Friday 21 September 2018

Ryanair: Airline Getting Battered

Yesterday was Ryanair's AGM, which I attended on behalf of the ITF. The two major stories ahead of the meeting - sizeable investor unrest focused on the board, and labour relations - have merged into one, with a particular focus on chairman David Bonderman.

On the governance point, investors and some analysts have drawn a link between the lack of independence and challenge on the board and the ability to deal with significant problems in the business effectively. On the labour side, the ITF, ETF and various unions have come to the conclusion that the haphazard nature of negotiations with the company signal a problem with its management and leadership. As such, heading into the AGM the ITF, ETF and others were calling for governance reforms, whilst investors like Aberdeen Standard, Royal London and the Local Authority Pension Fund Forum (LAPFF) raised concerns about labour practices.

As such the AGM was really dominated by discussions of both, with Michael O' Leary speeding much of his time talking about union negotiations, in between defending his chairman (yes, a chief executive defending his chairman, not the other way round).

O' Leary largely struck a conciliatory tone, saying the company was working with unions and hoped to have deals done in most markets by Xmas (which I think a number of unions would find a tad optimistic). He also said that the company was very happy to move to local contracts - rather than employing everyone outside the UK on Irish contracts - which is a rather significant shift from his comments after the ECJ ruling last September.

There were a couple of institutional shareholders there - LAPFF and Aberdeen Standard. The former recommended its members vote against the chair, whilst the latter voted for all directors, but on the understanding that it would vote against the chair and the SID at the next AGM if there had been no board refreshment (as in new directors, not a round of drinks for directors).

LAPFF asked a question about EU261 claims in respect of flights cancelled by strikes. It appears that Ryanair expects to go to court in the UK over this, because it doesn't agree with the CAA. It's worth keeping an eye on given the potential amounts involved.

As for Bonderman, he survived the vote today but must be on his way out. At the AGM the company only showed the % votes for - Bonderman only got 70.5%, and Kyran McLaughlin did even worse with 66.8%. But if you add in abstentions, and strip out Bonderman and O'Leary's own holdings, then the chair only got the support of 65% of non-insider shareholders. Plus we know that some of the investors voting for him have said they want change.

To put that result in context, the average vote in favour of a a director of an Irish company is 97.3% according to Proxy Insight, and the next least popular chair of an ISEQ20 company is Martin Keane at Glanbia - the most shorted stock on the Irish exchange based on public disclosures. Keane saw total oppose + abstentions of 24% at the Glanbia AGM. I can't see how a future vote on Bonderman as chair would not see even greater opposition.

I would be very surprised if there is not a new chairman by the time of the next AGM.

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