Tony shared the news with the other members of the board, who were similarly ‘shocked at the rapid deterioration and greatly concerned.’ Second-quarter profits had plummeted by 20 per cent, and there was no obvious sign of new investment. Banks and manufacturers were now demanding what they were owed. GPA looked doomed.
Faced with the imminent collapse of everything he had built, Tony resolved to act. He elbowed Foley aside, once again taking up the reins as executive chairman of GPA. ‘In the present challenging circumstances’, he informed the staff, ‘it is in GPA’s best interest that there should be a single leadership focus and that duplication should be avoided.’ That would allow the company to face ‘the issues which we must address successfully, and quickly, so that we can resume our historic growth pattern.’
They were brave words, but in reality the situation was dire. Not only was GPA running out of money but its opportunities for generating revenue and equity were limited. It was stuck in a cycle of distrust and suspicion. Lack of confidence in the company had led to panic-selling of GPA bonds. That in turn had resulted in the company having no access to the bond market in order to raise capital. Similarly there were no buyers of GPA shares even at $8, and most banks were trying to sell their GPA debt.
This lack of finance, particularly bank finance, had a knock-on effect for GPA’s assets and services. There was little or no demand for physical assets such as aircraft, which in turn was driving prices even lower as buyers anticipated a GPA ‘fire sale’. When GPA’s individual circumstances were coupled with a global airline business that was haemorrhaging money, the result was that the company’s access to money was choked off.
This situation was calamitous, but in many ways it was one that suited Tony’s temperament. At heart he remained a scrapper. The qualities that had seen him build GPA in the first place—hard work, aggression and unconventional thinking—were now required once again for what he optimistically called ‘Project Rebound’.
His play was typically bold. Having identified the no. 1 priority as being ‘to ensure liquidity,’ Tony made the one phone call that he believed could resolve that issue. His relations with the American behemoth General Electric had not been easy when they were in business together, but his personal relationship with Jack Welch, the GE chairman, had been friendly enough. Now Tony went to him cap in hand. It was a gutsy, if humiliating, move but one that paid off. Despite the failure of the IPO, Welch still saw the potential of GPA in particular and airline leasing in general. If GPA and its fleet were there to be picked off, it made sense to establish a relationship now. After direct discussions between the two men in October, Welch agreed—‘uniquely’, Tony said—to a request to provide up to a billion dollars of liquidity on the basis of an aircraft sale.
Tony was ecstatic, believing that he had not only bought GPA time but also, in the longer term, found a potential buyer for a rejuvenated GPA. Therefore he was astonished when GPA’s banks rejected the plan. ‘This is a cherry-picking exercise,’ they told him. ‘That’s incorrect,’ Tony replied: ‘aircraft can be replaced.’
Humiliatingly, Tony returned to Welch to explain that he was having trouble getting his banks to agree to the deal. Welch told him not to worry, that the offer was still on the table, and to stay in touch.
For the next five months Tony maintained that contact until, in March 1993, he again had the ground taken out from underneath him. Panicked GPA shareholders voted to approve a rights issue organised by Nomura Bank of $1 per share. Later, Tony would call it a naïve decision. At the time he was beyond livid. ‘The company was now valued by its owners at $120 million,’ he wrote starkly. It was no surprise when immediately afterwards ‘Mr Welch called and withdrew his offer.’
Now GECC had a different offer to put on the table. By advancing $1.35 billion of financing to allow GPA to pay down some of its debt, they would take a four-year option to acquire majority ownership of the company for $200 million. Restructuring would see GPA split into two separate companies, with one owned by the existing GPA group and the other by a subsidiary of GECC. The company with the GPA name would be responsible for managing the vast debt that had been accumulated; the other would be responsible for managing the GPA fleet, along with the 450 aircraft already owned by GE.
In many ways it was an unsatisfactory deal, not least because GE had refused to take on GPA’s debt. Yet, faced with the alternative of imminent ‘examinership’ (or ‘administration’), it was no surprise when, after a summer of intense negotiations, an extraordinary general meeting of shareholders approved the deal on 18 October 1993.
