[Article] Aer Lingus privatisation

Victor

http://home.eircom.net/content/irelandcom/topstories/2297055?view=Eircomnet

Brennan to focus on Aer Lingus slots in Heathrow
From:ireland.com
Monday, 5th January, 2004

The Government is set to examine whether valuable landing slots at Heathrow Airport owned by Aer Lingus should form part of the sale of the airline.

A discussion paper from the Minister for Transport, Mr Brennan, will examine whether the slots should be retained by the State because of their national strategic value or be included in the sale.

The question of the slots is likely to preoccupy the airline and the Government in the next few months as plans to sell the airline intensify.

Mr Brennan intends to publish the discussion paper and facilitate a Dáil debate where the slots issue will be discussed.

Opposition politicians are pressing the Minister to find some way to retain ownership or control of the slots, which are believed to be worth up to €120 million.

They believe at least some of the slots should be retained in State ownership because they are national assets.

In October, British Airways paid £12 million (€17 million) for four slots from US carrier United Airlines. Aer Lingus has 20-30 slots, depending on the time of the year.

It is understood that Aer Lingus opposes withholding slots from any sale process because the airline's value would be seriously eroded.

Opposition politicians, however, are concerned that a buyer might buy the slots for use on non-Irish routes.

Some Opposition politicians have raised the possibility of British Airways buying Aer Lingus and using the slots at Heathrow to increase its services into North America.

During a debate before Christmas, Mr Brennan said on the issue: "I share the concerns of the House. We must be careful as to how we handle the issue because it is essential that we continue to have access to these hubs in the future.

"This whole area of slots is a legal grey area, which is exercising EU policymakers' minds. I share the deputies' concerns on this matter and will make stringent efforts to ensure that, in any changes of Aer Lingus ownership, great care will be taken on that issue."

But he made it clear that the State did not own the slots per se.

"I must clarify that Ireland does not own slots in Heathrow Airport.

"These slots are time slots held by Aer Lingus on the basis of a historical precedent, known as 'grandfather's rights'.

"The allocation of slots at congested airports such as Heathrow is strictly governed by EU rules which are now under review. The current regulation allows for the exchange of slots but does not cover their sale. This has not prevented the development of a 'grey market' in slots," he said in the Dáil.

Analysts have put a price of €350-€500 million on Aer Lingus.

If the slots were in some way excluded from the sale, these valuations might have to come down.

In the recent debate, Mr Brennan explained why the slots were important strategically.

"The slots at Heathrow are important because, apart from Aer Lingus, only British Midland operates Heathrow-Ireland services. Their value arises from their scarcity." While increased runway capacity at Heathrow may provide additional slots in the years ahead, as the largest international hub in the world the slots will remain highly valuable.

Fine Gael has described the slots as "extremely valuable" and pointed out that "if Aer Lingus were to lose them we might not be able to get them back.".

Mr Simon Coveney, of Fine Gael, speaking in the debate in the Dáil, said: "It is crucial that the number of slots held by Aer Lingus at Heathrow for flights to and from Dublin, Cork and Shannon be maintained.

"It is important, therefore, that we should not lose what I consider to be a national asset, namely, our slots at Heathrow through the sale of Aer Lingus."

Victor

http://www.breakingnews.ie/2004/02/06/story132954.html

Aer Lingus may float within two years
06/02/2004 - 9:24:49 am

The Minister for Transport, Seamus Brennan, is reportedly to support a proposal from the board of Aer Lingus that could see the company float on the stock market within 18 months to two years.

A report in the Irish Times today says that the Minister is expected to bring the plan to Cabinet shortly. The plan proposes that a significant stake in the airline be sold to institutional investors in the near future, with a stock market flotation following within 18 months.

About 40% of the airline - which is valued at between €300m and €500m - may be sold in the first stage. The airline's 5,000 staff are entitled to almost 15% of the company, held through an employee trust.

Victor

http://home.eircom.net/content/irelandcom/topstories/2485903?view=Eircomnet

Brennan backs Aer Lingus plan for stock flotation
From:ireland.com
Friday, 6th February, 2004

The Minister for Transport is to support a proposal from the board of Aer Lingus that could see the company float on the stock market within 18 months to two years, writes John McManus

Mr Brennan is expected to bring the plan to Cabinet shortly, according to Department of Transport sources. It proposes that a significant stake in the airline be sold to institutional investors in the near future, with a stock market flotation following within 18 months.

In the region of 40 per cent of the airline - which is valued at between €300 million and €500 million - may be sold in the first stage. The airline's 5,000 staff are entitled to almost 15 per cent of the company, held through an employee trust.

