Business Irish

Saturday 1 October 2016

IAG boss Willie Walsh wants expanded Aer Lingus to target Asian destinations

Published 01/06/2015 | 02:30

IAG chief executive Willie Walsh
IAG chief executive Willie Walsh

Aviation chief Willie Walsh sees opportunities for Aer Lingus in destinations like India, Japan and China.

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Mr Walsh said IAG wanted staff in Aer Lingus to be excited about the takeover deal, and insisted it was for the long-term.

As well as expanded transatlantic routes, he said there were opportunities for the airline in Asian destinations.

"You'd start with India, Japan and China," he said.

"I think China could be a real opportunity as Ireland has real trade links with China. Our experience with BA in China is that it is a slow burn and takes a long time."

Mr Walsh, who secured agreement from the Cabinet this week for IAG to buy-out the State's stake in Aer Lingus, also said negotiations with the State were "a bit heated at times" and had come close to collapse.

But he claimed being Irish helped, as he said there were people on the IAG board who "struggled to understand what was going on".

Announcing the €335m sale of the State's 25.1pc shareholding last week, Transport Minister Paschal Donohoe insisted it was the best deal on offer for the country and will result in 635 net jobs in five years.

IAG plans to pay €2.50 in cash for each Aer Lingus share and is also factoring in a five cent per share dividend that will wing its way to shareholders.

In an interview with 'The Sunday Business Post', Mr Walsh said he thought he understood the politics of the situation in Ireland and he believed the Government would see it as a good proposal.

"Maybe I misjudged the sensitivity of where the Coalition government was at the time, but I came to terms with that," he said.

"It's lucky that I am Irish. There are people on my board who struggled to understand what was going on.

"We didn't want to do anything that was going to create political uncertainty."

Mr Walsh said it was being pushed onto the agenda by the IAG team, rather than himself, as he didn't want it to be perceived as "Willie Walsh doing some unfinished business."

He said that to a large degree he adopted a "negative attitude" towards it, challenging others so that they could see for themselves the attractiveness of it as a business proposal.

On the negotiations, he said he was personally reluctant to go beyond the five-year commitment on the Heathrow slots.

"There were occasions during the meetings where in effect the negotiations … if they hadn't [actually] collapsed, were very close to it," he said. "Some of the direct discussions we had were a bit heated at times.

"I've always tried in negotiations, no matter who I negotiate with, to be able to shake hands at the end of it."

He said he believed Dublin had the potential to expand as a transatlantic hub.

Last week Mr Walsh insisted that the Aer Lingus cost base is efficient, but that there's "always scope for improvement" at airlines.

Investment

He also said he expects IAG to make a substantial investment in Aer Lingus in the coming years - probably well over €1bn - in order to achieve ambitious growth targets, including the creation of up to 635 net new jobs.

Much of that investment will be down to basing additional long-haul aircraft in Ireland.

IAG plans to base up to eight more such aircraft here as part of its Aer Lingus takeover plan.

Mr Walsh pointed out that each long-haul aircraft it would base in Ireland has a list price of between $220m and $280m (€202m to €257m).

The IAG chief executive said that existing Aer Lingus management, including CEO Stephen Kavanagh, have been effective at controlling costs.

Mr Walsh also added that Aer Lingus deserves great credit as it has restructured its cost base.

"It has demonstrated that it can be profitable in a weaker economic environment."

Irish Independent

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