Sunday 23 October 2016

No compelling reason to sell strategic State asset

Published 09/04/2015 | 02:30

Aer Lingus
Aer Lingus

The fate of Aer Lingus still hangs very much in the balance, with the board of directors supporting the International Airline Group (IAG) bid; the Government still sitting on the fence; and Ryanair continuing its trench warfare with the UK Competition and Markets Authority, which has ordered it to sell most of its near 30pc strategic stake in Aer Lingus.

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A number of factors are at play which could decide the fate of Aer Lingus in the coming weeks.

If - and it's a very big if - Ryanair was successful in overturning the UK competition watchdog's order for it to dispose of its Aer Lingus stake, it could ostensibly become the kingmaker in the battle for control of Aer Lingus. Financial analysts already believe IAG is offering a fair price to buy Aer Lingus, so Ryanair would be highly unlikely to squeeze anything more from the British Airways owner. Also, it's the only opportunity Ryanair is going to realistically have in coming years to recoup the €400m spent accumulating its Aer Lingus shares.

Passenger figures would seem to indicate that the Irish airline is ripe for sale. Its long-haul passenger numbers jumped by a whopping 25pc during March, indicating that the airline is focusing on this profitable segment of the market.

On the other hand, passenger numbers on short-haul flights fell during the same period, indicating that Aer Lingus was prepared to sacrifice more market share to keep its profit margins up.

Aer Lingus is a strategic Irish asset and if it continues to be well led and well managed, it promises to make handsome profits in the future. The Irish airline is itself strategically placed between Europe and America and there is no reason why it cannot exploit both markets successfully and profitably.

The Government needs to tread very warily on this issue. IAG's Willie Walsh knows the airline business, at home and abroad, very well - and effective as he has been at public relations, he has so far given no compelling reasons why the Government should sell to him. Or at least, none that we know of yet. Next week, precisely what he has offered may at last come into the public domain.

Irish Independent

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