Aer Lingus To Cut Directors Fees - Report

Irish carrier Aer Lingus is set to reduce annual fees paid to its directors following pressure from major shareholder and arch-rival Ryanair, The Irish Times newspaper reported Friday.

The newspaper said Ireland's Department of Transport wrote to Aer Lingus chairman Colm Barrington signaling that Transport Minister Noel Dempsey wanted him to cut fees in the light of the current economic slump and the airline's plans for further cost cuts.

"He (Dempsey) has asked that I convey to you his view that it would be desirable if the board were to review the level of such fees having regard to current norms for companies with similar market capitalization and in similar circumstances to Aer Lingus," Julie O'Neill, secretary general of the Department of Transport, was quoted as writing in the letter.

The former state carrier has posted two profit warnings this year and seen passenger numbers, fares and cash reserves plummet, prompting analysts and trade unions to suggest it should be bought or taken back under state ownership.

In response to the letter, The Irish Times said Barrington replied:

"I wholeheartedly agree with the suggestion that a review be carried out of the level of directors' fees, having regard for current norms for companies with a similar scale as Aer Lingus and having regard to the responsibilities of directors of a publicly listed company."

Barrington said a review was already under way within the context of the overall cost-reduction program and the outcome would be announced shortly.

Barrington's decision is a victory for Ryanair.

The Irish budget airline had tabled motions for Aer Lingus' annual general meeting later on Friday calling for Barrington's salary and directors' fees to be cut.

Last week, Ryanair handed its votes on the issue to the Irish government, which owns around 25 percent of Aer Lingus, putting pressure on Dempsey.

The minister declined Ryanair's offer, which would have given him over 50 percent of the votes and enabled him to carry its motions.

Instead, O'Neill's letter to Barrington stated that Dempsey had appointed the Aer Lingus chairman as his proxy to vote on his behalf at the AGM.

O'Neill wrote that the minister has "indicated" that his vote "should be cast with the board against these [Ryanair] resolutions", The Irish Times said.