Ryanair boss O’Leary must be asking ‘should I stay or should I go?’
AFTER building and growing Ryanair over the last 24 years, Michael O’Leary is now caught in a classic trap that befalls successful CEOs – when to go. He told journalists after the annual general meeting last Thursday he was “unlikely” to stay running the airline for another five years, when his current five-year deal expires in 2019.
O’Leary has the overwhelming support of the shareholders, with over 98pc of voted shares backing his re-election to the board. This is hardly surprising, given his overall performance in the job and what he has done for the company.
The question is whether he wants to keep going or not. He said during the week:
“I have no idea when I’ll have had enough. I like this company. I like working for this company. I don’t do it for the pay I get. But as long as it remains interesting and fun and challenging, I see no reason not to continue to try to lead it and lead it forward positively.”
But he won’t say for how long and he isn’t signing up for another five years, or even three years but plans to revert to rolling 12 months contracts from next year.
If the airline had not made the decision to recognise trade unions, it might have been a lot easier to pick an exit date. Every chief executive is concerned about their legacy when they go.
If O’Leary announced now that he was leaving in 12 months, because it just wasn’t “fun” anymore, everybody would say, the unions drove him out.
Part of his legacy, despite changing the face of European aviation, might in some quarters be that he could only stick when there were no trade unions.
At the very least O’Leary might want to stick around at least until the relationship with their new ‘stakeholders’ (trade unions) is bedded down. That might involve more strikes as they get to know each other.
“Recognising unions was not one of my best days in Ryanair, but it was inevitable at some point in time”, he told journalists last Thursday.
He also said that further strikes will follow the industrial of this summer. “It is inevitable that there will be some strikes as we learn how to deal with unions and the unions learn how to deal with us,” he said.
Perhaps that lack of familiarity binds him to the company for now. After all, if all of the key industrial relations battles were fought and concluded, O’Leary could exit the job, not only leaving a more stable environment for his successor, but also proving that union recognition wasn’t too bitter a pill to swallow.
The problem of course is that the trade union wars may be only getting started and could keep on coming. Aside from specific grievances that particular groups have, there are bigger structural issues about the location of some employment contracts.
Ryanair clearly is willing to make concessions but it will have red lines around anything that would undermine its low cost model.
This kind of hassle would hardly be described by many chief executives as “fun”.
If it is fun Michael is after, he will have plenty more of it before he finally decides to call it a day.
It’s a little early for celebrations over rural broadband rollout
COMMUNICATIONS minister Denis Naughten is determined to deliver national broadband to rural homes and businesses around the country. He is so determined to complete the National Broadband Plan that he sounded almost celebratory during the week announcing that a final tender document had been submitted by the last remaining bidder.
Unfortunately, his high spirits may be a little premature. Firstly, after six years of working on this particular project the Government has now got a tender document – a bid, nothing more.
Secondly, it turns out the last remaining consortium doesn’t look much like the previous last remaining consortium. Lead participants have been dropping like flies in the last six months.
First there was SSE and it left in July. The State infrastructure fund seemed to step in to plug any gaps in the consortium. That doesn’t appear to be directly involved now. Enet, 78pc-state owned, is now a partner rather than a full equity holder. That leaves Granahan McCourt, a private investment firm.
Other new partners were listed including Nokia and Actavo, the former Siteserv owned by Denis O’Brien.
But these are partners as opposed to equity stakeholders in the plan. Who is putting in money?
It appears that the only shareholders at this juncture are the Granahan McCourt group.
None of this will matter in the end if the National Broadband Plan gets rolled out. But will it? How soon? And what will it cost?
These have all to be worked out. Will there be further changes in the make-up of the consortium along the way?
At the end of the day the State is going to have to stump up for this venture. It always was anyway. Its commerciality is questionable but it is about more than a commercial return. This is a social and economic investment. Just because it will cost the State money, doesn’t mean it isn’t worth doing.
Yet questions about the cost, the subsidy, the rollout and the business plan are valid and need to be asked.
At this point the tender document probably includes financial and cost projections and how the consortium would like the shortfall to be addressed by the State.
Naughten’s department must now evaluate all of those figures and possibly do some horse trading of its own. But this is a very unusual process. Ordinarily, a tender would have more than one bidder and there would be scoring criteria based on deliverability, cost, subsidy, and so on. The highest score would win the tender. How can you conduct such an exercise when there is only one bidder left standing? Ensuring value for money for the taxpayer will be difficult. The harder the bargain driven by the State, the less commercially attractive it will be for the bidder.
If they walk away, the political fallout for the government, and the minister in particular could be significant.
It is definitely a little early for celebrating.
Exchequer missed out on stamp duty millions with low rate
IF there was ever any doubt that Michael Noonan should have hiked commercial property stamp duty back up to 6pc while still finance minister, Green REIT’s results during the week truly nailed it.
In the darkest days of the recession then Noonan slashed stamp duty from 9pc to 2pc in an attempt to get the property market moving. However, it wasn’t brought back up to 6pc until Paschal Donohoe’s budget last October.
This came after billions of euro worth of commercial property deals were done and values had shot up.
Green REIT announced an 11pc increase in after-tax profits to €144m during the week. It reduced its net asset value by €59m after the Budget last year but still reported an 8pc increase in NAV for the financial year despite the stamp duty hit.
Chief executive Pat Gunne said: “The past 12 months has been great for us on all fronts ... the Irish property market remains well supported by our growth economy, our expanding employment base and a diverse international investor set which continues to find our market attractive, underpinning our positive outlook.”
The minister was aiming to bring in an extra €375m in stamp duty this year from the move.
Based on big transactions in 2016 and 2017, the State could have raked in about €600m extra from stamp duty if Noonan had moved sooner.