17th Sep 2007 10:34
Aer Lingus Group PLC17 September 2007 Board of Aer Lingus rejects Ryanair EGM request The Board of Aer Lingus Group plc has today written to the Directors of RyanairHoldings plc rejecting a second request from Ryanair to convene an EGM, the aimof which is to interfere with and frustrate the commercial and operationalperformance of Ryanair's most resilient competitor. The Board has received strong legal advice that the resolution proposed byRyanair is no different in substance from those previously rejected on the basisthat they would result in an infringement of Irish and EU competition law. Thislatest request is not an isolated act and cannot be treated as separate from theprevious requisition request and from related public statements by Ryanair. "The Board of Aer Lingus will act in accordance with the law and will not danceto the tune of our competitor," said John Sharman, Chairman of Aer Lingus. "We will continue to progress our stated business strategy in the interests ofour shareholders and will not be deflected by the self serving agenda of acompetitor with whom we fight tooth and nail for business every single day. TheBoard's definitive decision is therefore to reject Ryanair's interference andturn down the request to convene an EGM." The full text of the letter rejecting the request is set out below. 17 September 2007 Strictly Private & Confidential Mr Jim Callaghan Company Secretary Ryanair Limited Dublin Airport Co Dublin The Board of Directors Ryanair Holdings plc Dublin Airport Co Dublin BY HAND DELIVERY Re: Requisition of EGM Dear Mr Callaghan, I reply, on behalf of the Board of Aer Lingus, to your letter of 04 September. Your letter of 04 September 2007 requisitioned an Extraordinary General Meetingof Aer Lingus to consider, and if thought fit, pass the resolution set out inthat letter. I refer also to your letter to the Chairman of Aer Lingus of thesame date. Likewise, I refer to the previous correspondence between Aer Lingusand Coinside Limited, another Ryanair company, relating to the ExtraordinaryGeneral Meeting requisitioned by Coinside Limited by letter of 13 August, aswell as the statement to the Stock Exchange on behalf of Ryanair Holdings plc of14 August, Aer Lingus' letter to Coinside of 31 August 2007 refusing to convenethat meeting, Ryanair's letter to Aer Lingus of 31 August 2007 and our reply of03 September, 2007. The Board has now considered and taken advice on the requisition of the 04September, 2007 and decided to reject it. For the reasons set out in our letterto Coinside Limited of 31 August, Aer Lingus is satisfied that the holding ofthe EGM and the consideration of the resolutions as requisitioned by CoinsideLimited would have involved Aer Lingus and Ryanair in an infringement of Irishand EC competition law. It is the Board's view that the resolution which Ryanair now wishes to seeconsidered and passed at an EGM is little different in substance or effect fromthe two resolutions earlier proposed by Coinside and rejected by Aer Lingus. Asyou should be aware, both section 4 of the Competition Act 2002 (the "2002 Act")and Article 81(1) of the EC Treaty prohibit agreements and concerted practicesbetween undertakings which prevent, restrict or distort competition and affectState trade, or trade between Member States, as the case may be. Breach of theseprovisions is a criminal offence in Ireland and may also give rise to civilpenalties. The Board is advised that incitement to commit a criminal offence,attempting or conspiring to do so, or aiding and abetting a criminal offence,are themselves criminal offences. Directors and shareholders are also exposed toliability in respect of such breaches. The effect of your resolution, if passed or implemented, would be that Ryanair,Aer Lingus' principal competitor, will have caused or contributed to Aer Lingusbeing directed to carry out its commercial activities in relation to theHeathrow/Shannon routes in accordance with Ryanair's wishes, and contrary to thepolicy already determined by the Board. Moreover, if Aer Lingus were directed,at the instigation of its principal competitor, to remain on the Heathrow/Shannon routes, that would inevitably affect the ability of Aer Lingus tocommence or maintain other routes, in particular Aer Lingus' proposed Belfastservices. In that latter regard, as you are well aware, the limitation on the number ofslots held by Aer Lingus at Heathrow means that if the Shannon/Heathrow servicesare retained, Aer Lingus' proposed services from Belfast would either have tooperate to a London airport other than Heathrow, or would have to use slotscurrently used by Aer Lingus' services to Heathrow from Dublin or Cork. Theeffect on competition of your proposed resolution is thus highly significant andwide-ranging, quite apart from the fact that an agreement or concerted practiceto maintain the status quo on Aer Lingus' services to Shannon, would itself bean infringement. It is the Board's view that although your proposed resolution is no longeraccompanied by the second resolution proposed in Coinside's letter of 13 August,it follows that the competitive effect is to all intents and purposes the sameand is not therefore "immune" as is suggested in your letter of 04 September.In this regard we refer again to Mr O'Leary's statement of 14 August where hesaid that maintaining the Shannon/Heathrow services "....need not come at theexpense of Belfast, since we believe that Aer Lingus can switch its recentlyannounced 4 times daily Dublin-Gatwick flights to Belfast. Competing fromBelfast to Gatwick against the relatively high fare EasyJet, will certainly bemore profitable for Aer Lingus than competing against the much lower fareRyanair on the Dublin-Gatwick route..... Alternatively Aer Lingus can still flyfour times daily from Belfast to Heathrow by switching one Dublin and one Corkflight and taking back the two Heathrow slots which it presently leases out."These matters plainly impinge significantly on competition between Aer Lingusand Ryanair. The Board takes the view that a discussion of the proposed resolution at an EGMcould not sensibly take place without the risk of disclosing or exchangingcommercially confidential information between competitors. Moreover, in its statement to the Stock Exchange of 14 August, Ryanair hasalready signalled what its intentions would be if Aer Lingus were to maintainits Shannon/Heathrow services, namely that Ryanair would not introduce 3 newflights from Shannon to London that it was otherwise proposing. Such signallingis itself constitutive of a concerted practice if accepted or acted upon by AerLingus. In these circumstances, the Board is advised that the holding of an EGM and theconsideration, passing or implementation of your proposed resolution wouldplainly give rise to an agreement or concerted practice restricting ordistorting competition, contrary to Section 4 of the 2002 Act and Article 81(1)of the EC Treaty. In addition both companies would have signalled their futureintentions, and commercially confidential matters between competitors would havebeen disclosed or discussed, which is unlawful. I am therefore instructed by the Board to inform you that it does not intend toconvene the EGM which you have purported to requisition. Aer Lingus will not bea party to the concertation of activity or to the unlawful disclosure ofcompetitively sensitive information. Aer Lingus will not engage in such illegalconduct, which would expose Aer Lingus and Ryanair and their directors to therisk of both civil and criminal liability. Finally, we completely reject the statements in your letter in relation to AerLingus' interim results. The costs incurred by Aer Lingus in relation to theRyanair bid would have been entirely avoided if Ryanair had not chosen to make ahostile bid for Aer Lingus which was doomed to failure on competition grounds,as confirmed by the decision of the European Commission. Ryanair, by seekingthrough Coinside, and again now directly, to requisition an EGM in clear breachof competition law, continues to cause Aer Lingus to incur significant costs. Yours sincerely, ____________________ LAURENCE GOURLEY Company Secretary ends For further information contact: Irish Media International Media Investors and analysts Padraig McKeon / Sarah Ryan Matthew Fletcher/Victoria Palmer-Moore Mark Kenny/ Jonathan NeilanDrury Communications Powerscourt K Capital Source Tel: +353-1-260 5000 Tel: +44-207 250 1446 Tel: +353-1-631 5500Mob: +353 87 2312632 (PMK) Mob: +44 7796 693066 (MF) Email [email protected] +353 87 676 7452 (SR) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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