Expert: IAG link to US would be a big boost to Aer Lingus
Published 20/04/2015 | 02:30
A takeover deal would allow Aer Lingus to grow its long-haul network and would not hurt passengers, according to a leading financial analyst.
David Holohan, head of research at stockbroking firm Merrion Capital, dismissed claims that Ireland's transatlantic services could be jeopardised by a takeover of Aer Lingus, or that fares will be pushed up for passengers.
"IAG has quite a unique positioning on the north American corridor, given that it has an agreement with American Airlines, which Aer Lingus would slot into going forward - which would be hugely advantageous for Aer Lingus," he said.
He also told the Irish Independent that it is looking increasingly likely a deal is on the cards.
His comments come after transport economist Senator Sean Barrett said that selling the State's share in the former flag carrier could damage vital transatlantic routes. He said a deal could endanger Ireland's direct links to the United States.
However, Mr Holohan said a deal would provide an opportunity for Aer Lingus to grow its long-haul network.
He also dismissed claims that a deal could result in higher fares for passengers.
"The airline industry is one with chronically low profit margins due to the competitive landscape and I don't believe that the IAG/Aer Lingus deal would change that market construct," Mr Holohan said.
"It would still be competitive on short-haul networks and the fares on transatlantic flights will be equally competitive, because Ireland is only an hour away from London. So if they were to increase the fares dramatically in Dublin, people would simply fly over to London and fly from there on cheaper fares."
Writing in yesterday's Sunday Independent, University of Oxford professor Kevin O'Rourke said the money raised by a sale would be "peanuts" compared with the future risks the takeover poses to competition.
But Mr Holohan said higher fares would be an industry-led initiative, not something that one airline could get away with.
"It's not something we've seen, and we haven't seen it because it's very difficult for any airline to increase fares materially more than their competitors," he said.
"It would have to be an industry increase. With oil prices as low as they are, that's unlikely."
Aer Lingus holds its annual general meeting on May 1, and will be hoping to be in a position to have received a formal takeover from IAG by that date, or at least a decision by the Government that it will sell the State's 25.1pc stake to IAG.