The two-step approach is attractive politically as it would allow the Government put some distance between itself and the ultimate stock market offering. Fear of reopening the wounds inflicted on more than 400,000 small shareholders by the flotation of Eircom in 1999 would figure in any Cabinet decision on Aer Lingus.

In addition Mr Brennan has given a commitment to seek the approval of the Dáil for the broad principles involved in any disposal of Aer Lingus shares.

The decision to go with the Aer Lingus proposal follows several months of deliberation by the Minister and his officials. Among the issues being considered was whether or not the Government could separately hold on to Aer Lingus's landing rights at Heathrow in London. These are nominally valued at up to €200 million based on a recent deal in which Qantas, the Australian airline, paid for four slots.

Aer Lingus has up to 30 slots a day depending on the time of year and, although airlines buy and sell these slots on a so-called "grey market", the advice given to the Department was that it was not possible to treat them as a separate asset.

Aer Lingus is shortly expected to announce operating profits of €79 million for last year, which will represent a 23 per cent increase on 2002. The company has benefited from better-than-expected revenue on its transatlantic services, with the increase in people travelling to the US to avail of the weak dollar more than making up for a fall off in traffic the other way.

The figures follow an impressive turnaround by the airline under its chief executive, Mr Willie Walsh, and its chairman, Mr Tom Mulcahy, the former chief executive of AIB. Aer Lingus plunged to losses of €52 million in 2001 due to a combination of the worldwide economic slowdown and the collapse in transatlantic traffic following the September 11th terrorist attacks. As part of the restructuring, which saw over 1,500 staff leave in 2002, the employees were granted a 14.9 per cent stake in the company.

Fears that the airline's fortunes could suffer another dramatic reversal are a significant factor in the Department of Transport's support for the sale of Aer Lingus. Even though the Government is prevented under EU law from giving any State aid to the airline, it came under intense pressure to help it in 2001.

"We are worried that they [Aer Lingus] will be coming looking for money again and we won't be able to give it to them," according to one Department source.

The legislation to facilitate a sale is making its way through the Dáil, which would allow a rapid placing of the initial stake should the Cabinet give its approval.

Yoda

From http://www.breakingnews.ie/2004/04/04/story141304.html

Minister Brennan plans sale of Aer Lingus
04/04/2004 - 11:11:59 AM

The Government is planning to put Aer Lingus up for sale within the next 12 weeks, according to a report in the Sunday Business Post.

The sale is being put forward in the Dáil by the Minister for Transport, Seamus Brennan.

It is believed that Minister Brennan wants to sell a majority of the airline, but with the State holding on to a stake in it for several years to allow the exchequer to benefit from sale and any increase in value of the company.

Wouldn't it be nice if SAS or Finnair bought it? Then our country could have a decent, civilized airline with excellent service. Of course an airline has many concerns, but isn't it unbelievable that Ireland's national airline sells us cups of tea, so that they can claim to be low-fare? :rolleyes:

embraer170

Of course an airline has many concerns, but isn't it unbelievable that Ireland's national airline sells us cups of tea, so that they can claim to be low-fare?

Iberia, Swiss, Austrian and KLM now do the exact with Lufthansa and Air France rumoured to follow in the near future.

Sarsfield

Originally posted by Yoda
...isn't it unbelievable that Ireland's national airline sells us cups of tea, so that they can claim to be low-fare? :rolleyes:

What's unbelievable is some peoples fixation with free cups of tea instead of routes, fares, growth and profitability :rolleyes:

therecklessone

Originally posted by Yoda
From http://www.breakingnews.ie/2004/04/04/story141304.html Wouldn't it be nice if SAS or Finnair bought it?

Great, and SAS style fares. Oh goody...

Yoda

My flight to and from Düsseldorf was over €210 with taxes. That isn't really all that low.

Sad to see European courtesy descend to the base commerce American airlines have been indulging in for two decades. For the price of a cup of tea.

Yoda

Originally posted by Sarsfield
What's unbelievable is some peoples fixation with free cups of tea instead of routes, fares, growth and profitability :rolleyes:

I suppose the tea is symbolic. Comfort and courtesy are nice things. Between Münster and the Düsseldorf airport this morning I enjoyed Deutsche Bahn's exquisitely comfortable seats and breakfasted on nicely-prepared scrambled eggs and Danish bacon and excellent coffee in the café. Of course I paid for the food. But it was good food, and polite and kind service. Aer Lingus, thrilling to be counted along with Southwest (the inventor of "no frills flying") and with Ryanair, has downgraded the quality of what they used to offer, and is charging us into the bargain. To suggest that Aer Lingus' profitability hung on whether they gave everyone breakfast on a 1.5 hour flight or not is to oversimplify.

