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Impact Investing

IPE special report May 2018


Ryanair sale of Aer Lingus stake opens door for resolution of pension impasse

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  • Ryanair sale of Aer Lingus stake opens door for resolution of pension impasse

EUROPE – Ryanair has been ordered to sell its nearly 30% stake in competitor Aer Lingus in a move that would potentially allow the Irish carrier to address underfunding in the Irish Airlines Superannuation Scheme (IASS).

The UK's Competition Commission said Ryanair should be forced to sell its 29.8% stake, reducing it to 5%, after it ruled that the airline "had an incentive to use its influence to weaken Aer Lingus's effectiveness".

The report repeatedly mentioned Aer Lingus's plans to resolve the deficit within the multi-employer IASS and cited comments from the formerly state-owned airline that Ryanair's forced sale of its stake would remove its ability to "litigate for (alleged) disregard of its shareholder rights".

Ryanair said in February last year that would consider a lawsuit if the airline attempted to increase contributions to the IASS.

Aer Lingus has since drawn up an alternative proposal in conjunction with the Labour Court that would see it pay €140m towards a new defined contribution (DC) fund rather than addressing the IASS deficit, a proposal that would still need approval from shareholders at a forthcoming extraordinary general meeting.

In its discussions with the UK regulator, Ryanair insisted Aer Lingus would be unable to continue as an independent airline – a reference to its attempt to acquire the rival – and cited the pensions deficit as one of the reasons it would struggle to operate beyond the next five years.

According to the regulator's report, Aer Lingus countered that Ryanair was regarded as in control of the airline's destiny.

"It told us that, because of the minority shareholding, Aer Lingus was known as a target for a Ryanair takeover rather than a successful and profitable airline," the report said.

"It said Ryanair's presence on its share register was considered by potential investors to be a 'poison pill'."

Ryanair chief executive Michael O'Leary said the Competition Commission's report was "bizarre and manifestly wrong, but also entirely expected".

The airline added that it would appeal the instruction to sell down its shareholding in Aer Lingus.

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