Thursday 22 February 2018

Aer Lingus takeover hangs on Heathrow pledges for Dublin, Cork and Shannon

Simon Coveney
Simon Coveney

Peter Flanagan and John Mulligan

The Coalition has put pressure on British Airways owner IAG to come up with reassurances on the protection of flights to Heathrow if a takeover of Aer Lingus is to go ahead.

However, the prospect of a takeover became far less likely after Taoiseach Enda Kenny set the bar for a sale extremely high, seeking guarantees on connections to Dublin, Cork and Shannon.

Agriculture Minister Simon Coveney said the takeover is now a "big if" as pressure grows on the Government to hold on to its stake in the former national carrier.

Mr Kenny demanded a "cast-iron guarantee" on the future of Aer Lingus routes from Ireland and the Heathrow slots before he signs off on a sale.

Industry experts believe it would be nearly impossible for Mr Kenny to get a legally binding contract to guarantee the future of flights to and from Ireland's main airports.

While IAG may be willing to make some concessions, it would be nearly impossible to get anything more than an informal pledge in regard to its future strategy.

Mr Kenny's intervention will do little to encourage the sense that IAG will be allowed to buy Aer Lingus.

Shares in Aer Lingus closed on Friday at only €2.15 a share - well below the €2.55 a share IAG has indicated it would be willing to pay - suggesting the financial markets do not expect the bid to succeed.

IAG has yet to make a formal offer for Aer Lingus, but the indicated price of €2.55 a share values it at around €1.36bn.

Mr Coveney said the "non-monetary" aspects of the deal had to be considered and appeared to indicate a deal was now unlikely.

"We must make sure if this sale is to go ahead, and that's a big if at this stage, the non-monetary issues are very much brought to the fore," he said.

"The Government's shareholding needs to be used to make sure that if there is to be a sale we get absolute guarantees around protecting regional connectivity, and maintaining the Heathrow slots, so that as an island we maintain routes for business and the travelling public," he said.

In his strongest comments to date on the takeover saga, Enda Kenny said: "If IAG are going to come to the table in the next few days, then I need to see, in so far as this is possible, a cast-iron permanent guarantee in respect of connectivity for Cork, for Shannon, Dublin and a lesser extent Knock."

IAG chief executive Willie Walsh is believed to be leading a charm offensive with the Government in an effort to get the state to sell its 25.1pc stake in Aer Lingus, and some sort of pledge on maintaining connectivity at Ireland's airports will likely form part of that strategy.

"I need to see flesh on that [pledge]," Mr Kenny said.

"If that happens, Government will of course continue to look at all the options here. I'm not saying yes or no because it's not my place to do so now. We need flesh on the initial offer."

"I'm also cognisant of the voices of those far more experienced in business than I who say that this kind of guarantee might be difficult to get... We're in a limited influential position here," he added.

Mr Kenny later wrote on his Twitter page that the guarantee needed to be in place before the Government "can even consider selling its stake".

A Government spokesman said talks between IAG and officials from the Departments of Finance, Public Expenditure, Transport, and New ERA were "ongoing". Analysts are not expecting IAG to make a formal bid in the immediate future but will wait for an indication of the Government's intentions.

Irish Independent

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