Tony Ryan

by Richard Aldous

  Tony had little choice but to hand over details of his personal assets, and it was revealing of his worth and lifestyle. His net salary was $200,000, with further fees of $100,000. His dividend income the previous year from GPA was $5.6 million. Interest on his deposit accounts generated a further million, all of which came to an annual personal income of $6.9 million. His expenditure was estimated at $150,000 a month, totalling $1.8 million per annum. Interest paid on bank loans totalled $1.5 million. Taken together, his incomings and outgoings left a discretionary surplus of $3.6 million. Post-IPO assets included properties in Spain and Mexico each worth $1 million. His art and antiques collections were valued at $10 million. He held $25 million in bank accounts and cash. GPA shares, which would turn out to be worthless, were nevertheless estimated at $234.1 million.

  At a testy meeting on 5 February 1993, Merrill Lynch went through the entire history of all asset sales and transfers that Tony had conducted over the previous five years. At the end of the discussions, it reiterated its demand for information about the Ryan family assets, including those owned by the investment company Irelandia, others held personally by his children, and those owned by the CDS Trust (the Ryan family trust, so named after the initials of Cathal, Declan and Shane).

  There now began an elaborate game of cat and mouse. Merrill Lynch went after the assets of Tony’s children while their father fought tenaciously to protect the family. Formal letters were written to Tony’s sons asking them to consider Merrill Lynch’s request and to ‘respond to same as a matter of urgency’. Peter Hagan, who ran negotiations for the bank, informed Michael O’Leary that ‘their overall approach would be guided by the family’s response.’ O’Leary hedged, telling Hagan that ‘we had written to the boys but did not expect their response quickly.’

  Hagan followed up with a letter to Tony on 15 February in effect putting a deal on the table. Meetings with all the banks involved in Tony’s loans had been ‘positive’. However, before Merrill Lynch would refinance, O’Leary reported back, it was demanding that charges on the family assets ‘be agreed by the boys’.

  Tensions exploded to the surface in a nasty meeting in London on 22 February. Declan and Cathal had written to Merrill Lynch refusing to put up their own assets or those of the trust, including Kilboy, as security against the loan. A furious row now broke out when Hagan reiterated that Merrill Lynch could not go forward without undertakings from the CDS Trust. O’Leary launched into a blistering attack on Hagan, then became involved in a furious argument with other bank officials around the table. Tony had written to his sons, O’Leary bluntly told them, but, as they were separate legal entities, Cathal, Declan and Shane were perfectly entitled to say, ‘Get lost.’ Now tempers flared, with accusations thrown across the table from both sides. Ann Lane of Citibank was reported to have told Tony to ‘can the crap’.

  They were ‘really gruesomely offensive to Tony at these meetings,’ says O’Leary, ‘but he remained remarkably stoic through it all, struggling through great personal humiliation with dignity.’ On this occasion it was Tony who stepped in to try and calm matters down. The meeting continued in a more restrained fashion, but the damage had been done.

  For almost a month there was ‘total silence and unavailability of all Merrill Lynch people’. On Sunday 21 March it became apparent why: the story about Tony’s debts had been leaked to the business editor of the Independent on Sunday in London. ‘Tony Ryan in crisis talks on $35m loan’, ran the headline. The article told of how ‘Dr Ryan does not have sufficient security for the loan.’ An unnamed spokesperson from Merrill Lynch was quoted as saying, ‘We have had discussions between Dr Ryan and the group of banks to refinance the loan. Dr Ryan has put forward a variety of proposals and we have had discussions.’ The story went on to contrast ‘the man who describes himself as a simple Tipperary farmer’ with the one who owned ‘many thousand acres … a large country house … has homes in Spain, Monte Carlo and Mexico [and] a sizeable art collection.’

  Tony was livid when he saw the newspaper. Early next morning he phoned Hagan to express his ‘great concern’ that Merrill Lynch had spoken to the journalist without his knowledge or approval. The fact that it had gone to the papers was ‘damaging’. Moreover, it had started off a frenzy of press speculation in Ireland. Not only did that erode Tony’s own position, it ‘generates further nervousness amongst the banks and the bond markets’ about GPA.

