ALONGSIDE THE CHAIRMANSHIP OF AIB, Sutherland held another high-profile directorship when he left the European Commission. Little did he realise, however, when he took up the position with Guinness Peat Aviation (GPA), that it would become one of the most colourful sagas in Irish corporate history.
Ireland is now one of the top centres in the world for aircraft leasing. Its success is largely due to one man. Tony Ryan, who was originally from Tipperary, had started his working life with Aer Lingus in 1955 at the age of nineteen. He held a number of positions with the fledgling airline, including postings to the UK and the US, before returning to Ireland in 1972 to take up a role in its aircraft leasing division. Tasked with leasing out Aer Lingus’s surplus aircraft to other airlines, Ryan quickly discovered he had a talent for making deals. In 1975, he formed a joint venture between Aer Lingus and London-based investment bank Guinness Peat. With his headquarters in Shannon, he held a 10 per cent stake in the new company, Guinness Peat Aviation, with the remaining 90 per cent split evenly between Aer Lingus and Guinness Peat.
GPA became among the biggest of the few Irish business success stories of the 1980s, and Ryan set up an airline named after himself along the way. His style – he was teak-tough and a very skilled negotiator – became legendary in Irish business circles. Denis O’Brien and Michael O’Leary are just two of the businessmen who started their careers under Ryan’s wing. In 1990, when Sutherland joined the board, GPA made a profit of $242 million through lease agreements on 240 planes to 68 airlines in 41 countries, but it needed more capital if it wanted to expand. Ryan eventually agreed that the company would float on the stock exchange.
Sutherland even set up a meeting for David O’Sullivan with a view to joining the company. ‘So I had a few conversations with them. I even had an interview with Tony Ryan. My wife and myself flew over.’ There was talk of flotation on the stock market within a few years, which would have been extremely lucrative for employees had it been successful. ‘I was honestly not convinced,’ says O’Sullivan. ‘I kept saying to Peter, so what happens with all these shares you loan me money to buy? What happens if something goes wrong? And he said, no, no, nothing can go wrong. I remember Peter Ledbetter saying to me over dinner that there were almost no circumstances in which he could imagine GPA going bankrupt. Now I had no business acumen whatsoever, I just had a kind of gut feeling that this wasn’t quite for me. So I turned down the offer and came back and told Peter. And it was the first time I think I saw Peter clearly not happy with me. He harrumphed and said, “Well it’s your future, but I think you are making the wrong decisions. You’re turning down a huge opportunity, I think you are being timid.”’
In 1991 Michael Lillis, after his secondment from the Department of Foreign Affairs to the European Commission, was back in Dublin on a break when he made contact with Sutherland. The two men had lunch in Ballsbridge, close to the headquarters of AIB. That afternoon Sutherland called Tony Ryan. ‘I was told to go down to Tony for an interview, which was very interesting,’ Lillis says. He gave up his career in the civil service and joined GPA. Richard O’Toole also left the civil service to join GPA. Both men worked on plans for the company’s initial public offering (IPO) – its launch on the stock market.
The GPA board was packed with heavyweights. As well as Sutherland, its directors included Garret FitzGerald, Nigel Lawson, the former British Chancellor of the Exchequer, and Sir John Harvey Jones, the former chairman of ICI. The flotation, planned for 18 June 1992, was the most ambitious offering ever undertaken by an Irish company. GPA shares would be floated on the London and New York markets as well as in Dublin. During 1992, the GPA management team went on a roadshow to meet investors. The feedback was generally positive, but this was a misreading of the general backdrop. The global economy and in particular the aviation sector were in a slump. If it had been successful, then GPA would have accounted for 20 per cent of the Irish stock market. Instead it was a spectacular flop. The shares collapsed as soon as they were put on the market.
Tony Ryan took responsibility for setting the share price. This was a fatal mistake; he had set the price far too aggressively. When institutional investors largely shied away from GPA shares on the day of the flotation, the management team took a decision to abort the IPO. It was both humiliating and financially disastrous. On 17 June, GPA had looked like a company that would dominate the Irish business landscape for the foreseeable future. On 19 June it was facing bankruptcy, with unsustainable debts and a shortage of funds.
Michael Lillis is in no doubt what went wrong. ‘Tony [Ryan] made some big mistakes in the run-up to the flotation, in particular that it should float at a certain price which was just not possible. The flotation would have squeaked through if it had been floated at 60 per cent of what Tony was insisting on. Tony was a smart guy but he got that wrong.’
Attempts to rescue GPA were as colourful as the crash. Lillis, who was friendly with the son of the Emir of Kuwait, was involved in one such effort. ‘They were interested but they backed off. Then we went to Mexico, where there was a guy of Irish ancestry called Rómulo O’Farrill, whose ancestors had gone to Spain in the seventeenth century from Longford. Like many families they did very well.’ O’Farrill, who had extensive holdings in telecoms and the media, was the richest man in Mexico at the time and held a position as Irish honorary consul. He came to Ireland, to Ryan’s place in Tipperary. ‘He owned four Gulf Stream Fours. He brought all of them over.’ Brown Thomas, the upmarket department store on Dublin’s Grafton Street, was opened for a private shopping session for the O’Farrill family on a Saturday morning. According to Lillis, it required two trucks to ferry the shopping to the airport.
‘Rómulo, who was eighty-two, piloted his own plane. We arrived that night in Mexico City. The customs guys came out to unload the plane,’ Lillis says.
Next day, recalls Lillis, he, O’Toole and Ryan had lunch with ten of the richest men in Mexico. ‘The most spectacular lunch I have ever seen in my life.’ Towards the end of the lunch Lillis turned to Ryan with a simple injunction. ‘I told him, “For fuck sake would you say something”.’ It was not an unreasonable request, as the Mexicans were willing to put up $1 billion to rescue GPA. ‘He just couldn’t do it. It offended his dignity. Don’t ask me to explain. The deal was there to be done. The documentation was ready. All that needed to be done was for Tony to say, great that you are interested, now let’s sign the papers. He just wouldn’t do it and he lost his company.’
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General Electric picked up most of GPA and Lillis went to work for the US firm. But there was a sting in the tail. Most of GPA’s senior management team had taken out loans to buy preference shares in the company. The shares were worthless, which left many of them nursing heavy losses. Sutherland had bought 34,000 shares, which put a dent in his wealth, but he had sufficiently deep pockets to absorb the losses; Garret FitzGerald, who had taken out a loan of IR£170,000 from AIB to buy his 45,000 shares, repaid IR£40,000 of the loan, and AIB – still under Sutherland as chairman – wrote off the balance. There were accusations of a sweetheart deal between Sutherland and FitzGerald. But when the deal was scrutinised by the Moriarty Tribunal, it was revealed that FitzGerald had sold his home and used the profit to pay down his AIB debt. He had no other assets. Confronted with the choice to bankrupt him or write off the debt, it had chosen the latter. There were no findings against either the former Taoiseach or Sutherland.