Colm Barrington is a firm believer in the concept of an iron fist in a velvet glove. A keen and successful sailor, the word glove has appeared in the name of most of his boats over the years. His main boat at the moment is called The Velvet Glove. “Be firm and strong, but outwardly gentle,” he says.

Now 75, Barrington remains fit and exceptionally busy. When we speak, he has just returned from a session at the gym, and he talks about his upcoming sailing schedule.

And, although he admits he should probably be retired by now, he remains a significant presence in business, sitting on a host of boards including Hibernian REIT and Finnair (he also sits on the board of the Olympic Council of Ireland (OCI), having been part of the team that helped unseat Pat Hickey’s regime).

And, as chief executive of Fly Leasing, he still has a full-time day job. However, following the Irish company’s $2.36 billion (€2 billion) sale to Carlyle Group in March, it remains unclear how long he will stay in that role.

I had reached out to Barrington to talk about the impact of the pandemic on the aviation sector and the wider Irish economy. However, as we spoke, Barrington delved into the archives and talked about his own journey.

And what a journey it has been. From being dispatched to the US to acquire hotels for Aer Lingus to being poached by Tony Ryan to work at GPA. He was there for the failed float and the GE takeover, and even had an explosive battle with Bank of Ireland over money he had borrowed to acquire GPA shares (he famously won).

As chairman of Aer Lingus, he fended off a number of hostile takeover attempts by Ryanair, before getting the state to sell to IAG. Along, the way, he has met, battled with and worked for, some of the most dominant personalities in Irish business.  

In his own words, this is his story:

Getting my break at Aer Lingus

My father was a civil servant, and my mother was a teacher and an actress. At home, we talked about the civil service, about politics, about government. Of my five siblings, three joined the civil service. Anne became an ambassador – her last post was as Ambassador in Tokyo. Conor, my younger brother, was also in the Department of Foreign Affairs, and my sister Ruth was in the Department of Health. My elder brother Tony went to the US to do a masters in town planning and never came home. My other brother Paul studied engineering. My Dad, to his mortal shame, said he was sorry to see Paul give up the pen for a bulldozer. There was a government public service mentality in the family.

I did the diploma in public administration in the Institute of Public Administration in my last year in college – the same time as I was doing my master’s in economics. I was quite taken by it, until the last few weeks when we had real civil servants come in and talk to us – and tell us that despite our fancy notions, it was not like that at all. They said we would have to knuckle down and play by the civil service rules. That put me off.

It was 1964, and there was not a hell of a lot going on in Ireland. My Dad encouraged me to apply to join Aer Lingus because he said it was the one Irish company that was outward looking and was international. The rest of Irish business was domestic at the time. I initially joined BP Shell, but I only stayed a few weeks because I got a job with Aer Lingus.

My big break there came when I got selected to join the Aer Lingus Ancillary Activities Group, which was part of the diversification of Aer Lingus at the time. I was given specific responsibility for the hotel’s division. My job was to go around looking to buy hotels. At the time, the traffic at Aer Lingus was very cyclical. On the Atlantic, we carried 11 times as many passengers in August as we did in February. It was also coming up to bad times in Northern Ireland, so the company decided to diversify, and hotels were one of the areas they decided to go into. That got me into hotel acquisitions and that led us to buy a hotel company in the States that was then called the Dunfey Family Corporation (it is now Omni Hotels). I was working with Gerry Dempsey (chief executive of ancillary services) at the time. We were negotiating with Aetna Life Insurance from Hartford in Connecticut. Their turnover at the time was about the size of Ireland’s Gross National Product.

Tony Ryan could have sorted out a lot of people’s problems for a million or two, which he did not do.

We bought the hotel company. We did a very interesting deal which has had repercussions on other deals over my life, whereby we paid a little money up front, got a leasehold interest with upside sharing on about 3,000 hotel rooms. Most were in New England. I was then sent over to be the Aer Lingus man in the hotel company and was made vice president of development. My job was to go out and look for more hotels. In the six years I was there, we grew the company from 3,000 hotel rooms to 13,000 hotel rooms. It was an interesting time. We did not want to put up too much equity, so in a lot of the deals, we would buy the hotel, develop it and then syndicate the equity. Again, this has had lots of repercussions on the rest of my life. That was 1972, (when I joined that business) and I was 26.

*****

I lived there for six years, and then we decided that we would like to comeback to Ireland. By chance, I bumped into Tony Ryan one Christmas Eve in the Hibernian Hotel. I knew him from Aer Lingus, and he asked me when I was coming back to Ireland to work with GPA. I joked that he could never afford me. Of course, this was a red rag to a bull with Tony because Tony felt he could afford anything. Sure enough, he sent people across the Atlantic to try and recruit me. In September of the next year, after nine months, I joined GPA at Shannon.

