Given that the airline almost specializes and almost seems to pride itself in being obnoxious to passengers who might dare to complain about being stuck in a far-off airport in Eastern Europe due to a cancelled flight (or being left in France over Christmas as some found themselves) its success is all the more remarkable. Passenger numbers were up 23 percent to 22 million, and profits are expected to be just shy of $.5 billion for the year, with the airline flying to a panoply of new destinations, particularly in Eastern Europe, benefiting from the huge growth in demand for seats presented by European Union enlargement through migrant workers flying to and from home, as well as tourists.
An aggressive approach to pricing, providing seats sometimes for free with just taxes to be paid, appears to be matched by dealings with staff who don’t follow the mantras of colorful but brutal chief executive Michael O’Leary. An embarrassing series of court appearances included one when both he and another senior executive faced the threat of imprisonment over a court order that ordered it not to ground a pilot who was a trade union member.
In another taken by the airline which had alleged bullying of staff by union members and wanted to find out who was behind anti-Ryanair Web sites, a judge said the evidence provided by one of the airline’s executives was “baseless and false” and that its plans to charge pilots over $20,000 for the cost of training if they sought to negotiate through a union meant that the airline was the one doing the bullying. Ryanair was probably most peeved not by the embarrassment, but by having to fork out the estimated $1.3 million in costs of everyone in the spurious legal action.
If cordiality and friendliness were the measure of performance on the stock market, then Ryanair would be a basket case, being voted the most-complained about airline in Europe. But with profits rolling in, it remains a darling of the stock market and media and business commentators here who say that caring for profits is what’s important.
At the tender age of 37, the Cork banker-turned-businessman headed the largest-ever takeover of a U.S. firm by an Irish company. Riverdeep’s reverse takeover of U.S. publisher Houghton Mifflin was tied up late last year and was worth just under $5 billion. It gives the educational software company a platform to the lucrative U.S. market, while giving Houghton Mifflin entry into online publishing and educational markets. Much of the success of the deal was down to O’Callaghan himself: his persuasive skills sold the deal to large investors in Dublin who helped provide the cash to make it happen.
The deal involves considerable combined debt of $2.2 billion , but if it works, O’Callaghan, who rolled over his stake in Riverdeep, is reported to be set in line to win to guts of a shareholding of $132 million, meaning he has a bright future even if he does nothing else in his life.
The success of the deal also hinged on the friendship built up between the Cork swashbuckler and Houghton Mifflin chief Tony Lucki, who will become vice chairman to executive chairman O’Callaghan of the new entity, HM Riverdeep.
Two other young Irish businessmen shocked the markets when Michael O’Rourke and Leonard Ryan’s TV broadcasting company Setanta took a chunk of coverage of live English Premiership rights, previously held by Rupert Murdoch’s Sky Sports. Murdoch’s willingness to pay astronomical sums for live coverage, previously the preserve of UK terrestrial broadcasters BBC and ITV, transformed English soccer, with its Premiership players, now the highest paid in the world.
But Setanta showed they could play too, rocking the market with a successful bid to show 46 matches a year for three years, costing $758 million, or over $5 million a game. Setanta intends to recoup its money from subscribers to its cable service as well as from pubs and bars showing its games, and of course, advertising. To fund the deal, it sold its NASN North American sports channel to ESPN and has raised private equity of around $200 million. It’s a long way from the early days of 1990 when the two’s anger at not being able to watch Ireland’s World Cup soccer matches in London prompted them to set up a closed circuit broadcast in the city, then full of Irish emigrants. GAA matches soon followed, with expansion into Scottish and European soccer and the U.S. bringing rapid growth fuelled by the desire of emigrants to watch sports from their home country. But for a relatively small company, their Premiership deal puts Setanta firmly in the big league.
Not a good year for Smart Telecom, whose 45,000 customers were left smarting after they were disconnected without notice when Smart could not pay a rather large phone bill of $5.5 million to the owner of the Republic’s fixed-line network, former State teleoms company, Eircom.
The company aimed to provide cut-price calls to consumers facing some of the highest telecoms charges in Europe in a market dominated by Eircom — itself sold this year by Tony O’Reilly’s Valentia to Australian Babcock and Brown — and now facing increased competition from former British equivalent BT. Eircom is obliged under competition rules to allow competitors access to the telecoms network and infrastructure, but Smart claimed that the Irish telecoms giant hindered it from doing so.
A broadband rollout was the central plank of Smart’s business development plan, but instead proved to be the plank on which it walked over the edge. Only 16,500 subscribers took up the offer out of a projected 50,000 take-up, spelling disaster. Arrangements for customers to transfer to Smart were anything but, meaning they would have to change numbers, while delays, tight margins after bills to Eircom were met and high start-up and advertising costs meant that it would take at least eight months before a broadband subscriber became profitable.
Smart alleged that Eircom had hindered them through “unreasonable delays” in accessing the network but as a competitor too, perhaps it likely it might not want to rush to assist. A High Court action by Smart alleging $60 million in damages from Eircom had to be dropped however, in the face of huge potential costs if it were to lose and with the company reportedly losing $3.8 million a month just to keep going.
Businessman Brendan Murtagh, who owned 20 percent of Smart, rescued it from total ruin, buying the firm for just over a dollar while taking on the liabilities of over $50 million. Original investors and subscribers will be less happy — shareholders lost heavily while fixed-line subscribers lost their service unless they took up the broadband option, which is now the refocused Smart’s core business.
Aer Lingus privatization
While the flotation of Aer Lingus raised cash to enable it to fund its future expansion plans through a bigger fleet and more destinations, it’s hard to see how the privatization can be seen as a success for anyone other than the big investors who were able to buy shares at a cut-price decided on by the government and its advisers.
Launched at $2.80 in September, near the bottom of its price range, they were four times over-subscribed and gobbled up, with Irish banks complaining about their allocation as being too low. Incredibly, noone saw Ryanair coming — with the budget airline, which consistently pillories the national carrier, now owning 25 percent of a company it detests. The government and its merchant bank advisers may have taken a cautious stance mindful of difficulties in the aviation sector and poor response to the Air Berlin flotation earlier in the year, but it also suggests a lack of confidence in what they were selling given that the market’s hunger for the shares suggested they were a bargain.
Ryanair showed what it thought the market was worth just over a week later, with a takeover bid offering
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