  In fact, to Hagan’s chagrin, he saw this himself that same morning at a meeting with Tony’s other creditors (the timing of which coincided with the story in the Independent on Sunday). AIB Bank, which had previously been quite accommodating when working with Merrill Lynch on Tony’s loans, now began ‘causing problems’ for Hagan. Soon afterwards, at a lunch meeting, Hagan would warn Tony that he had ‘very few friends … in AIB.’ Following the negative media coverage, AIB was telling everyone that Tony was still ‘living like a lord’, and therefore, Hagan judged, it was ‘not inclined on emotive grounds to settle or assist.’ Hagan explained that

  their main concern was the embarrassment in Ireland if for any reason you remain a wealthy person and have out-negotiated AIB. AIB, because of their banking relationship, are close to Aer Lingus, and are convinced that Ryanair was now very valuable and that after the settlement you would become chairman of the airline.

  There now followed a tense poker game, with the banks demanding commitments on Ryanair and the CDS Trust, and Tony politely informing them that they were not his to give. ‘As you will be aware from our previous correspondence,’ he wrote in July 1993, ‘Ryanair is not, and has never been within my ownership and/or control and therefore I am not in a position to give you the type of confirmations you seek. I have offered you all, repeat all, of my remaining assets, my shares, and my properties.’

  Hagan continued to press the point. ‘The banking group is not convinced that you have no control over Ryanair,’ he countered, ‘and further the banking group believes it can successfully challenge the transfer of money to the CDS Trust which is the capital base on which Ryanair operates.’

  Still Tony refused to blink. ‘It is a matter of fact, and indeed legal record that I have not, and nor have I ever exercised any ownership or indeed control over Ryanair,’ he coolly responded. ‘Ryanair is owned, operated and controlled by my sons. Whilst I was the source of much of the finance for it during its early years, these funds were settled by me upon CDS Trust some considerable time ago, and indeed with the full fore knowledge of both Merrill Lynch and the banking group.’

  Relations were not always so glacially courteous. Tony’s friend Ed Walsh, the founding president of the University of Limerick, recalls hearing how tense matters became.

  His world had collapsed, and they came in to take Kilboy and Ryanair from him. His key banker flew in from London to Kilboy in very dominant mode. The message was he was taking Ryanair as well as your personal possessions. So, anyway, Michael O’Leary and himself set upon this guy … and pursued him in such a way that he left having, according to Tony, not only wet his pants but the chair! So whatever Michael O’Leary and Tony said to this guy who came in to take everything from him, he went away and they retained Kilboy and Ryanair—and of course we know the story after that.

  Thus it was that Merrill Lynch folded first. In the summer of 1993 Hagan indicated that he would be willing to consider a settlement at about 25 cents on the dollar—a repayment of $14 million. This represented a loss of more than $20 million for the bank, but Tony, who was famous for leaving nothing on the table during a negotiation, still wasn’t done. He countered with an offer of $5 million, telling Hagan he could ‘with some degree of confidence raise this figure from friends and other resources, and through the sale of the Mexican and Spanish properties.’

  Another round of tortuous discussion and exchanges of letters followed throughout the rest of 1993 and into the new year, when Hagan finally confirmed that Merrill Lynch would ‘positively respond’ if Tony was to propose a settlement f
igure of $5 million and be in a position to make the payment quickly.

  Tony agreed to ‘do his best’, but even now—having won—he couldn’t resist having some fun with his beleaguered bankers. In March, with just weeks to go before the end of the financial year, on 5 April 1994, Tony returned to Merrill Lynch to say he was half a million dollars short. Glad to see the back of him, Hagan, ‘after some toing and froing’, accepted $4½ million subject to the transaction being done on or before 5 April. Tony left it to the last moment, but on the day itself he made the payment. The banks had taken a ‘haircut’ of $30½ million. Six days later Tony also resigned as chief executive of GECAS. Finally he was free of the shackles that had bound him since 18 June 1992. As it turned out, Tony had ‘got away with murder’ after all.