*****

Tony Ryan, the failed float and a battle with the bank

Tony Ryan was a wonderful entrepreneur. He certainly led from the front. He was also a bully, and he did bully people. He could be pretty remorseless on people from time to time. I once described our Monday morning meetings as there being ‘blood on the walls’. I have to say that he always treated me very fairly.

I think I was fortunate because I was heading towards the financial and capital market side of GPA. We set up GPA Capital, and our job was to source alternative funding by selling aircraft. We basically had three things to sell: we had the lease stream if the aircraft was on lease, we had a residual value expectation, and in those days, the owner could get some tax benefits. We tried to package those benefits. Over a five-year period, we sold over $5 billion worth of aircraft in 32 countries. We were all over the place trying to find investors who would be interested in buying aircraft assets.

We started off what has now become a big thing – effectively securitising aircraft and aircraft leases. In 1992, a week after the GPA IPO failed, we launched the first aircraft asset backed securitisation – a $470 million deal. It was amazing that we got it away as it was only a week after the IPO failed.

Coming back to Tony, he left us alone to a great extent. At the beginning of each quarter, we were given what we called the ‘gap’. Our job was to fill the gap. In most quarters we did it. But I had a very good team, people like Patrick Blaney, Michael Dolan, who has since passed away unfortunately, Peter Barrett, who now heads up SMBC, Brian Foley, Gary Burke. I had a very good team and we had a great time.

In fact, I think if the IPO had been given to our group instead of becoming a corporate venture, I think guys like Patrick Blaney and Michael Dolan would have made it happen rather than having it become a failure.

Actually, we did not really notice the impact of the IPO failure for the first few months. Then, when liquidity began to become an issue, we really did notice it. Instead of going out and selling aircraft and leases for gains, we were going out and selling them for liquidity. That was a big turnaround.

When GE came along and effectively bought the attractive part of the company – and left the dregs with Patrick Blaney and his team – that was certainly quite hard for everybody. As you know, there were a lot of people who had borrowed money to buy GPA shares and had personal distress because of it.

Of course, I had my famous situation with Bank of Ireland. I borrowed from Bank of Ireland on a limited recourse basis. I had first come across limited recourse financing in one of our hotel deals in the States. We were buying the Ambassador East hotel in Chicago. The price was $12 million, but there was a $10 million loan from a US finance company. The recourse was limited only to the asset. I went back to the others to get approval to buy this hotel and said all we needed to put up was $2 million. My boss said we would have a $12 million liability and that he would have to bring it to the board and even the Department of Transport, maybe even the cabinet. I explained that there was no recourse to us. He sought legal advice from a real estate lawyer who told him it was quite normal.

So, all my borrowings on GPA shares were on a limited recourse basis. I remember with my Bank of Ireland loan in particular, I told the manager that: ‘You can have the shares, but you don’t have me, you don’t have my wife, you don’t have my house, you don’t have my cat and you don’t have my dog. You just have shares’. When the whole thing went bad, Bank of Ireland tried to stop me taking money out of a smaller account there. I sought an injunction against them which we famously won. It was quite a big issue at the time. So, limited recourse financing was one of my pet loves.

But a lot of others lost a lot of money. One of the things I always felt Tony could have done – because Ryanair had done very well at that stage – he could have sorted out a lot of people’s problems for a million or two, which he did not do. He should have because there was an ethos within the company that you were supposed to buy shares.

Quitting GE and Jack Welsh, and working with BBAM

When GE Capital effectively acquired most of GPA, they set up an Irish company to do that and they made me President of GE Capital Aviation Service Ireland. But I did not like the GE management style. Jack Welch was CEO at the time. His whole mantra was personal empowerment. This was true if you were one of about three people in GE and you knew what Jack wanted, the rest were all looking over their shoulder wondering what Jack would think about this. So, I really did not like the culture. I agreed to stay for six months.

That was Autumn 1993, and I left in Spring of 1994 and set up my own company called Aviation Capital Management Limited. The objective was to do the management of asset backed securitisations – putting together packages and pools of aircraft on behalf of investors and then syndicating the equity.

