In early 2020, Domhnal Slattery knuckled down with his chief financial officer Andy Cronin to assess how an emerging virus in China could potentially impact Avolon, the Dublin-based aircraft leasing giant that Slattery had launched at the height of the last financial crisis in 2010.
 
The global financial markets seemed blind to the potential threat of Covid-19 at the time. But Slattery had strong connections in China, and he could sense they were very concerned. So, they broke with the cadence of their planned finance strategy and greenlit a $1.75 billion bond offer to strengthen Avolon’s liquidity position. The auction was oversubscribed, while the coupon was priced at an all-time low.
 
Within months, the aviation industry was in turmoil, with carriers scurrying to raises cash wherever it could. Avolon, meanwhile, had acted early and had enough petrol in the tank to withstand the gathering storm. “We coined a one liner, a strapline, which was that we wanted to be ‘long cash, short metal’,” Slattery told me in early 2021.

The practical impact of that strategy involved cancelling orders for 102 Boeing 737 Max jets and deliveries of other aircraft, and capitalising on its strong credit rating by raising $4.4 billion of debt during 2020 at an average 3.7 per cent coupon.

When the skies reopened, Avolon was arguably in a better position than it had been before the pandemic. It was a testament to the leadership of the company.

Last week, Avolon said Slattery was standing down as CEO and from the company’s board later this year. Cronin will replace him. The transition is seamless – Cronin was a founding member of Avolon also. 

It is far too early to reflect upon Slattery’s legacy, but it is worthwhile to look at his journey – and examine what he achieved. Ireland has not produced too many homegrown companies that became global leaders. Avolon is one of them. 

From a standing start in 2010, it has grown to become one of the largest aviation lessors in the world.

According to its 2021 full-year results, Avolon had $2.1 billion in total revenue, more than $6.3 billion in available liquidity and $31 billion in total assets. As of June 30, 2022, it had “an owned, managed and committed fleet of 851 aircraft”.

It is an amazing achievement, especially considering, as Tom wrote last week, Slattery set up the business to salvage his beleaguered personal finances from the wreckage of the crash.

And that is what is so brilliant about Slattery’s journey. He has seen the high and lows of business and kept going regardless. And, unlike so many of his contemporaries, he has been honest and reflective about his difficulties. He never sought to downplay them or hide from them. In fact, he owned them. He has shown both steely confidence and humility. And that is what made the startling success of Avolon and of Domhnal Slattery so sweet.

He worked under Tony Ryan at GPA (he later described him as “Ireland’s greatest entrepreneur”), and there are parallels between the two men. Both made a fortune, lost a significant portion of it, only to bounce back with gusto. Indeed, Slattery learned from the failure of GPA, and built internal structures within Avolon to ensure some of GPA’s faults could not be replicated in Avolon (he also learned from the failures of banker Fred Goodwin, who he briefly worked with).

“They set up their organisations where no one had the authority or the bravery to say stop,” Slattery told The Currency for an in-depth profile in late 2019. “That is the biggest lesson I have learned in the last 20 years – how we structured Avolon with the risk committees and so on. I make very few of the business decisions in this company. We remove the ego quotient from business decision making.”

To make this happen, Avolon put a monumental effort into understanding its own company values – and then ensuring that it lived by them. The five values are transparency, respect, insightfulness, bravery and ebullience. Combined, the handful of values gives the acronym Tribe.

“They are constantly used every single day. We believe in them. We make business decisions by them. We recruit by them. We exit people by them,” he once told me.

Slattery made his first fortune selling International Aviation Management Group (IAMG), the boutique consultancy he founded with John Morrissey, to RBS in 2001 (this was where he encountered Goodwin). He then set up a private equity called Claret Capital.

Many entrepreneurs invest their own personal wealth through family offices. Slattery harboured a different ambition – he wanted to create an Irish version of KKR or Blackstone – “something that could be the best in the world,” he said.

It had some hits and some misses but came undone during the crash. Take Jet Bird for example. His team had worked on the private jet rental business for two years. On the day it was slated to launch, Lehman Brothers went bust. 

In the aftermath, he had to borrow money from his brother to cover the mortgage. Yet, he ruled out following the route of so many and declaring bankruptcy. “I had a lot of fights to survive but it was just in my psyche. My father, God rest him, would turn in his grave. I was not going to lie down. I did not make the bloody global recession,” he told me in 2019. “A lot of my vintage, my peers, they all left or declared bankrupt. Very few reinvented.”

And that is exactly what he did with Avolon. The genesis of the business was sketched out on a beach in Cap Ferrat in 2008 by Slattery and a handful of executives including John Higgins, an aviation executive from RBS that had come on board and who ultimately became one of the seven founders of Avolon. The document stressed that the cyclical downturn created a near term window of between two and three years to buy quality aircraft at prices below base values.

From this one page, Slattery and his team raised €1 billion in 2010. The company then went from start-up to IPO within five years, and from IPO to private ownership. Shareholders came and went; all had made money.

Slattery is now leaving the table. But he leaves behind a best-in-class company rooted in Ireland. 

*****


Staying with aviation leasing, Thomas painstakingly pulled together the story of how the Government worked with AerCap to salvage Russia insurance cover. When European sanctions hit aircraft leasing companies’ Russian contracts, they stood to lose everything. Co-ordinated industry and diplomatic lobbying resulted in their insurers being on the hook instead.

Elsewhere last week, Stephen wrote a sobering column on emissions targets and the climate crisis, arguing that the leaders who set climate targets must deal in a world of reality and not public relations. 

He wrote: “This process of sectoral target-setting has been divisive, because the government is being asked to make a decision. When you decide, you divide. But there is no way around these decisions. There are offsetting measures, and money can be spent in making sure farmers affected are compensated, but nature cannot be fooled. Emissions must go down.”

A property developer borrowed millions from his company and never paid any tax. When challenged, the company said its owner was acting illegally. The resulting case has shone a light on the tax implications of so-called “soft company loans”.

As though things weren’t bad enough, the spike in inflation has upset the economics of housebuilding. The current level of costs, supply chain disruption and uncertainty is incompatible with Ireland meeting its housing needs, as evidenced by new data examined by Ronan Lyons. 

We also had company analysis on Smurfit Kappa, Greencore, Pamela Scott, Randox and GameStop.