  To some degree Tony’s ability to wriggle Houdini-like from the chains of debt was due to luck. Back in the mid-1980s he had set up the CDS Trust in a thinly veiled attempt to maintain the pretence that he—the chief executive of a company in which Aer Lingus was a major investor—was not setting up an airline to go into competition with the national carrier. No-one had believed him for a moment, but now the legalities of that arrangement had kept the CDS Trust and other family assets out of the grips of his creditors.

  Pulling off the escape had required patience and unshakeable nerve. No amount of charm, threats, inducements, public humiliation or potential ruin had moved him. He was fortunate to have had O’Leary both as master of detail and as attack dog. In fact it was watching these attributes in action during the debt process that convinced Tony by the end of 1993 that O’Leary was the right man to put in charge of Ryanair.

  Yet in the end it was Tony himself who had needed not to buckle under the intense strain. Indeed, when he might have been expected to fall into depression, Tony had maintained his sang froid throughout. He joked with correspondents about reading Leadership Secrets of Attila the Hun. To others he quipped, ‘I sleep like a baby—I wake up screaming every ten minutes.’ In one conversation with Hagan he remarked laconically that he was speaking on a car phone ‘and was passing Kilmainham Jail’. All told, it was a remarkable performance, whatever anxieties it masked.

  That fortitude was a quality others admired. ‘The story of GPA was like a Greek tragedy, with you as the tragic hero,’ wrote Nigel Lawson. ‘Nothing can alter the fact that you created a world-class company; and your conduct in the face of adversity which caused it all to be ousted from you was indeed heroic.’

  Lawson’s letter was one of many that buoyed Tony during the crisis. While he was often criticised behind his back and pulverised by the press, he also received a vast amount of correspondence offering support and consolation. Some was from those who had run across him at various times in his life, such as the old school friend who wrote to offer his ‘utmost support at this time’.

  Other correspondents were more elevated. Perhaps the letter that meant the most was from Jack Lynch, the former Taoiseach and a hurling legend of Tony’s childhood. ‘It is sad’, Lynch wrote, ‘when people like you who have the courage and initiative to take risks and achieve great success to the immense advantage of our country, find that unpredictable world events should operate against you.’

  There was a sense of eulogy to most of these sentiments. Tony had played the game with great success, then lost spectacularly, before managing to pull himself back from the brink of personal ruin. Few thought that, in his late fifties, Tony Ryan had much more to give. In fact he was already planning how to win back his millions. AIB Bank, as it turned out, had been right: Tony had made fools of them all.

  Chapter 12

  RYAN REDUX

  By the spring of 1994 Tony Ryan had emerged battered but intact from the rubble of GPA. Certainly he was left resentful and shell-shocked by the experience. ‘People say I’m arrogant, and I am,’ he told the Irish Times, ‘but you should see those arrogant sons of bitches on Wall Street.’ Yet while Tony had lost both his reputation and a vast fortune, he had at least wiped out his debts and held on to some of his assets. Now he began setting about regaining the wealth and esteem he had relinquished. His means for doing so was the airline that bore his name. Ryanair, so long an expensive drain on his resources, was going to make Tony rich again.

  That prospect had seemed highly unlikely back in 1988, when the board had fired Eugene O’Neill, and Tony had despaired of ever making money out of the airline. Indeed his principal consideration had not been to make money but simply to stop losing it. Michael O’Leary, the PA who had been sent in to audit Ryanair, had reported back on a company that was haemorrhaging money, would continue to do so for the foreseeable future and required massive investment from the then still wealthy Tony. He had warned that the Ryan family had to consider the entire investment and asked whether Tony really wanted to continue funding the airline.

  O’Leary and Declan Ryan, who became interim CEO until the appointment of P. J. McGoldrick, believed that the answer to that question should be no, and they advised him accordingly. ‘It was lucky that Tony didn’t agree with us,’ Declan says, ‘but he didn’t like people telling him things he didn’t want to hear. Thank God, he just told us to go run and jump.’

