That resilience proved to be a particularly useful attribute in the 1980s as Tony lurched from one apparently quixotic venture to another. One such project was the purchase of the Old Schoolhouse in Dunquin, on the Dingle Peninsula. In fact, the ‘old’ house was no such thing. Built of concrete and faced with stone for an authentic look, it had been part of the film set for Ryan’s Daughter. ‘Tony was down there on a beautiful, clear sunny day,’ Denis O’Brien remembers, ‘and he had a couple of jars, saw it and said, “Now wouldn’t it be great to buy that.” He never used it afterwards— never went near the place—but he just liked it!’ Declan Ryan recalls that the auctioneer had told his father that it was the most westerly property in Europe, ‘so he used to console himself with that for having wasted his money on it.’ Years later Tony would consider establishing a writers colony to ‘initiate a bard culture’, but the plans fell through for lack of interest.
Another project was an attempt to apply to build a high-powered European satellite in conjunction with the state-run RTE and Telecom Éireann. The Government, afraid that the investment was too risky, ended up blocking the move. In fact the company that eventually won the licence, Astra, would lead the way in the communications revolution that followed, not least as the main provider for Sky Broadcasting.
Closer to home was the purchase of his own pub, The Pike Inn at Birdhill, Co. Tipperary. On one level the initiative could hardly have been more personal. ‘The GPA crowd would drink in Durty Nelly’s [in Bunratty] after work,’ recalls Gerry Power, who started in the company in 1985, ‘but then from Nelly’s to home was too long a drive, whereas from Birdhill it was, like, fifteen minutes. So Tony wanted to have a pub closer to home.’
The Pike Inn was in a terrible state, so John Meagher was asked to restore it. Denis O’Brien, who managed the project, estimates that about £750,000 was put into the renovation of what was ridd Matt the Thresher. ‘I couldn’t believe that,’ O’Brien laughs. ‘I just thought, Holy feck—that much into a pub!’ But he later came to see that Tony’s gastropub concept was ahead of its time. Gerry Power agrees. ‘His idea was to establish Matt the Thresher and then recreate the formula around the world. Nowadays there isn’t a capital city anywhere without an Irish pub, but he was at the forefront of branding that idea.’
Tony would eventually sell the pub in 1987. He had told Meagher when they looked at the original Pike Inn that he wanted to buy the place because ‘one of my ambitions in life is to get a free pint and a free newspaper.’ The Sunday Tribune and Matt the Thresher had provided him with scoops of different kinds, but neither had turned out even to be cheap, let alone free.
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Friends were amazed at how sanguine Tony was about the disappointments he had endured away from aviation. Owning the Sunday Tribune had brought Tony the kind of press attention that was hellish to endure for such a private man. His consolation was that elsewhere, in the business press, he was beginning to receive the kind of international attention that profiled his achievements in aircraft leasing rather than dust-ups with Vincent Browne. The former subject may have garnered less gossip in the Horseshoe Bar at the Shelbourne Hotel, but in the wider scheme of things it mattered more.
That was certainly the case with a profile that appeared in December 1983 in the prestigious financial magazine Fortune. In many ways the tone of the feature, both admiring and perplexed, was typical of the international reaction to this entrepreneurial success story from Ireland. ‘GPA has come from nowhere in 1975 to earn $8.7 million on assets of $100 million in [this] fiscal year,’ it reported. ‘Those returns—world class by the standards of the highly-leveraged leasing industry—flow into GPA’s improbably provincial home base at Shannon Airport in the west of Ireland.’ The implication was clear enough: How had Tony Ryan built a multi-million-dollar business, making himself a reported personal fortune of more than $7 million, from a place that was ‘remote and not particularly well connected to the world by airlines or even telephones’?
Tony himself provided readers with the answer.
I don’t want to sound arrogant, but we’ve learned the market very well. We’ve never been wrong in valuing an aircraft. As I have a large equity in the company, it concentrates the mind that you have to get it right. An error could be a very painful experience.
