CEO of Ireland's Aer Lingus airline resigns

[April 06, 2009]  DUBLIN (AP) -- Aer Lingus chief executive Dermot Mannion resigned Monday, saying the Irish airline needs a new leader to compete with its bitter rival Ryanair and return to profit.

Aer Lingus chairman Colm Barrington has taken charge temporarily while the Dublin-based airline seeks a long-term successor. Two likely candidates are deputy chief executive Niall Walsh and chief financial officer Sean Coyle, a former executive at Ryanair.

Under Mannion's 3 1/2-year leadership, the formerly state-owned Aer Lingus became a publicly traded company, resisted two Ryanair takeover bids, and battled labor unions as it slashed its own operating costs.

But Mannion leaves at a time when Aer Lingus is hemorrhaging cash and appears to be losing its toe-to-toe fight on European routes with the continent's No. 1 budget carrier, Dublin-based Ryanair. Aer Lingus surprised analysts last month by dropping its previous forecasts of a return to profit in 2009, citing the sharper-than-expected bite of Ireland's recession, while Ryanair has raised its own already rosier outlook.

"My decision to step down will allow a new CEO to bring fresh thinking and new ideas to the business," Mannion said, adding that he had been privileged "to have led the company through a period of profound change."

Aer Lingus shares jumped 4.5 percent to euro0.70 ($0.95) as trading opened on the Irish Stock Exchange.

Aer Lingus floated on the British and Irish stock markets in September 2006, barely a year after Mannion took control, at a then-conservative price of euro2.20 per share. Mannion launched ambitious plans to use the hundreds of millions in cash generated from that privatization to prune Aer Lingus' union-controlled work force and buy new Airbus aircraft, which it used to expand both its short-haul European network and its trans-Atlantic routes.

But life as a private company has meant constant conflict with Aer Lingus' neighbor, Ryanair, which stunned Mannion and other Aer Lingus executives by immediately building a major stake.

While Ryanair has become the biggest Aer Lingus shareholder with a 30 percent holding, its ambitions have been thwarted chiefly because the other two major investors -- the Irish government with 25 percent and Aer Lingus employee-controlled trusts with 15 percent more -- oppose Ryanair.

But Aer Lingus in many ways has had to ape Ryanair's no-frills model to compete. While it still offers a more comfortable service -- by providing passengers seat assignments and luggage transfers, for example -- Aer Lingus has adopted Ryanair's policies of charging extra for myriad items, including checked luggage, and bulldozed its frequent-flyer benefits.

Mannion infuriated the Irish government with a January 2008 decision to withdraw Aer Lingus services from Shannon, the major airport in western Ireland, in favor of a new hub in the British territory of Northern Ireland. Mannion said Belfast would be more profitable, but those predictions have failed to pan out. Aer Lingus restored some Shannon services after a 14-month break.

[Associated Press; By SHAWN POGATCHNIK]

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