Wednesday 17 January 2018

Aer Lingus takeover hopes fade as Walsh eyes BMI


John Mulligan

British Airways owner IAG moved closer yesterday to acquiring Lufthansa's BMI operation, in a move that is likely to definitively rule out any hope that Aer Lingus could also become a takeover target for the aviation group.

As Aer Lingus yesterday released third-quarter results that showed it generated a 19.4pc rise in pre-exceptional operating losses to €94.6m for the three months to the end of September, IAG -- which also owns Spain's Iberia -- edged towards exclusive negotiations with Lufthansa to buy the BMI business.

If IAG successfully concludes an acquisition, it will gain a large number of additional takeoff and landing slots at London's Heathrow Airport, boosting its share of those valuable slots from 42pc to 51pc.

Aer Lingus has 23 slots at Heathrow, and is the fourth-largest holder of slots at the airport after British Airways, BMI and Virgin Atlantic. Aer Lingus has also made a bid to boost its slot numbers, thereby putting in a bid to buy some BMI slots.

If IAG takes control of BMI, then any subsequent effort to buy Aer Lingus could fall foul of competition laws.

But the issue is almost certainly moot, as IAG chief executive Willie Walsh has only recently ruled out any approach being made by the group for Aer Lingus.

The Government is currently mulling whether to offload its 25.1pc stake in the airline, while Abu Dhabi-based carrier Etihad has already expressed an interest in that holding. Ryanair, which controls 29.9pc of Aer Lingus, has said it would also be willing to sell its stake. Ryanair boss Michael O'Leary has previously said that he believes IAG would be the most likely buyer of an Aer Lingus stake.

Continued uncertainty surrounding a €500m-plus pension deficit at the pension fund that serves around 15,000 former and current workers at Aer Lingus and the Dublin Airport Authority also needs to be resolved before any parties would look seriously at buying into Aer Lingus.

Some resolution is likely to come by the end of the year.

Aer Lingus chief executive Christopher Mueller said yesterday that he doesn't envisage the Government putting its stake up for sale -- if that's what it decides to do -- before the first quarter of 2012. He also said that he expects full-year profit at the airline for 2011 to be at the upper end of a €35m-to-€42m range.

Analyst Joe Gill at Bloxham Stockbrokers yesterday described the airline's results as "solid".

Passenger revenue at Aer Lingus was up 6.4pc to €422.7m in the period, while fuel costs jumped 8.7pc to €83.7m and staff costs rose 10.2pc to €68.2m.

Irish Independent

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