No wonder, then, concluded Fortune, that ‘in the increasingly free market for air travel, many airlines are likely to specialise in marketing what they know best—schedules and service—and leave their hardware problems to specialists like GPA.’ And to Tony Ryan, the man they christened ‘the airlines’ golden middleman’.
Profiles in magazines such as Fortune helped facilitate Tony’s vision of expanding GPA’s international reach. His objective was to grow profits by 35 per cent a year for the next five years. To meet that target required a major push into the American market. The United States was home to almost half the world’s airlines. If Tony could make serious inroads into that market, he knew he would achieve his goal not only of making GPA the biggest leasing company in the world but also of transforming how the airline industry conducted its business. ‘Forty years ago’, he mused, ‘it was incongruous for a shopkeeper not to own his own shop. Nowadays, retailing and real estate are thought of as separate businesses.’ His aim was to make the same true for airlines in their relationship to jet planes.
Civil aviation was going through a period of radical change by the mid-1980s. Deregulation in the United States had increased the demand for aircraft, and new ‘anti-noise’ legislation was making older planes obsolete. With many airlines reluctant to commit money to buying aircraft, the level of leasing shot up even among prestige carriers. By the end of the decade, for example, British Airways would be leasing a third of its planes. These figures implied rich pickings for companies like GPA, which suddenly found their services greatly in demand. Indeed, the problem increasingly became not demand but supply, and the capital to finance it.
By the time of the Fortune profile there had already been one false but not unhelpful dawn for GPA in breaking into the important American market. When the airline Braniff had entered bankruptcy proceedings in 1982, the company’s secured creditors enlisted GPA to carry out a technical evaluation on the entire fleet. It was a plum role, not least because an appointment in such a high-profile case attracted publicity for GPA and reinforced its reputation as a trusted judge of value in the market. ‘We interviewed a number of people,’ remarked one of Braniff’s lenders, ‘but GPA brought the broadest experience to the problem we had to solve.’
Tantalisingly, there was also the prospect of further advantage: if Braniff was unable to reorganise to the satisfaction of the courts and the creditors, GPA would be asked to dispose of the entire Braniff fleet, bringing in a potentially huge commission on more than sixty aircraft. In the end, Braniff managed to offload a third of its fleet to another airline, which was enough to finance a restructuring. GPA missed out on the ultimate prize, but it did get a hefty fee, along with a raised profile and reputation in that all-important American market.
It was no coincidence that GPA’s first major American deal followed shortly afterwards. In 1983, taking advantage of airline deregulation, America West Airlines raised $19 million in a public offering to finance a ‘no frills’ service operating out of Phoenix, Arizona. The time-scale for America West was incredibly tight, with a planned launch within months. The message to GPA was simple: get us seven 737-200 aircraft by the launch date and you’ve got yourself a relationship. There followed a period of frenetic negotiating and scrambling around to acquire an additional four aircraft to supplement the three that GPA already had to hand.
On 1 August 1983 America West made its first flight into Phoenix, where hundreds of local residents were waiting under a giant banner proclaiming Welcome to the Valley! GPA had delivered for the airline. ‘They’re very creative people,’ judged an approving America West investor. In return it was clear to Tony that America West was GPA’s ‘most signific
ant new customer’. In the coming financial year alone the airline would contribute 9 per cent of GPA’s annual profits, with further expansion to come. What was particularly gratifying was that a successful entry into the American market had been based on good judgement more than luck.
After airline deregulation, Tony had taken the decision in 1982 to set up an American subsidiary. This made GPA geographically better placed to capture new business with the low-cost American airlines that were expected to proliferate within the new deregulated market. Graham Boyd was sent to New York to set up an office, before an eventual move in 1983 to Stamford, Connecticut, the upmarket home of many Fortune 500 companies. In effect the role of the company, named GPA Corporation, was to hustle for business and facilitate deals in the United States. Contracts were always signed in tax-free Shannon, meaning that GPA Corp. got taxed only on its finder’s fee. Such was the success of GPA Corp. that it would soon be going head-to-head in the United States with Steve Udvar-Házy and International Lease Finance Corporation, the California aircraft-leasing company that was GPA’s only major rival.