Throughout the negotiations, Tony had been bedevilled by increasing rancour within GPA itself. Many had seen potential fortunes wiped out overnight. Maurice Foley had lost an estimated £9 million. For Jim King it was about £5 million. Colm Barrington had seen a potential £7½ million disappear and was left with a toxic loan of $1½ million, taken out to buy his GPA shares. Seán Donlon and other former public servants, including Niall Greene, Michael Lillis and Richard O’Toole, had also discovered how brutal the private sector could be. And many ordinary GPA staff members who had been banking on a windfall to keep them comfortable for life were left with nothing.
Tony was particularly frustrated by the constant backbiting and leaks to the press from the management team. ‘The recent damaging reports of management division within GPA may have been fed by leakage from the company,’ he had complained that summer. ‘If this is so, it represents appalling disloyalty and disregard for GPA’s well-being on the part of those concerned.’
Certainly there was festering antagonism among some at GPA. ‘Not a whiff of acknowledgement of responsibility,’ complained a senior vice-president, Christopher Brown, in his diary. ‘Not a whisper of apology. Nothing. And there never has been. Yet again Tony and his directors present the situation as an achievement.’ In fact, Brown thought, everything was ‘Typical Tony—back to the old routine—criticism and kicks in the bollocks all delivered from the hip with his usual quiet intense asperity.’
Other criticism had been more targeted. On 2 April 1993, crucially while Tony was away in the United States, the senior managers Patrick Blaney and Philip Bolger circulated a memorandum on ‘survival-strategy issues’ to all the executive and non-executive members of the GPA board. It offered a devastating critique of Tony’s leadership of Project Rebound. ‘This note is written because we are seriously concerned about GPA and its survival and because we see no evidence that GPA has either a viable plan for survival or the necessary management focus, and agreement thereon, to achieve it.’ Morale in Shannon was ‘at a level where the authors believe the core staff of GPA is on the brink of departing.’ Attempts to move forward had been thwarted by backbiting and poor planning. The memo continued:
Survival normally forces management to set aside their differences and focus on the essential talks in a co-ordinated and agreed manner. GPA on the other hand has been unable to do this … There has never been one management meeting, to the authors’ knowledge, where the assumptions, issues and/or direction of Rebound have been raised and debated such that all involved can get to both understand them and agree what needs to be done.
The only way forward was to ‘debate at some length these issues, develop and agree the plan going forward and how it will be implemented, sell it to the staff and our stakeholders, and then do it.’ In conclusion, as well as offering their own resignations if required, they forecast that the ‘agony of continuing the way we are cannot last much longer.’
Sending the memo was in many ways a brave act. ‘It is the first time in eighteen years that anyone has stood up to Tony Ryan,’ Jenny Brown, the manager of GPA’S London office, was heard to remark. Yet if that was so it was because so few had learnt the lesson that Tony respected and even relished confrontation—he had, after all, employed those non-shrinking violets Denis O’Brien and Michael O’Leary as his assistants, neither of whom hesitated to challenge him in the most direct way.
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sp; Tony’s reaction to the criticism from Blaney and Bolger—described breathlessly by workers at GPA as an attempted ‘putsch’—was complex. His instinct was to fire both men on the spot. But almost immediately after doing so he reconsidered. Certainly he thought it would have been ‘preferable and customary’ for criticism to have been raised through ‘established channels and procedures’. On reflection he put this down ‘more to a consequence of inexperience and lack of awareness of the sensitivities between various constituencies than anything else.’ However ‘unfortunate’ the approach to, and distribution of, the memo might have been, Tony recognised that it was indeed ‘disturbing in its content’.
Back home, he called Blaney and Bolger into a meeting and subsequently asked them to address the GPA board. Afterwards, they were both promoted, with Blaney co-opted onto the board and appointed chief operating officer, with immediate effect. He was to report directly to Tony, and his mission was to develop and run Rebound 2. ‘In this task’, the message Tony circulated to all the staff read, ‘he will have [my] full authority to draw the necessary resources from all sections of the company.’