  McGoldrick, O’Leary and Declan Ryan had set about addressing the structural chaos at the heart of Ryanair, but the most basic issue the puny airline had faced was that it was constantly out-punched by a heavyweight national carrier. When Ryanair began flying to the newly transformed Stansted Airport in London, Aer Lingus simply slashed prices and undercut its fledgling rival.

  It was not a situation that could continue. Despite carrying more than 680,000 passengers and achieving an average load factor of 64 per cent, Ryanair had lost more than £3 million on revenues in excess of £33 million in the financial year 1988/9. Altogether the Ryan family had invested more than £20 million since the airline began.

  By 1 March 1989 the new chief executive had concluded that there were only two options available to the company: ‘immediate closure of the airline thereby stopping further losses, or the injection of the necessary capital to enable the airline to survive the next few years in anticipation that it will become profitable in due course.’ Tony was determined to carry on, but he recognised that it would be a wasted investment unless Ryanair could secure from the Government a ‘minimum level of protection’ at Stansted and Luton Airports. ‘It has been becoming increasingly obvious’, McGoldrick noted after a meeting with Tony, ‘that the company’s long-term profitability can only be ensured if Ryanair is the exclusive Irish carrier to Luton and Stansted, while Aer Lingus retains its established monopoly to both Heathrow and Gatwick.’

  That stark message was delivered in March 1989 to the Minister for Tourism and Transport, John Wilson of Fianna Fáil, without much success. However, Tony’s luck changed on 12 July, when the first Fianna Fáil-PD coalition Government came to power. That saw Tony’s friend Des O’Malley, leader of the PDs, return to office in a new Government with a more entrepreneurial, free-market spirit. O’Malley remembers Tony driving up from Tipperary to Rathmines after the election to urge him to join a coalition Government. ‘I was suspicious that Haughey had sent him,’ O’Malley says, ‘but Tony had come up off his own bat, arguing that the country needed stable government and more competition.’

  The new Minister for Tourism and Transport was Séamus Brennan, who earlier had come close to leaving Fianna Fáil for the PDs and was sympathetic to the new party’s liberalising agenda. Urged on by O’Malley, Brennan met Tony and McGoldrick over the summer to talk about the Government’s aviation policy. Brennan had already read a report by the TCD economist Sean Barrett that estimated Ryanair’s impact on fares, time savings and increased tourism from Britain as generating £200 million for the Irish economy. Now Brennan heard Tony say that unless Ryanair was given room to compete with Aer Lingus through exclusivity on the Stansted and Luton routes he was going to close it down. ‘They told me Ryanair was going into liquidation and the company would be closed on the fo
llowing Friday week,’ Brennan recalled. ‘The losses were staggering.’ However, if the Government agreed to a new ‘two airline’ policy Tony pledged to invest a further £20 million in Ryanair.

  It was a high-risk strategy by Tony, but one that paid off. On 20 September, Brennan announced a new direction in policy to facilitate ‘the strengthening of the Irish presence rather than having two Irish carriers actively pursuing traffic on identical routes.’ Aer Lingus would maintain its exclusivity on the profitable Heathrow, Gatwick and Manchester routes; Ryanair got Stansted, Luton and Liverpool. New routes would be divided between carriers. ‘This policy shift’, noted Brennan’s political adviser, Frank Lahiffe, ‘gave Ryanair the opportunity to prove itself while also protecting Aer Lingus—the best of both worlds.’

  Aer Lingus, despite keeping hold of 96 per cent of traffic to Britain, was predictably unhappy about the new arrangements. Union members even picketed Brennan’s house and constituency office. Nasty rumours were circulated accusing Brennan, in effect, of taking a bung from Tony. Similar accusations were made to Brennan during an interview on the RTE Radio programme ‘Morning Ireland’, in which he was repeatedly asked if ‘these concessions’ were the result of a political donation to Fianna Fáil. Later the director-general of RTE, Vincent Finn, controversially went on air to express ‘regret that such a question was put to you which carried an implication for which no evidence was provided.’