The deals with America West, and those over Braniff, raised GPA’s visibility in the United States, which in turn helped the company attract American investors. GPA was by now a dynamic force in the industry, but in many ways it remained a ‘boutique’ operation. Tony wanted GPA to take advantage of the deregulation dogfight by upping its 3 per cent of global aircraft inventory to 5 per cent. To achieve this, GPA would need to find a bolder strategy, matched by an equity base of about $200 million. ‘GPA is good at “putting out fires”,’ urged Juan O’Callahan of TAI, the company’s research arm, but it risked ‘losing out’ in times that were ‘interesting (perhaps dangerous)’. The strategy was perilous but offered the potential for vast reward: a stake in a global market projected at an annual $13 billion for as far as anyone could see.
To expand and meet Tony’s objective to make GPA the biggest leasing company in the world required considerable capital and investment. The breakthrough came when Tony gained an introduction to the influential Australian investment banker James Wolfensohn. Although Wolfensohn was temperamentally a different kind of character from Tony, the two men had a similarity in age and background, as well as a cultural affinity based on the historical ties between their two countries. Wolfensohn, however— whatever his outsider origins as an Australian—was the ultimate insider in New York financial circles. He had recently been a candidate for president of the World Bank and would later assume that role in 1995. In the early 1980s his investment firm, James D. Wolfensohn Inc., was among the most prestigious in the world. When he took a look at GPA he liked its potential and agreed to present the company to American Express and General Electric Capital Corporation for potential investment.
Tony was exultant, particularly at the prospect of going into business with GECC, the investment arm of one of America’s most famous businesses. As Maurice Foley noted, ‘if you look for a US financial institution that’s interested in aviation and that’s not a bank you come very rapidly to GECC.’ Indeed GECC was one of the biggest players in the aviation industry, with its CF6 family of engines in the 1980s powering wide-body aircraft that included the Boeing 747 and 767, the Airbus A300, A310 and A330, and the McDonnell Douglas MD-11. Investment by General Electric in GPA would represent a massive breakthrough for the Irish company in terms of prestige, access to capital and the continuing expansion of its North American base. In addition it would bring Tony into contact with Jack Welch, General Electric’s already legendary CEO. The two men, a year apart in age, would get along well in person, although eventually the relationship would end in tears and public humiliation for Tony.
Negotiations with GE proceeded throughout early 1983, with Wolfensohn brokering the deal. The objective was to facilitate GPA’s expansion into the American market, ‘where airline deregulation has greatly increased opportunities’. In April, GECC agreed in principle to buy an equity interest of just over 22 per cent in GPA for a total consideration of $18 million. Tony’s personal 10 per cent holding in GPA remained undiluted. ‘The agreement to come on board reached by GECC this week,’ Tony enthused to Wolfensohn, ‘represents one of the most significant milestones in GPA’s history.’ As he wrote in his next annual report, the investment not only ‘significantly enhanced the strength of the balance sheet’ but also ensured that GPA could ‘take advantage of trading opportunities without the need to have bank financing in place in advance.’ In other words, Tony could let his GPA dogs off the leash.
‘Without any question,’ Tony wrote afterwards to Welch, ‘the single most significant development for GPA since its formation in 1975 was the investment made by GECC in 1983. While the GECC shareholding equalled that of the other corporate shareholders, the size and financial muscle of GECC clearly [surpasses] their combined total strength.’ GPA, Tony believed, had ‘at last obtained a near-perfect shareholder mix in terms of motivation, interest, financial capacity and nationality.’
Alas for Tony, that turned out not to be the case. The relationship with GECC quickly soured. In part this was a clash of cultures—not national but of size. GECC was a big corporation within a giant one. It had little history of owning minority stakes in other companies: GE as a group rarely bothered with businesses it didn’t control. In fact it made no secret of the fact that the initial investment in GPA was just the beginning of its commitment, which most analysts presumed would lead to a friendly takeover.
