Business Irish

Saturday 17 March 2018

Aer Lingus sale: Heathrow slots may be worth just €300m - new chief

New Aer Lingus CEO Stephen Kavanagh. Photo: Mark Condren
New Aer Lingus CEO Stephen Kavanagh. Photo: Mark Condren
John Mulligan

John Mulligan

Take-off and landing slots controlled by Aer Lingus at Heathrow Airport are worth significantly less than €500m, according to new chief executive Stephen Kavanagh - and his claim has been backed up by a senior British aviation expert.

There has been speculation that the 23 slots at London's Heathrow Airport that are used by Aer Lingus could be worth as much as €1.2bn.

But that estimate is based on just one recent sale of a pair of slots by Scandinavian carrier SAS for $60m (€53m).

Extrapolating that to arrive at a valuation for the overall Aer Lingus slot portfolio at Heathrow was not possible, said the senior UK source.

He spoke on condition of anonymity because slot valuations are such a sensitive commercial issue for airlines.

"It is very difficult to value the slots, and we're not privy to the private agreements between airlines," he said.

He pointed out that the value of slots at Heathrow depended on a range of factors, including the time of day they can be used, the general economic cycle and demand.

"It's like putting a work of art up for sale at auction - you just don't know how much it will fetch," he said, noting that slots come up for sale infrequently, making the valuation process more difficult.

He said that slots that can be used prior to 11am at Heathrow are the most expensive, and can typically sell for between £30m and £40m (€41m to €54m).


Afternoon slots can be normally valued at between £10m and £15m (€13m to €20m), while evening slots would only fetch between £5m and £10m (€7m and €13m).

Based on the Aer Lingus schedule in July, with flights between Dublin, Cork, Shannon, Belfast and Heathrow, the airline's slots could be valued at around £310m (€420m). But even that could be optimistic. Mr Kavanagh hinted yesterday that the slots could be worth as little as €300m.

Some of the slot pairs Aer Lingus has at Heathrow aren't suitable for long-haul services because they involve an aircraft arriving in the evening in London, and remaining overnight at Heathrow to fly to Ireland early the next morning.

"We are comfortable with the valuation we've used," Mr Kavanagh told the Irish Independent.

"Aer Lingus has a portfolio of slots across the day. I'd just ask for a little bit of reflection," he said of the valuations that have been in the public domain in recent weeks.

He pointed out that when UK-based airline BMI was sold in 2012 to IAG it controlled 13pc of Heathrow slots and BMI valued them at £770m (€907m at the time). Aer Lingus controls about 3pc of Heathrow's slots.

"Ultimately, we're not in a position to sell slots," said Mr Kavanagh. "We don't want to sell slots."

Irish Independent

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