Tuesday 25 October 2016

Forget concessions canard - Aer Lingus bid is hostile takeover

Sean Barrett

Published 27/05/2015 | 02:30

"Attempts by the executives of both Aer Lingus and British Airways/IAG to present the takeover as a done deal have gone on far too long"

Attempts by the executives of both Aer Lingus and British Airways/IAG to present the takeover as a done deal have gone on far too long.

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The takeover of Aer Lingus by British Airways/IAG is not in the Irish national interest, is anti-competitive and anti-consumer. T

his is a hostile takeover against the wishes of the overwhelming majority of the people (the Ipsos/MRBI poll of March 30 found a majority opposed the sale with 54pc against) of this country who own the 25.1pc of Aer Lingus.

The executives in both colluding airlines have sought to bypass the public who own the shares in a series of leaks to the media. The interest groups cited by management to favour the takeover proved short on details of the meetings at which the pro-British Airways/IAG decisions were made.

That two airlines aim for merger is no surprise in an industry which has a long history of collusion and anti-competitive behaviour. Older readers will recall decades of PR material from the old Aer Lingus/British Airways cartel attempting to justify their Dublin, Cork and Shannon fares to London as low. The 'Financial Times' reminded us this weekend that the cheapest Dublin-London flight in 1985 was £569, inflation adjusted, versus £35 today.

But maybe the new improved British Airways will be better for Ireland than Aer Lingus has been? The contrast between Aer Lingus in developing nine North Atlantic routes and the BA failure to develop any such routes from Glasgow, Edinburgh, Belfast, Manchester and Birmingham is remarkable. We are asked to believe that, on acquiring Aer Lingus, BA/IAG will undergo an about-turn and take a belated interest in regions such as Ireland, Scotland, Northern Ireland, and the English northern and midland regions. Real aviation policy in the UK regions, as distinct from PR handouts, is illustrated in a statement by the SNP transport spokesman, Angus MacNeil MP, that "there has been a historic imbalance in UK aviation policy that has held back Scottish airports and the development of direct international links".

Mr MacNeil took 54pc of the votes in his constituency in the UK election, identical to the proportion of our population opposed to the BA takeover here. In generating 11 million passengers from a home market population of under five million people, Aer Lingus is substantially more efficient than BA in generating 38 million passengers in a home market population of 64 million people.

The "concessions" given by British Airways/IAG that Aer Lingus will grow more as a wholly owned subsidiary than as an independent airline are based on a peculiar definition of property rights. As one of my colleagues made wonderfully plain: "If I buy a field, it's my field and I can do what I like with it." The peculiar logic is that you have more control when you don't own any shares than when you own a quarter.

Others claim that Aer Lingus on its own is destined for failure. This ignores the success of Aer Lingus in growing in a home base that experienced one of the worst bank-induced recessions in modern times. It is a good brand, especially in North America. It is a profitable airline and vital to Irish tourism, high-tech industries and financial services and has developed links to Ireland that are the envy of the Scots. Predicting a hard landing for Aer Lingus as an independent airline is a route of pessimism about Irish entrepreneurship in aviation. Ireland is a success story in this field as illustrated by Aer Lingus on the North Atlantic, Ryanair as the airline in Europe with the largest passenger numbers, and a highly successful aviation leasing sector. Alfred Kahn, the renowned aviation economist, described the "successful adaptation of Aer Lingus from the traditional European national carrier to the new deregulated market, in contrast with other former national airlines in Europe that have either left the market or been absorbed by larger carriers".

Slot surrender at hub airports has been a standard feature of previous airline mergers in Europe.

The role of UK in blocking the Ryanair takeover of Aer Lingus provides us with a warning. The UK Competition and Markets Authority instructed Ryanair to limit their holding in Aer Lingus stock to 5pc. There is a legal tension between the case that under Ryanair we might have "Aer Lingus being prevented from combining with another airline or from disposing of Heathrow slots in the context of optimizing its route network and timetable" and claims to the Oireachtas committee that Aer Lingus wishes to retain the Heathrow slots.

There are also concerns that the British Airways/IAG takeover of Aer Lingus increases British Airways' slot concentration at Heathrow without the apparent agreement of the UK and EU authorities while the same authorities oppose an airline with no slots at Heathrow, Ryanair, making the same takeover. A further anti-competitive aspect of the takeover is that BA will be able, through ownership of Aer Lingus, to control Dublin as a potential hub competitor with Heathrow.

As a member of the Oireachtas Transport Committee, I find the restriction on parliamentary debate due to Stock Exchange takeover panel rules problematic. The takeover is not discussed openly in Leinster House but leaks freely attempt to distort public opinion with little or no challenge. Public opinion supports an independent Aer Lingus. Parliament must be free to discuss all the options in a rational and fully informed fashion.

If it looks like a duck and quacks like a duck, it is most likely a duck. These concessions and the claims of a better Irish aviation future under the wing of British Airways/IAG have all the hallmarks of waterfowl.

Sen Sean D Barrett FTCD is an independent member of Seanad Éireann for the University of Dublin constituency. Sean taught transport economics for almost 40 years at Trinity College Dublin.

Irish Independent

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