A significant aspect of the GECC deal was that an initial public offering (IPO) was expected for shares in GPA either in London or in New York. With a new investor of the quality of GE on board, and with GPA providing (to quote Fortune) ‘world class’ returns, the timing could hardly have seemed more propitious. ‘We all believe a successful flotation to be in the best interests of the company and the shareholders, including GECC,’ Tony told Wolfensohn. The information memorandum that was prepared for the GECC deal stated explicitly that ‘the company and certain or all of its shareholders intend to make an initial public offering of the shares of the company as soon as possible after the current offering.’
The GECC deal was approved by the GPA board on 23 May. A date in a month’s time was set for the IPO, and a prospectus was prepared. Then it was delayed until September. The GECC deal still went ahead on 19 August 1983. Shortly afterwards the IPO was postponed indefinitely.
It is hard to know exactly what game Tony was playing. Having been so gung-ho about the IPO when he had GECC on the hook, his rapid about-turn once he had reeled them in is difficult to explain. Initially Tony had given the GECC executive vice-president, Gary Wendt, the impression that they were in it together, as Jim King recalls.
I’ll always remember the day that the GECC involvement was agreed, with Tony and Gary down on their knees, with their backsides up in the air, drawing up structures and all the rest of it on the floor in Kilboy … When we were finished we walked down to the pub in the village and had a few pints. That was how the agreement took place.
However, Tony now fell back on the excuse he often used when backtracking on a given issue: operational difficulties. Simply put, he told Wendt, an IPO would get in the way of everyday trading. ‘Our commercial development has been less than it should have been,’ he explained, blaming the complexities of negotiating a private offering to GECC and a potential IPO at the same time. That inevitably had ‘serious implications for the normal operations of the company’ and was something that GPA must consider ‘in reviewing future plans for a public issue’.
There was no question that the previous few months had been technically difficult, but more important to Tony and GPA was the sudden unpleasant realisation that GECC was picking up the company on the cheap. The $18 million that GECC had paid for its 22.7 per cent stake in GPA implied a valuation for the company of about $80 million, or nine times its previous year’s earning. Tony and his senior executives believed that the company was worth considerably more. ‘GECC got a private pla
cement discount,’ Maurice Foley noted. ‘For now we’ll invest our new equity and turn this company into an even stronger vehicle.’
That approach might have worked for Tony, but it was never a situation that was going to suit GECC for long. ‘The General Electric System relies on intense management involvement’, wrote Wendt, ‘and finds itself frustrated when its expectations are not met or its influence unimportant.’ Exactly a year after GECC bought a stake in the company, Wendt told Tony of his ‘desire that GECC have as great an involvement with GPA as possible.’ Seven months later he announced that GECC was pulling out of the company.
The blow, when it came, was unexpected. At a GPA board meeting in London on 29 March 1985, Wendt casually announced, under ‘any other business’, that GECC would be selling its stake in GPA. It was the kind of ruthlessness that would later see Wendt engulfed by a notoriety that went well beyond the business pages of the national media. The announcement was ‘shattering’ for Tony. His first reaction was one of fury at the manner of the announcement. ‘I should have been told privately in advance of GECC’s position on such a vital subject,’ he wrote angrily to Wendt afterwards. ‘I can envisage nothing more likely to erode the confidence or progress of a company than such a precipitous action by a major shareholder.’
Along with his official letter as CEO, Tony also included a private note scolding Wendt. Only weeks earlier Tony had agreed a new deal to become chairman of GPA (with executive powers), with a further $10 million investment. ‘Had the GECC position been advised to me in time, I would not have agreed to enter into the new agreement,’ he complained, adding menacingly, ‘I believe I have been the subject of misrepresentation.’
That threat was too much for Wendt, who fired back angrily ‘to express concern over the tone’ of the official letter and the personal note. ‘GECC reached its position after careful consideration of the factors surrounding GPA and expressed this position to its fellow shareholders as soon as practicable,’ he countered. ‘Innuendos that we are acting unethically and in a manner which is detrimental to the other shareholders are uncalled for given the circumstances.’
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