Then I got into discussions with Babcock & Brown. We had done a lot of deals with them when I was in GPA. They were a boutique investment bank and we had done a lot of innovative transactions with them, including double dip leases between the US and Japan and the US and Hong Kong, where effectively for every three aircraft we bought, we got one for free because we were getting benefits up front in terms of US tax creditors and then depreciation in both countries. I got on very well with the guys in Babcock & Brown, they were innovative. They, meanwhile, were selling a lot of aircraft to Japanese investors because they had set up a joint venture with Nomura called Nomura Babcock & Brown. They were building up a pool of aircraft which they were responsible for managing. They thought it would be useful for me to come in and manage that. They effectively bought me out – although there was not very much of me to buy out. I have been working with them since 1994.

Was it a big decision to sell it? Yes and no.

We were doing very good fee income from the aviation side because we were buying assets for the Japanese investors. We did not have to warehouse the assets – just buy it and sell it on to Nomura’s clients.

In 2010, the management of the aviation division – not including me – did an MBO with Babcock & Brown and bought it out. That is now known as BBAM. The reason I did not do it was because of a conflict of interest. During the period between 2005, 2006 and 2007, we had bought a package of assets with Nomura’s money. Post 9/11, aircraft assets were relatively cheap, so we bought about 60 aircraft into Babcock & Brown, and then we floated them in what is now Fly Leasing on the New York Stock Exchange in October 2007. Just literally before the world crashed in around us. We were lucky to get it away. I joined Fly and effectively became CEO of it. I felt conflicted – while I worked with BBAM and still do, I was delegated full time to Fly so had to focus full time on it. That is how Fly started, and we have trundled along now for 13 years. Until we took the decision to sell it.

Why we sold Fly Leasing

Was it a big decision to sell it? Yes and no. I had come to the conclusion for some time that Fly really was not going anywhere. We were relatively small. If you look at Aengus Kelly and his new operation, for example. For a public company, we were too small. We had to report under US GAAP because we were listed. Our quarterly earnings were quite volatile so investors could not really get a grasp of us and analysts could not get a grasp of us.

We had decided, mostly to protect our shareholders, not to commit on large future orders of aircraft with Boeing or Airbus, we did not have the stream of new product coming in. Analysts like that because they can get their head around what the growth pattern is going to be. We did not have any fixed-in goals. We were growing the portfolio through purchase and leasebacks and buying on the secondary markets. And we were doing quite well on that. 

I am very glad that of the three battles I had with Ryanair and Michael O’Leary, we won them all.

We were also very keen to sell aircraft to show a gain. You could sell a few aircraft, making a lot of money and have a great quarter. If there were no sales in the next quarter, then earnings would not be so high. Finally, the market does not like externally managed companies. They think there are too many conflicts of interests.

Fly was not going anyway. We continued to trade at a significant deficit to our net book value. We had been trading – even on good days – on 60 to 70 per cent of net book value. Meanwhile, we had been selling assets at 15, 20 per cent premia to net book value. It did not seem like it was going anywhere.

My advice to anyone who ever wants to sell a company is three words: call Goldman Sachs. We called Goldman Sachs and they worked on a few possibilities for us. Within a year, they had enough interested parties, and we did a quiet auction. Eventually, it went to Carlyle.

What next? My job now is to ensure that the process gets done. I probably should be retired long ago, so I will have a chat and see what happens after.

All Aer Lingus thought about was Ryanair

Taking the chair at Aer Lingus was the easiest decision I ever made. In October 2008, I got a call from a head-hunter on a Friday morning asking could he come and see me in my office in Dun Laoghaire. He came in the afternoon and said he had been asked to offer me the job as chairman of Aer Lingus. I asked how he could offer it to me. Did I not need an interview?  He said that the board had decided they wanted me. I told him ‘give me the weekend to think about it but on Monday I am going to say yes’.

I was excited to go back. I had also done a bit of dealing with Aer Lingus. We had leased them a few aircraft and done a bit of finance with them. I found them very moribund. The company was very, and I hate to say this, very Irish. It did not have any international outlook. The people did not seem to know what ‘good’ was. I thought there could be very interesting things to be done.

When I got there, there were a few routes that were literally haemorrhaging. Dublin-Washington was just awful. Shannon was losing a fortune, as it always had been. We had to make some really hard decisions, and we had lots of political pressure not to reduce services out of Shannon. But in the wintertime, there was no one flying in or out of Shannon. At that stage, we only had the bigger aircraft, the AS30. We subsequently got into the 757s and that gave us a bit more flexibility. 

They also set up a Gatwick base, which had not been very well analysed. It did not have the cost base or the market presence to compete with EasyJet. Things like that were losing a fortune. We had to change much of that.

