Thursday 23 November 2017

Aer Lingus: IAG share cheques due within two weeks

Willie Walsh
Willie Walsh
John Mulligan

John Mulligan

Thousands of Aer Lingus shareholders are set to receive a summer windfall as the airline's €1.36bn takeover by IAG looks set to be cemented today.

Aer Lingus shareholders have until 1pm this afternoon to accept IAG's takeover offer, with the Government, Etihad and Ryanair all having agreed to sell their Aer Lingus stakes.

IAG, which is headed by Willie Walsh, will have 14 days to pay shareholders who've accepted the deal. Once that's done, Aer Lingus will be formally part of IAG. It will subsequently be delisted and any outstanding shares hoovered up by IAG.

IAG issues half-year results tomorrow, and Mr Walsh will be hoping to be in a position to declare his seven-month pursuit of Aer Lingus complete.

Aer Lingus is being bought as it experiences a surge in transatlantic traffic. Mr Walsh wants to buy it to capitalise on the potential for using Dublin as a transatlantic hub, continuing the Aer Lingus strategy of funnelling passengers from the UK and mainland Europe to North America through the capital.

Releasing first-half results yesterday - its last set of results as a public company - Aer Lingus said that its total passenger revenue rose 7.3pc to €700.8m in the period, while it posted a €13.9m pre-exceptional operating loss - 40pc worse than it did a year earlier.

Its second-quarter pre-exceptional operating profit fell 10.9pc to €34.5m, with the airline having taken an adverse €21m foreign exchange hit due to a much stronger US dollar and sterling.

That unfavourable foreign exchange trend will moderate, according to chief financial officer Bernard Bot.

The airline's fare revenue from transatlantic services rose 24.4pc in the second quarter to €172.5m, as Aer Lingus lifted capacity on those routes by 9.7pc compared to the second quarter in 2014.

Speaking to the Irish Independent, Aer Lingus chief executive Stephen Kavanagh said the airline is planning a number of new customer initiatives, and is also eyeing additional services to Orlando next year, and possibly a service to Miami.

It's also planning to raise short-haul winter capacity by 5pc and will introduce a new premium short-haul service towards the end of the year. That planned premium service was first revealed by the Irish Independent last year.

Eighteen months ago, Aer Lingus set a target to achieve annualised savings of €40m by the end of 2016, but Mr Kavanagh said management are actually targeting a higher figure, especially once the takeover by IAG is completed.

"Our ambition is to beat the €40m target independent of an IAG transaction, because we deem it to be necessary," said Mr Kavanagh.

"We're confident we can exceed that €40m. But obviously the opportunity that IAG brings allows us to have far more ambitious targets from a cost reduction perspective."

He declined to say what kind of targeted savings could be achieved under the takeover scenario.

However, he said Aer Lingus would be able to benefit from the scale of IAG, and not just from renegotiating its contracts with service providers.

"The ability to be involved in joint procurement, we believe, will offer significant benefit."

Mr Kavanagh said assuming the Aer Lingus takeover goes ahead, passengers will start to see changes be phased in as code share agreements are extended to Aer Lingus.

He said that financial savings would be more immediate.

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