Wednesday, August 29, 2007

Shannon To Heathrow And Back Again

Aer Lingus generated a fire storm when it decided to end its run from Shannon to Heathrow and fly out of Belfast instead. What makes fiscal sense for the corporation, however, has yet to be run past the shareholders. And what of the majority shareholders?

There's the government of Ireland, for one, with about a quarter of the shares. They'd be entitled to sound off and represent the wishes of the people. They already stand accused of obfuscation on the issue so that Aer Lingus's stock price wouldn't be made to suffer in the current downturn. The average stock holder doesn't much like governments meddling in corporate affairs, and the stock holding government certainly did not want to be seen as meddling in Aer Lingus's affairs. All the same, there is pressure building for the Irish shares to be voting against the move.

Who else owns a great deal of Aer Lingus stock? None other than Ryanair, with around thirty percent of the rival's stock. Couldn't be allowed to buy out the lot, but Ryanair has enough muscle to do a bit of serious flexing. Doing things like calling extraordinary general meetings and putting forth proposals.

Here's a suggestion, says Ryanair. The decision to eliminate the Shannon to Heathrow route? That's got no legs. Instead, Aer Lingus can scale back on its service to Gatwick, and use the savings there to build up the Belfast hub. Brilliant, is it not? Everyone will be happy, everyone gets what they want, and Ryanair gets a leg up on Aer Lingus.

Ryanair would like to get more business out of their Gatwick to Charleroi and Gatwick to Dublin runs, where Aer Lingus is the competition. How fantastic is that, when you can not own a company outright, but you can get it to do things that benefit your airline? And to make it look like you're doing a good deed for those hard done by in the west of Ireland, that's sweet.

Count on the board of Aer Lingus to point that out, of course, when they explain to their shareholders how wrong Ryanair's suggestions are. After all, Ryanair was not allowed to buy up Aer Lingus because it would decrease competition, and allowing the airline to decrease competition through the back door cannot be allowed to stand.

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