, is perched in the departure lounge, quitting at a time of crisis for the airline industry.

In the old semi-state days, the vacancy for the position would have been easy to write: Wanted: a safe pair of hands to steer Aer Lingus through turbulent times. The successful applicant will preferably be a Fianna Fail supporter; a social partnership junkie will have a distinct edge; must be ‘flexible’ about the need for profit. The ideal candidate’s business flair will have been dulled by experience in the state sector or by membership of Ireland’s golden circle of directors. Sharman bucked this trend.

In today’s brave new world, there are plenty of safe options for John’s job . Most are dull as ditch water. The Aer Lingus board could opt for ex-CRH boss Liam O’Mahony, solid as a rock of cement. They could recruit cautious old accountant Ron Bolger; the safest of all bankers Pat Molloy; current Aer Lingus board member Sean Fitzpatrick; David Dilger, once of IBEC and Greencore; the lost leader at Irish Life, David Went; or even One Fifty One’s Philip Lynch. The Aer Lingus board is spoiled for safe choices. None of them would cause as much as a ripple of controversy.

And what has the board done? At a time of crisis they have turned to the most adventurous Irish businessman of his generation. A maverick is about to take the chair.

Aer Lingus has sent for Dermot Desmond. A stroke of genius — or a sign of desperation?

Such bold moves are not part of the Aer Lingus culture. The troubled company was for decades a fortress of stagnation, a prisoner of restrictive work practices, a union-dominated enclave invariably guided by the semi-state ‘safety first’ principle. God knows, if the directors continue on this road, they will soon be preaching the gospel of competition.

A super-successful entrepreneur, a billionaire, a restless businessman who knows more about the industry than most Aer Lingus directors, is poised to take on a bundle of trouble. The board’s choice of Dermot Desmond is inspired. It shows shocking imagination. Fasten your seat belts. This is going to be fun.

Michael O’Leary had better look to his laurels.

Suddenly, the thought of Dermot in charge of Aer Lingus heralds untold excitement.

The airline has nearly €1bn in cash; Dermot’s instincts will not leave it idle for 20 minutes. The aviation industry is a cauldron for cannibals; Dermot has guzzled with the best of them. The airline is still cursed with a legacy of militants in the workforce; Dermot is as likely to be sympathetic to the boys with the beards as is Michael O’Leary.

Desmond has a magic touch in the airport sector. His purchase of London City Airport for stg£23.5m in 1995, its dynamic expansion under his stewardship and its subsequent sale is a textbook study not only in timing, but in how to develop a business.

He bought the airport for half of nothing and sold it for stg£750m. More importantly, Dermot showed that he was not just a dealer; he understood the air business.

Aer Lingus is back in play. It could shortly go on the acquisition trail. Or, it could go on the block. Dermot could be at war with Michael O’Leary. Or the duo could be allies, making common cause against the Dublin Airport Authority’s Third-World slum at Dublin Airport. Michael could be the monkey on Dermot’s back, or they could fight shoulder to shoulder. Expect action in the industry.

Perhaps, only perhaps, it is a ‘buy’ signal for the shares?

If Dermot accepts the post, Irish aviation will be energised.

Dermot’s return to the centre of the stage in Ireland will be the climax of a remarkable month for Irish airline heroes based abroad. His success at London City is just one of many spectacular hits for the Irish in the overseas aviation world. At home, last week Ryanair’s bad results were a rare black spot for one of our proudest global ambassadors; but overseas, individual Irishmen — like Dermot — scored heavily. In Australia, the little known Dubliner Alan Joyce landed the top spot at Qantas. Joyce is from Tallaght, but left Aer Lingus for Australia in 1996. His current conquest, Qantas, is one of the biggest airlines in the world.

In 2005, Alan turned down an offer to head up Aer Lingus as successor to last week’s real star of world aviation, yet another Irishman — bearing the familiar name of Willie Walsh.

Like Alan, Willie Walsh turned his back on Aer Lingus. What a loss. Willie was driven mad by the straitjacket imposed on Aer Lingus by the Irish Government. Not surprisingly, the top brass at BA came calling at Willie’s door with big bucks. BA showed him its cheque book and Willie headed to London.

Begrudgers and lefties suggested that Willie would meet his comeuppance, moving skywards from a minnow to a giant. They were disappointed. Willie is today negotiating one of the biggest mergers in aviation history. BA, with a market cap of €3.6bn, is deep in ‘merger’ talks with Spain’s Iberia (€1.6bn).

Within a few months, Willie is likely to be heading up the second biggest airline in Europe. Combined, BA and Iberia will make pre-tax profits of €1.2bn and own a fleet of nearly 450 airplanes. They will dwarf Ryanair.

Only a few months ago, Willie’s stock wobbled when BA’s plans for London’s Terminal 5 ended in fiasco. There were barely concealed cheers from the same band of malcontents whom he had offended in Ireland. They awaited his resignation with glee.

But Willie won the admiration of the UK’s business world when he went up front, took the flak and admitted responsibility. No wonder he could not stay in Ireland. Back home, chief executives like Maurice Pratt, who blunder badly, blame the weather.

Aer Lingus’ current chief executive, Dermot Mannion, similarly made a great success of Emirate airlines before returning home to succeed Walsh.

We have already lost too many talented home-grown dynamos to overseas airlines. Desmond, Joyce, Mannion and now Walsh have proved their mettle abroad. Joyce and Walsh took a look at Aer Lingus and left in horror. Let us pray Dermot Desmond does not do the same.

The board of Aer Lingus is far from bonkers. The decision to invite Dermot to take the chair shows that it is in the throes of creating an oasis of sanity in a former lunatic asylum.