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Monday 5 December 2016

Third runway would decrease value of Aer Lingus slots

Paul O'Donoghue

Published 02/07/2015 | 02:30

A Boeing 747 on approach to Heathrow Airport over the suburb Feltham. Photographer: Jason Alden/Bloomberg News
A Boeing 747 on approach to Heathrow Airport over the suburb Feltham. Photographer: Jason Alden/Bloomberg News

Construction of a third runway at Heathrow would reduce the value of Aer Lingus' slots to land at the airport, according to an aviation expert.

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The Irish carrier has 24 slots at the UK's busiest airport. Industry analysts estimate their value at €400m-€500m.

Limited capacity at Heathrow for new routes is one reason IAG wants to buy Aer Lingus.

If a third runway is built at Heathrow the value of existing slots, which is based on scarcity, is likely to decrease, according to David Holohan, the head of research at Merrion Capital. However, he said Aer Lingus could also significantly benefit from the construction of another runway if it ends up being part of British carrier IAG.

IAG's €1.4bn bid for Aer Lingus is currently being reviewed by the European competition authority. The UK carrier currently holds about half of Heathrow's 688 slots. "Theoretically if more slots are added existing slots will lose value if sold, but that doesn't change the fact that they can only be operated by an airline so their value is determined by what airlines are willing to pay," he said.

"Given how important Heathrow is to IAG, I would imagine that they would express interest. Anything that will benefit IAG will benefit Aer Lingus [in the event of a takeover] and more slots will lead to increased traffic," he said.

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