Business Irish

Saturday 16 December 2017

Walsh to leverage bond on Heathrow landing slots

Donal O'Donovan

Donal O'Donovan

COVETED landing rights at Heathrow airport held by Aer Lingus could be used as security to raise debt after bigger rival IAG announced plans to issue bonds backed by its Heathrow slots.

IAG, the group that includes British Airways, has the most Heathrow slots of any airline.

The company's planned bond issue is the first time an airline has attempted such a financing deal outside the US.

Willie Walsh's IAG is hoping to raise £250m (€316m) by issuing bonds backed by landing rights at London's Heathrow airport, according to the 'Financial Times' newspaper.

Ireland's Aer Lingus has the third-largest share of landing rights at Europe's busiest airport, thanks largely to its historic status as a so-called 'flag carrier' in the days when most European airlines were state-controlled and operated from state-controlled facilities.

Implications

The IAG deal will have little immediate implications for Aer Lingus because it is not trying to raise money at the moment, according to Brian Devine of NCB Stockbrokers.

However, he said, having access to a new funding option will appeal to any potential buyers for the airline.

Traditionally, Aer Lingus has raised money in the debt markets using its airline fleet as collateral.

If the IAG deal is a hit with investors the Irish airline will be able to diversify that collateral pool. Though with almost €1bn in cash already on its balance sheet Aer Lingus has no current financing needs it can't meet.

More worrying for the Government is the risk that the bond deal will make the slots themselves more attractive, increasing any temptation for Aer Lingus management to sell off some of the slots it holds.

There is already an informal trade in landing rights at Heathrow -- and Transport Minister Leo Varadkar has admitted he would be powerless to prevent slots currently dedicated to maintaining the crucial links between the UK capital and Ireland from being used for alternative routes.

Irish Independent

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