Thursday 29 September 2016

Aer Lingus sale 'would endanger links to US'

Economist warns that sale to IAG could damage economic recovery

JOhn Drennan and Philip Ryan

Published 19/04/2015 | 02:30

Sean Conlon
Sean Conlon
Cathy Shevlin
STARK WARNING: Senator Sean D Barrett

Leading transport economist Senator Sean D Barrett has issued a stark warning - the IAG takeover of Aer Lingus poses a clear danger to Ireland's fragile economic recovery.

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Mr Barrett warned a deal could leave the county stranded like "Robinson Crusoe" and "endanger" vital trade links with America.

"The economics of air travel mean the fairytale of a painless IAG takeover could turn into a dark story for Ireland," he told the Sunday Independent.

The senator's warning comes as Transport Minister Paschal Donohoe prepares to publish the findings of the Government's interdepartmental group on a potential Aer Lingus deal.

The final report is likely to ignite Coalition tensions with sections of both Government parties strongly opposed to the sale of the State's 25.1pc share in Aer Lingus.

Labour remains resolute in its opposition to the bid offered by IAG boss Willie Walsh, with senior party members seeking guarantees on connectivity and jobs.

Labour's Joe Costello, who is among a list of TDs adamantly opposed to the takeover, described the wait for the group's report as the "quiet before the storm" and said he still has serious concerns about the bid.

Fine Gael has refused to take a position on the deal, but Transport Minister Paschal Donohoe admitted last week there are a "variety of views" in Government on the takeover. Minister Donohoe also insisted the ruling by the UK's Competition and Markets Authority (CMA) which could see Ryanair forced to sell some of its 30pc share in Aer Lingus, did not change Government's view on the need for competition on key flights routes.

Unions representing Aer Lingus workers, who fear widespread jobs losses, remain unconvinced by the proposals put forward by IAG.

The Government's focus is on the impact a sale could have on the country's connectivity, especially if it were to lose crucial landing slots in Heathrow Airport. However, Senator Barrett believes the Government should be more concerned over the consequences when it comes to our connectivity with America.

"An IAG takeover could mean Ireland will move from having the fastest-growing cross-Atlantic travel market to being as stranded as Robinson Crusoe when it comes to flights to America," Mr Barrett warned. The economist said connectivity played a key role in attracting US foreign direct investment into Ireland of €220bn in 2013 which currently directly generates 48,000 manufacturing jobs here. The scale of this investment means Ireland economically needs a direct link to America.

"Services to the US to Boston, New York, Chicago, San Francisco and Washington from Dublin with direct flights from Shannon to Boston and New York represent vital linkages to the US, where trade increased by 25pc last year," he said.

He warned the Government should be very aware in "aviation terms" that an IAG-Aer Lingus merger could "endanger" Ireland's direct links to the US.

Mr Barrett said Heathrow is at near maximum capacity with 99pc of air movement slots filled, meaning the only method of obtaining capacity is to re-purpose some existing slots. "In terms of shareholder value, Willie Walsh will want to use those slots for more profitable runs to Asia and America, not for less profitable runs to Ireland," he warned.

Mr Barrett also warned that in terms of growing the current American market, the performance of British Airways in regional UK centres was not encouraging.

The senator said it is far from likely that IAG aviation policy would "be driven by the national Irish interest to ensure that everything we do facilitates the essential American role in our economic recovery".

Sunday Independent

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