It would be easy to conclude that Tony had caved in, not least if he had been put under pressure by his board. Yet as the unsympathetic Christopher Brown noted before the crucial meeting on the memo, ‘the board is filled with Tony’s sycophants and it will be like the morning meetings of olden days—Tony bullying his way through. It will be whatever Tony wants, I suspect.’ Tony had the numbers to dispose of Blaney and Bolger if he wished. They remained because, through gritted teeth, Tony admired their courage and accepted their analysis that a new approach was needed. The fact that putting Blaney in to run Rebound 2 also sidelined Maurice Foley, with whom Tony had become increasingly frustrated, only added to the attraction.
For all the energy that Blaney brought to the task during the summer of 1993, Tony always believed that if the banks and the GPA board had grabbed the opportunity he had won from Welch in the autumn of 1992, the future of GPA would have been very different. ‘The awful irony’, he later wrote, was that the same process took place exactly a year afterwards ‘but with all the advantages going to GECC at the expense of our shareholders.’
In a rare flash of public anger Tony complained that Welch had ‘raped’ GPA. ‘What do you expect’, Welch told him the next time the two men met, ‘when you’re walking around with no clothes on.’ It was a riposte with no answer.
If the downfall of GPA had been a humiliation, Tony—in his more reflective moments, at least—felt it had been an ordered retreat. He concluded that
the deal with GE ultimately led to the consummation of various arrangements which underpinned the rescue and continuance of GPA, the preservation of the jobs of almost 200 people (and over 1,000 in ancillary companies) and the repayment of all bank debt together with interest as and when due. The company was thus enabled to continue to meet its debts (paying, for example, $1.4 billion to bondholders over the critical period) and [with] cash and available facilities in excess of $400 million.
The result was considerably better, Tony concluded, than the alternative of liquidation.
Others were less generous. ‘Tony got away with murder,’ the legendary PR guru P. J. Mara was overheard saying immediately before the emergency general meeting that approved the GE deal. In fact, as far as Tony was concerned, it was he himself who had been knifed.
The trouble had begun with the Public Schools Employees’ Retirement System, the pension scheme in Pennsylvania. As a significant investor in GPA it had made it a condition of participation in the restructuring that Tony resign when the deal closed and that he waive any claims arising from his contract. That meant giving up, or at least putting into arbitration, a £1.8 million bonus paid over three years and share options independently valued at $28 million.
Tony believed that the ‘irrational behaviour of PSERS’ was nothing but ‘bizarre’ posturing. Others were more concerned. On 16 September, Maurice Foley, who despite being sidelined had remained as Tony’s nominal no. 2, wrote to the non-executive director Sir John Harvey-Jones, advising that Tony should, in effect, be sacked. ‘I believe TAR [Tony] will have to be formally pressed to resign without compensation,’ he wrote. ‘Obviously I regret that this may become necessary but we have to face up to the fact that it may be [the] only alternative to court protection.’
Foley also included a draft memorandum for Harvey-Jones to send to Tony. ‘I regret that there is only one alternative solution now available to us and it is my painful duty to put it to you,’ it stated. ‘This is that you confirm to the Board in appropriate form that you will comply with the PSERS condition, i.e. resign and waive any claim to compensation as a result.’
It was a bullet Tony hadn’t been expecting, but there was another to come that turned his life into a shooting gallery. He was angry about having been ‘compelled as a condition precedent to the consummation of the GE Investment to resign my position and forfeit all rights, entitlements and claims against GPA.’ He had already seen his personal-wealth potential from the IPO drop from a quarter of a billion dollars to nil. Now he had been fired. At the very least he might have been allowed to slip away to lick his wounds in private. But PSERS was not the only investor making demands.