Travel to anywhere in Europe routinely takes six or more hours door, with taxis and waiting and queuing and all. The reason comforts were a part of air service was because people need and deserve a certain amount of comfort. If the only way our national carrier can survive is to turn into Ryanair, then I surely hope someone with taste as well as a knack for profitability can take over. Must we always settle for "sure it'll do"?

BuffyBot

Originally posted by Sarsfield
What's unbelievable is some peoples fixation with free cups of tea instead of routes, fares, growth and profitability :rolleyes:

Well, take bmi as an example (who still provide all of the above, free)

Their fares are generally lower than Aer Lingus, they have an extremely modern fleet, an expanding network of destinations. All in all a pretty good airline, with a good product.

I can only wonder how Aer Lingus can't emulate the same level of growth and service.

Victor

http://home.eircom.net/content/unison/national/2998963?view=Eircomnet

Aer Lingus strike is averted but cabin staff refuse to move
From:The Irish Independent
Monday, 12th April, 2004
Eugene Hogan

The threat of an all-out strike by Aer Lingus cabin crew, over the attempted transfer by management of 29 Shannon-based crew to Dublin, has been put on hold.

All 1,000 plus cabin crew at the company's Shannon, Dublin, Cork and London bases had voted unanimously for industrial action up to all-out strike if the company disciplined any of the 29 crew who were refusing to move.

However, the matter has been allayed for the moment following the company's decision to restore the 29 staff to the Shannon roster pending the outcome of the Labour Relations Commission's deliberations on the issue.

The first of the crew members defied the transfer orders by reporting for duty to Shannon instead of Dublin, but the company did not seek to discipline her.

Negotiations between the union and management have since resumed and it was agreed to refer the matter to the LRC and restore the cabin crew members already affected to their Shannon roster.

But workers remain defiant that they will not give in on the demands and say that they are already understaffed at the Shannon base.

Shannon based crew said it would not be possible for them to transfer to Dublin as they have family and mortgage commitments in the mid-west and simply could not afford the move.Meanwhile, a new airline set to operate out of Ireland from June has thrown down the gauntlet to low-fares carriers.

It is stating that it will treat its customers "like people, not cattle."

The new airline - duo - will operate daily flights to Birmingham and Edinburgh from Shannon and says it will do so by putting the class back into air travel.

The airline is banking largely on a return to the good old days of complimentary hot food and drink for it's success.

It says that many travellers are sick of the "no-frills no-thrills" service.

Victor

http://home.eircom.net/content/irelandcom/topstories/3010719?view=Eircomnet

Aer Lingus to gain if EU airport rules shift
From:ireland.com
Wednesday, 14th April, 2004

The Aer Lingus balance sheet could be significantly strengthened if the European Commission accepts a proposal to allow airlines to trade officially in landing slots at Heathrow and other major airports.

A 400-page report commissioned by the Commission has recommended that airlines be allowed to trade in slots and list them as assets on their balance sheets, a practice currently prohibited under EU regulations.

This could boost the Aer Lingus balance sheet by more than €100 million. The airline has 20 to 30 slots at Heathrow, depending on the time of the year.

The report by London-based consultancy, National Economic Research Associates (NERA), for the Commission, claims that some peak time slots are under-utilised by owners and a free trade system would allow supply to match demand.

Slots are already traded in a so-called "grey market", but the Commission may now move to formalise this arrangement, opening the way for the slots to come onto airline balance sheets.

This would benefit Aer Lingus ahead of a potential flotation or private placement. It would also give a boost to Ryanair which has many slots at Stansted, although these are not as valuable as Heathrow slots. Last October British Airways paid £12 million (€17 million) for four Heathrow slots from US carrier United Airlines. More recently Australian carrier Qantas paid £20 million for two peak time slots at Heathrow. Slots are priced according to their position in peak flying time.

The Minister for Transport, Mr Brennan, has previously warned that Heathrow slots may be of national strategic importance and in any Aer Lingus sale their position must be carefully considered.

The fear among Government advisers is that in a few years Heathrow slots could be sold off by the new owners of Aer Lingus to bigger carriers which might want to use them for transatlantic routes.

The report by NERA also describes Dublin as having "excess demand at peak times of the day", but it says far more serious congestion problems exist at Dusseldorf, Frankfurt, Heathrow, London Gatwick, Milan, Paris Orly and Madrid. These airports suffers from congestion "throughout" the day, it claims.

Meanwhile passenger traffic for Britain's biggest airports operator, BAA plc, rose 4.4 per cent in the last year and there was an improvement in its hard-hit north Atlantic routes, the firm said yesterday.