They were also just so focused on Ryanair. There was no other world out there other than competing with Ryanair – and only on a fare basis. I did a bit of analysis myself. I looked at Dublin to Frankfurt on Monday 14 May on Aer Lingus – €9.99. I did the same for Lufthansa and it was €199.99. I asked the team why they were so cheap. They said they were just filling the back of the aeroplane and they would get them on the way back. But they had similar fare structures for the way back. They had no focus other than what Ryanair was doing.

Bringing Christoph Mueller in as chief executive changed a lot of that. He was an airline pro. Then they brought in the triple fare structure – the premium fare, the medium fare, and the low fair – and things began to look a lot better. Christoph was a difficult person to work with, but he knew what he was doing. He also brought in quite a few new people. There was a significant management change. In fact, I was chief executive for six months myself, between when Dermot Mannion left and when Christoph arrived. The board actually asked me would I be interested in staying on as CEO. But I was in my early sixties and I told them I was too old and had never been part of an airline operation in my life. But it was an interesting period.

Battling O’Leary, selling Aer Lingus

Our shareholding structure was very difficult. We were 25 per cent owned by the government. We were 35 per cent owned by Ryanair. 10 per cent owned by the employees. Three and a bit owned by Denis O’Brien. And the rest owned by the public markets and eventually Etihad came in and bought a percentage too. So we were not really a PLC at all.

All the government wanted to do was to maintain employment, keep Shannon flourishing and, if we could, fly to China. All Ryanair wanted to do was make us as unprofitable as possible so they could buy us as cheaply as possible. The employees wanted to keep their jobs and get paid as much as possible. The pension was another big issue that we had to try and resolve. That was a can that had been kicked down the road since the IPO basically. That took a lot of work.

I feel guilty myself in some ways that I did not do more about it earlier.

Colm Barrington on Pat Hickey

We also had to make the airline more efficient. So we brought in a programme to try and save several hundred million in costs. That worked out very well. With the employee’s agreement, we got them to tear up some of the old rule books. Pilots had their black book and crew had their green book and so on. So we got a lot more productivity out of the crew and a lot more productivity out of the ground handling staff. The engineer and the technical side were pretty efficient already so that was not a huge issue. But there was a lot of old stuff going on in the head office that needed to be changed.

To give management their due, they did a pretty good job and Aer Lingus became significantly profitable. We even came in with a dividend – and remember that an airline paying a dividend then was pretty remarkable.

But we had the tryst with Ryanair, who tried to buy us on three occasions. I was only there for two of them. They took a lot of management attention also. And we had the famous Hanger 6 tryst with O’Leary also. I am very glad that of the three battles I had with Ryanair and Michael O’Leary, we won them all. And we made the airline successful and stood up for competition.

Selling it to IAG was the right think to do, I think. Some part of me wonders if we should have held on. We had a lot of cash and we could have probably held on. But being part of a larger group has made the airline much more prosperous over the last few years since IAG acquired it. It has expanded hugely. It has hired more people, acquired more planes and is a much bigger and better operation.

But it was a real struggle getting the government to agree to sell. Shannon people wanted to make sure Shannon was preserved. They were all concerned that the Heathrow slots would be used by BA as opposed to Aer Lingus. But in fact, if they had looked into the facts, BA has lots of slots at Heathrow, many of which are not profitable. But the Dublin slots to Heathrow are significantly profitable. The likelihood of them using our slots for anything else was remote.

I think it has all settled down now.

Covid-19 and the future of aviation and leasing

Policymakers have ignored the aviation crisis during the pandemic, just as they have ignored the crisis in lots of other sectors. We have been totally focused on Covid – and it is a horrible thing that needs to be dealt with. But you have to have some balance. Everything in life is balance, particularly in business, you have to be balanced in what you do. They have ignored the impact on aviation and on the travel industry and on the hospitality industry.

They have now got our finances into a pretty torrid state. Fortunately, interest rates are low so we are not being hugely penalised. But I always reckon that our response on the financial crisis would have been a lot better had we not had to borrow every day to pay the teachers, the fire fighters and the civil servants, if you have to borrow to fund current expenditure, then you are always exposed. And we are now more exposed than we need to be.

So, what is going to happen? Last year, forgetting the first quarter, airlines were reporting that traffic was down 90 per cent from the previous year. I think it will be about the same in the first quarter of this year. So even if things get up and going again, I can’t see traffic being any more than 40 per cent of the 2019 levels for the year as a whole.

The vaccines are obviously working. If you look at Israel now, 60 to 70 per cent of the population are vaccinated, the level of new cases is very low. So hopefully the vaccines will have a significant impact here as they are having in the US. US domestic travel is now booming. There is still a desire by people to travel, although Europeans may be more conservative than Americans. But if you look at huge swathes of the world – a lot of Asia, most of Africa, most of South America – Covid is still rampant. I can’t see people moving from Europe to Africa, South America, and Asia with the same levels as they did before for quite some time – and vice versa.

