Friday 23 March 2018

'Aer Lingus Heathrow slots worth less than €500m' - incoming boss Kavanagh

STILL UP IN THE AIR: The Aer Lingus/IAG bid is far from a done deal.
STILL UP IN THE AIR: The Aer Lingus/IAG bid is far from a done deal.

Ailish O'Hora and Niall O'Connor

AER LINGUS'S 23 Heathrow slots are worth less than €500m, incoming chief executive Stephen Kavanagh said today.

"It is not €500m," he said when asked about previous valuations by analysts on Newstalk's Breakfast programe, adding that the airline needed investment of about €2bn.

"The valuation depends ultimately on the market," he said, agreeing that the figure is more likely to be around €300m.

He also said Aer Lingus would not reveal the value the company has put on the Heathrow slots, despite a price being put on these by a number of analysts on the back of the €1.4bn offer for Aer Lingus by IAG, the owner of British Airways.

"Ultimately the value on offer reflects the value of the business. It offers the option of growth, This will results in the creation of jobs, more economic activity and real value because of the global strength of IAG."

He also rejected claims by unions that up to 1,200 jobs could be lost if IAG comes on board.

"IAG is not an airline, it's an infrastructure company that invests in airlines."

"In the airline business cost cutting is never at an end. Processes become redundant."

However, he conceded that there could be synergies with the link-up but put potential job losses at less than 200.

Transport Minister Paschal Donohoe said today has received further contact from IAG about proposed Aer Lingus takeover. 

Mr Donohoe engaged in further discussions with the airline giant and briefed the Cabinet on the potential sale this morning.

The Fine Gael politician will make a statement on the matter this afternoon during which he will outline the areas in which he requires further clarification.

But the move suggests that IAG is intensifying it's efforts to secure the 25.1pc stake.

Labour Party politicians are planning to table at a motion ahead of the party's national conference in Killarney this weekend.

Meanwhile, takeover target Aer Lingus has reported operating profits of €72m, up 17.8pc for the year ended December 2014.

However, the airline reported an overall loss of €95.8m when the €190m provision for its pension costs are included.Aer Lingus last year agreed to a new plan to provide €190m to establish a new defined contribution pension scheme for staff to replace the IASS which was drafted by a government-backed expert panel.

Commenting on the results, the Aer Lingus chairman Colm Barrington also reiterated the board's support for the €1.4bn bid from British Airways owner IAG.

The airline said today that total revenue for 2014 was up 9.2pc to €1.6bn compared to €1.4bn in 2013.

During 2014 Aer Lingus’ total network passengers surpassed 11 million for the first time in its history. Average fare revenue per seat was €98.93, up 9.4pc.

Long haul performance was particularly strong with revenue up 28.4pc to €490m, passenger numbers up 20.6pc and load factor up 0.6 points to 83.7pc.

Short haul revenue was down in 2014 to €791m compared to €789m in the previous year.

And the board is proposing to pay an increased dividend of 5 cent per share for 2014, up from 4 cent for the year 2013.

Commenting on the current IAG bid, he said the company is focused on building value in the business.

Christoph Mueller, Aer Lingus’ outgoing CEO said: "We profitably expanded our long haul network utilising our cost advantage and favourable geographic position and helped establish Dublin as the 7th largest European hub for transatlantic connections. Our short haul business continued to demonstrate its resilience despite a highly competitive market. Commercial initiatives, in addition to cost control, led to the highest operating profit since the financial crisis and 17.8pc above last year."

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