April 6, 2009 / 6:36 AM / 10 years ago

UPDATE 2-Aer Lingus CEO resigns, search for successor on

* Mannion says new CEO will bring fresh ideas

* Chairman Barrington to be interim head

* Shares up 7 percent

(Adds more details)

By Carmel Crimmins

DUBLIN, April 6 (Reuters) - The chief executive of loss-making Aer Lingus AERL.IAERL.L resigned on Monday, boosting the Irish airline’s share price amid hopes a new face would bring fresh ideas to the carrier.

Dermot Mannion’s resignation comes a month after the group ruled out any chance of a pretax profit this year, as a severe recession and stiff competition crimp fares and bookings.

“My decision to step down will allow a new CEO to bring fresh thinking and new ideas to the business,” Mannion, who has led the airline since 2005, said in a statement.

Shares in Aer Lingus were up 7.5 percent in early trade, outperforming the general index .ISEQ, which was up 3 percent. Shares in Ryanair, Aer Lingus' main rival were up 4 percent.

“With this guy no longer at the helm copying Ryanair’s model the door is now open to get someone in who is a free thinker and can really compete with Ryanair,” one Dublin-based trader said.

Chairman Colm Barrington has taken over executive responsibility while a new chief executive is being sought.

“Against the backdrop of challenging market conditions the board and management team are focused on maximising revenues, reducing operating costs while maintaining a strong balance sheet to deliver value,” Barrington said in a statement.

Analysts said a new chief executive would have to have the mettle to take on Michael O’Leary, the combatative chief executive of Ryanair, which has twice tried to takeover Aer Lingus and is its biggest shareholder with a 29 percent stake.

“You need someone with a thick skin, someone who doesn’t get riled by O’Leary,” said Stephen Furlong, analyst with Goodbody Stockbrokers.

“There is no name that immediately springs to mind. It needs to be someone who can deal with the shareholder issues and succeed with the short-haul strategy.”

Possible internal candidates include chief financial officer Sean Coyle, a former Ryanair executive, as well as Enda Corneille, corporate affairs director, and Stephen Kavanagh, corporate planning director.

BADLY SHAKEN

Airlines globally are struggling to remain profitable but Aer Lingus’ shareholder structure — with Ryanair’s stake, plus 25 percent owned by government and 14 percent owned by employees — makes it difficult to shape strategy.

Mannion, who took over after predecessor Willie Walsh was hired to lead British Airways BA.L, wanted to pin the airline’s future onto expanded long-haul routes, although that strategy failed to boost profits.

While he oversaw the group’s stock market debut in 2006 and pushed through two major rounds of cost cuts, Mannion’s position was badly shaken when it emerged earlier this year that his contract had been changed to ensure him a payment of up to 2.8 million euros if Aer Lingus was taken over.

The revelation came in the middle of a takeover battle with Ryanair. The 1.40 euros a share offer was eventually withdrawn after the government rejected it on competition and valuation grounds.

Aer Lingus stock is now about half the Ryanair offer price and down about two thirds from a year ago. (Reporting by Carmel Crimmins; Editing by John Stonestreet and Andrew Macdonald) ($1=.7493 Euro)

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