Tuesday 17 October 2017

IAG plans may help kick-start some rational debate at last

Aer Lingus
Aer Lingus
John Mulligan

John Mulligan

Willie Walsh knows that one submission to the Department of Transport isn't in any way likely to help the Government make up its mind.

There will be a lot more toing and froing in coming weeks as the two sides try to thrash out an acceptable compromise that would allow the Government to arrive at a point where it believes it can sell its stake to IAG, and sell the idea of a disposal to the public and its political partners.

Hopefully, the IAG submission to the Government will help kick-start a more rational debate on the future of Aer Lingus and whether or not a sale should proceed.

There's been an awful lot of political posturing. Plenty of people have opinions that are clearly not based in fact.

Just take the issue of the legality of any agreement that could be drafted between IAG and the Government in relation to the slots at Heathrow.

Last week, plenty of commentators insisted that any such agreement "wouldn't be worth the paper it's written on."

But that's not necessarily true.

One leading UK aviation lawyer told the Irish Independent yesterday that she can't see any reason why contractual and enforceable agreements couldn't be put in place between IAG and the Government.

"It's not within the normal manner of slot provisioning, but I don't see why not," she said.

That IAG hasn't been able to address jobs at Aer Lingus will go against it, at least in public.

But the airline group can't realistically give guarantees that Aer Lingus will employ a specific number of people at a particular moment in time in the future.

But there are two points here. The first is that IAG is understood to think that the number of people currently employed at Aer Lingus - about 3,600 - is about right for its current operations.

Secondly, IAG doesn't want to buy Aer Lingus to butcher it. It obviously wants to grow it. That could mean more jobs in the future as it expands the Aer Lingus long-haul network.

"I think while there may be some job loss risk in the near term, the medium- to long-term forecast would be for thousands of jobs to be created in the wake of IAG owning Aer Lingus," claimed David Holohan, the head of research at stockbroking firm Merrion Capital.

"This is a wide-ranging set of commitments from IAG that should look to assuage the existing fears and concerns with regards to selling Aer Lingus," he said.

"The commitment of IAG not only to maintain the services to Heathrow from Irish airports but also ensure that those slots will not be sold is an enormous incremental positive to the likelihood of the deal completing."

He also believes that IAG will retain the routes to Heathrow out of all Irish airports, not just Dublin, and that IAG wouldn't want to sell the Heathrow slots either.

"IAG have no reason to sell the Heathrow slots," he said. "They are extremely profitable routes and will serve as an important conduit moving passengers from the UK to Ireland and then onward to North America, a key part of IAG's likely strategy for the airline."

Another big issue for IAG will be what to do if the Government comes out and opposes a deal.

It's a scenario it probably doesn't want to contemplate just yet and hopes it won't have to.

Irish Independent

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