O’Leary using the F-word won’t stop growing EU climate disquiet

WHEN chief executives of multi-billion-euro companies use the ‘F-word’, it usually means something serious is up. When the CEO in question is Ryanair’s Michael O’Leary, it often means very little is up.

Last week, O’Leary let fly after a group of nine EU countries came out supporting an aviation tax aimed at tackling the industry’s emissions. One of the countries backing it is the Netherlands. “The last thing we need is a bunch of f **king Dutch people telling us to pay more taxes,” O’Leary said.

It was succinct and to the point. It was also targeted, given the differences between eastern European EU countries and those in the west on this issue. Why not present it as a rich western plot against cheap travel by those who are rich enough to pay more?

O’Leary is also chairman of the Airlines 4 Europe aviation lobby group. The industry will lobby hard against the EU doing away with tax-exempt aviation fuel. The proposals being discussed would add enormously to the airlines’ fuel bill, which if passed on directly to customers, would see the price of airline fares rising by as much as 30pc.

This would definitely help emissions, as people would take a lot fewer flights.

There may be bad news coming here but O’Leary doesn’t quite need to unleash the F-word yet. New EU transport commissioner Adina-Ioana Valean has already said such a move would restrict mobility in the bloc.

“We don’t need fewer flights; we need to be more efficient and sustainable,” she said last month. She pointed out that a map of Europe shows a huge difference in connectivity between east and west.

During the week, the new EU Commission president, Ursula Von der Leyen, announced details of a radical plan to set the bloc on a road to being carbon-neutral by 2050.

An aviation fuel tax is one of the things to be discussed but it isn’t specifically proposed in her Green Deal document.

The Green Deal does talk about examining the issue, while also making a just transition toward a carbon-neutral economy, which would allocate €100bn of funding toward softening the blow to economies, particularly in the east, that are heavily dependent on fossil fuels. You don’t have to look to eastern Europe to find a fossil fuel dependent economy. The EU has one right here on its western border in Ireland. When it comes to travel, our island status and location should also be factors when talking about the taxation of transport options.

Despite the changing mood music in Europe on climate change and emissions, there is a long political journey before we would see aviation taxes applied across the board in the EU. Poland, Hungary and the Czech Republic don’t like the overall tone and gist of the Green Deal, while lots of other countries, like Ireland, are already hanging on to the protection of taxation policy as a matter for national governments.

The other big factor for Ireland in all of this is our tourism industry. CSO figures published during the week, covering the period from July to September, showed there were just 3,000 more overseas trips to Ireland compared with the same period last year. Holiday and leisure visits actually fell, albeit by a tiny 4,000, to 1.79 million.

The worrying thing for tourism is the suggestion that numbers may have plateaued after several years of enormous growth.

Restaurateurs are blaming higher VAT charges. The figures suggest the UK, America and Canada are largely to blame. For airlines, the picture is a little better because they also get to fly Irish people out of the country to spend money as tourists somewhere else.

Visits by Irish residents overseas shot up by 203,000 to 2.77 million during the period.

But if we are serious about emissions and the climate change agenda, aviation should not get a free ride. The airlines are pointing the emissions finger at shipping and other places. They say they want to see more incentives and initiatives on sustainable fuel alternatives, rather than be forced to pay more tax, which they would inevitably pass on to customers, resulting in fewer flights.

The problem is that so-called sustainable alternatives carry their own environmental consequences, and they remain a tiny part of the industry’s fuel mix.

Ryanair’s share price did dip a little this week, but it has soared from a low of €8.53 in August to around €14, adding nearly €6bn to its market capitalisation in recent months.

Investors who bought in August are sitting on a 64pc gain. O’Leary’s own stake has risen in value by €236m since August.

Kerry must try to secure DuPont prize on its own terms

SPECULATION suggests that the battle for DuPont’s nutrition and biosciences division has come down to a bidding war between Kerry Group and the New York-based International Flavors and Fragrances (IFF).

Shares in DuPont lifted on news that IFF was also in the fray for the $25bn (€22bn) division, which it plans to hive off into a separate company that would merge with the successful bidder. The deal is tempting for Kerry Group, which has done close to 200 smaller acquisitions over the past quartercentury. The nutrition division is the fastestgrowing in the wider DuPont group and it is in the centre of global nutrition trends right now, as it grows in the areas of plant-based nutrition and meat substitution.

Researchers are finding ways of replacing flavours and colours that are artificially produced for more natural ones. Food companies aim to respond to consumers who want to avoid ingredients like sugar.

All these factors play into the hands of ingredients and flavouring providers who want global scale while remaining on trend.

The deal is proposed in a tax-efficient way, which means the DuPont business would be hived off into a separate company and merged with the ‘acquirer’. Shares in this new business would then be allocated to shareholders of both businesses. Once the DuPont shareholders end up owning 51pc of the combined business there are tax benefits.

This is all well and good, but Kerry

Group will want to see precisely how the management and board breakdown of the combined entity would run. IFF has an advantage in that it may be easier to structure this deal for two American firms.

Kerry has the advantage that IFF is still digesting a massive $7bn acquisition of Israeli firm Frutarom Industries last year.

IFF shares slid back just over 6pc in the early part of last week. Kerry stock has fared better. Bidding wars are never easy.

But this entire sector is consolidating, and opportunities to create a $40bn firm don’t come around too often.

Added scale, R&D know-how and a whole new customer base are all tempting for

Kerry. Landing the deal will only be a coup for Kerry if it can make it work on its terms.

The Kerry Group HQ might well shift from Tralee. Is that really important these days? What might it mean for the Kerry Foods business further down the road?

That is not clear. It would also further separate the plc from the co-op in terms of its shareholding in Kerry Group plc. But that is happening anyway with each new share payout to co-op members.

A deal would overshadow CRH and cement the food giant’s place as the largest Irish multinational company ever. The preferred bidder might be announced before the year is out, but reports suggest the deal is so complex it could take a year to complete.