Maybe 40 per cent this year. Maybe 80 per cent in 2022. And we may be back to 2019 levels in 2023. While traffic levels may recover, yields will be tough because airlines will be trying to incentivise people to travel. Yields will be tough, so the airline industry will be hard hit this year and next year.

It is all about liquidity. I am on the board of Finnair and it is liquidity, liquidity, liquidity – to ensure there is enough cash to carry us through.

In relation to aviation leasing, there will be difficulties and I think there will be opportunities. The difficulty is that a lot of airlines will not be looking for aeroplanes. Why would you want to get more aeroplanes this year when you are only carrying 40 per cent of your traffic and next year at 80 per cent? We have seen airlines try to defer their deliveries from manufacturers. So, there is not going to be a huge demand for aircraft. And in addition, the manufacturers are going to want to get rid of their production; it is very hard for them to pull back on their production. So, they are going to be producing aircraft – not on the same level as before but they will be producing. The lessors are going to be competing with the manufacturers in the placement of new aircraft. That is a hard game to win because manufacturers can offer all sorts of incentives like training and spare parts. One of the lessons I learned is that you really want the manufacturers to be sold out for a few years ahead before you commit to buying any aircraft. It will be hard for lessors who have new aircraft ordered.

The purchase and lease back markets could however be quite buoyant because those airlines who are taking on new aircraft will have bloated balance sheets and they will have taken on a lot of debt.

Sailing competitively, Pat Hickey and helping save the OCI

I like the concept of the iron fist in the velvet glove. Be firm and strong, but outwardly gentle. All my boats are in fact called “glove.” My main boat is called The Velvet Glove.

How did I get interested in sailing? I grew up in a place between Bray and Enniskerry called Kilcroney. They set up a sailing club in Bray. A great friend of my father was called Mr. Moran. His daughter was Gemma (Hussey) who became a minister. He became a trustee of the sailing club. They had set up a tennis club in Bray a few years before that. It was set up by the Church of Ireland community, and few Catholics had joined. Mr. Moran was concerned that if they set up the sailing club that the same thing would happen. So he said to my Dad to get us to join. I joined, and for the first year was taken out sailing by some very nice young men from the Church of Ireland. Then my Dad bought my brother and me a boat, so we got really into it.

I have been racing all my life. In the last few years, I raced to the UK and to Europe. I used to bring the boat to America and do regattas down in Quay West in Miami and up in Long Island. We had great fun and reasonable success. We sailed around Ireland four times and won the event twice.

Around the time of the Sydney Olympics, I was asked to become chairman of the Olympic steering group of the Irish Sailing Association. That is the high-performance management group. Patrick Coveney is now the chairman of it. That gave me an interface with the Olympic Council of Ireland. I was appalled frankly. I went to one AGM in the Berkeley Court. The Honorary Secretary got up and gave a eulogy to Pat Hickey. Then the Honorary Treasury got up and gave a eulogy to Pat Hickey.

We tried to get some help for the Rio Olympics. They had arranged that everyone would go to the Olympics two weeks before the games started. We wanted to get the sailors out there five weeks in advance, so they could get used to the wind and the currents and so on. They told us we were on our own if we wanted to do that. They wanted our sailors to stay at the Olympic village, which was an hour and a half by bus every day to the sailing centre. We said we would get apartments near the sailing centre. Again, we were told we were on our own. We wanted to get the boats there early. They would not accommodate us.

I was appalled. They were absolutely useless. When Pat Hickey had his downfall, I thought it was an opportunity to do something. I had a few coffees with Sarah Keane and a few others. Eventually, we decided to launch a coup, and all of our candidates were elected. We now have proper structures in there. We have brought in an executive team, which is growing every few months as we get the budget going. We had made it athlete-centered. In the old days, if you looked at the website, it was all about meetings Pat Hickey was at. Now, it is about athletes.

I feel guilty myself in some ways that I did not do more about it earlier. I just decided that I did not want anything to do with them. People were afraid. They were afraid that if you took Hickey on that you might not get selected even if you made the Olympic qualification standard. So, he had a particular venom towards sailing because Richard Burrows had taken him on. Sailors were totally no go for Pat. He is gone. He is still technically allowed to attend our board meetings because he is a member of the International Olympic Committee. He has stood back from that but he has not technically resigned from it. But if he turns up, we will all walk out.