GECC was setting it down as a condition of the deal that Tony remain in place to run GPA operations for a minimum twelvemonth period. While his successors as chairman and overall chief executive would be given a four-year deal worth a combined $12 million, Tony became an employee of a GE subsidiary, GE Capital Aviation Services, on a salary of £300,000, with a bonus entitlement of less than half that amount. All this, he fumed, ‘despite the fact that my responsibility [would] encompass the management and operation of a fleet of aircraft up to two times greater than originally owned by GPA and includes the entire GPA fleet.’
The demands from PSERS and GECC combined to make an intolerable situation for Tony. The pension company was insisting that the deal would not go through without his resignation; GE said he had to stay. The only way to make both happy was to resign and then return as an employee. At first Tony refused, but over the next few weeks he came under ‘unbearable pressure which was placed upon me personally and was witnessed by a number of people who were present during these closing negotiations.’
One of those who saw the events close up was Michael O’Leary. His notes from the time record that Tony
has been required as a central element to sacrifice his name, reputation and contractual rights by resigning from GPA and being compelled to work for GECAS. Intense pressure levied upon TAR during GE process to submit and comply with these onerous conditions but not limited to the repeated threat that if TAR did not agree to work for GECAS the entire deal will fall apart.
In the end, five minutes before the midnight deadline on 22 September laid down by GE, Tony signed the paperwork. Nigel Lawson, former Chancellor of the Exchequer and a non-executive director of GPA, acted as witness to his signature. It was not a casual choice. With Tony having previously come under such intense pressure to resign, Lawson had privately given him his own letter of resignation to use if he needed it. ‘That was impressive,’ says Declan Ryan, ‘when so many guys were running for the hills. Tony appreciated that.’
Now Tony reflected disconsolately that he was ‘saving GPA at the expense of my own personal financial position and reputation.’ It was the culmination of a terrible period in his life, which had included a traffic accident in Ibiza that had tragically left a nineteen-year-old local man dead. ‘It has been an awful year,’ he wrote to Michael Smurfit, ‘and the accident was the last straw.’
Working for GECAS would turn out to be a hugely frustrating experience. On so many levels it was a clash of cultures. To begin with, Tony was incensed by—and ignored—a crass email from the human resources department drawing his attention to a clause in the termination agreement that stipulated that he must return all company property, including his car and computer. It was an ex
ample of what Patrick Blaney called the ‘normal GE subtlety’.
On a more philosophical level, Tony and GE were as much of a bad fit as they had been in the early 1980s. ‘Does GE have any business being in airline leasing?’ he asked Gary Wendt. ‘I believe there is now clear evidence that the application and procedures that may suit other GE businesses does not suit GECAS. The company is floundering and is being choked by bureaucracy rather than being market driven.’ There seemed to be more interest in ‘meetings about meetings’ than in any attempt to ‘focus on the customer’. When Tony wrote that ‘there is palpable frustration throughout the organisation’ it was clear that he primarily meant himself. Even worse, despite being nominally in charge, Tony now found himself marginalised within GECAS. Board meetings were held without his knowledge and permission. That same board was appointed without any consultation. ‘I first got sight of Directors names when I received the headed notepaper,’ he complained.
The situation could not continue for long. On 11 April 1994 Tony resigned, concluding that there was little point carrying on, as ‘I am virtually excluded from all elements of the operation.’ It was not long before GECAS was pestering him again about returning the car and any remaining office equipment.
Tony had been staring at personal ruin as well as professional humiliation from the very moment the IPO failed in 1992. Without the $36 million he had expected from the conversion of his A shares to ordinary shares, he had been left with an outstanding $35 million loan from Merrill Lynch. After weeks of extensive talks in the early summer of 1992, Merrill Lynch declared Tony as in default at a meeting on 4 August. It demanded that he prepare a full and comprehensive asset and liability statement, and also asked for a list of assets sold or transferred over the previous five years. And, crucially, at a meeting on 24 November 1992, it raised for the first time the question of Ryanair and the family trust. That was the moment when Tony got ready for a legal fight, engaging the services of the elite law firm Herbert Smith. As one of Tony’s creditors bluntly told him, things were going to ‘get ugly’.
Tony Ryan Page 19