The owner of seven UK airports including Heathrow, said March passenger traffic rose 10.4 per cent year on year.

Victor

http://home.eircom.net/content/irelandcom/topstories/3057581?view=Eircomnet

46 Aer Lingus pilots have not worked for past six months
From:ireland.com
Thursday, 22nd April, 2004

Some 46 Aer Lingus pilots have been at home for almost six months and have not flown for the company despite being on full pay, it emerged yesterday.

The pilots stopped flying the company's BAe 146 fleet of aircraft in late October but have not been retrained on replacement Airbus aircraft because of a union dispute.

The chief executive of Aer Lingus, Mr Willie Walsh, said yesterday the dispute would end up costing the airline between €5 million and €6 million if it continued for a whole year. He was speaking at a meeting of the Joint Oireachtas Committee on Transport.

"It must be addressed. It is clearly not sustainable," he said. He described the idea of pilots being paid for being at home as "completely unacceptable".

However, a Fine Gael senator at the meeting, Mr Feargal Browne, said the pilots and their families were being unfairly treated by the airline.

A spokesman for the Irish Airline Pilots' Association, Mr Michael Landers, said last night that it was not the pilots' fault the situation had developed in this way. He said 19 of the pilots would be attending an Airbus training scheme next Monday.

He said others were objecting to the training scheme because it was for co-pilots rather than captains.

"That is not acceptable. The pilots having been sitting at home because they haven't been given any work to do by the airline," he claimed. The airline last night said it had made attempts to retrain the pilots but a work-to-rule had made this impossible.

The airline said that any captains who agreed to work as co-pilots in future would retain their captain's salary.

Mr Brian Dunne, the airline's chief financial officer, said the recent decision to phase out the BAe fleet and replace it with Airbus aircraft had created a surplus of pilots at the airline.

He estimated the airline needed between 375 and 380 pilots but it currently had 455.

The Labour Court yesterday said it would appoint an independent party to consider the issue of whether Aer Lingus had a surplus of pilots. This follows two days of talks at the court.

The independent party appointed by the Labour Court is due to report back in late May. The court has asked that any industrial action be withdrawn in the meantime.

The situation could worsen at the airline because Aer Lingus is due to phase out some of its Boeing aircraft soon and this could leave about 100 pilots requiring retraining or redeployment.

Slice

I don't see how it's necessary to float an airline that is currently making a profit for the government - it kinda defies logic

Sarsfield

It's driven by ideology, not logic. Having said that, I'm not ideologically opposed to privatisation.

RicardoSmith

Originally posted by Slice
I don't see how it's necessary to float an airline that is currently making a profit for the government - it kinda defies logic

Is there a reason that the Govt should be running an airline?

RicardoSmith

46 Pilots on full pay and not working. This in a semi state company. Some screwed up management there. But what do you expect. Tell me why we pay taxes again?

I don't see why they are sitting idle and haven't been retrained. I heard they had ordered a bunch of new Airbuses. Since they already fly airbuses you'd think it would be a no brainer to train the pilots on their current airbuses and be ready for the new aircraft. Especially since the summer is their busiest time.

Bluehair

Originally posted by RicardoSmith
.... This in a semi state company. Some screwed up management there. ...

Like you wouldn't believe. The 'Us vs Them' mentality goes back so long in this company theres plenty of blame on both sides and sadly less than zero trust too.

The sooner Aer Lingus is privatised the better for all concerned.

Slice

Is there a reason that the Govt should be running an airline?

I think there is very valid reason Aer Lingus should remain in public ownership. I’m not arguing for a company that has its future and strategies constantly dictated by short term political interests but since the airline has started making a profit it has also introduced many new routes – this is a good example of how Aer Lingus is gaining financially and benefiting the country at the same time.

Consider the alternative… more than likely privatization will mean Aer Lingus gets taken over by BA or KLM. Aer Lingus will be bought for the landing rights it has at London Heathrow and not because these larger airlines get to tap into a market of just under 4 million people – let’s face it there are more people living in Tony Blair’s back garden.

It’s not like Ireland is in the middle of Europe here, if services to the island are reduced because the shareholders of some foreign company feel that cost cutting is needed to increase their dividends (and let’s face it marginal routes such as those to Ireland would be the first to go) then we can’t just hop into a car and drive the short distance to Schiphol or Charles de Gaulle airport and catch a flight from there – it will leave Ireland isolated and then we will see that in this instance our faith in free-market economics was a blind one.

RicardoSmith

Thats a good point. I hadn't thought of it like that. But basically you're saying its running as public service with the routes that are profit making paying for the routes that are not profit making. The only way to keep those routes is not to privatise it.

Victor

Originally posted by RicardoSmith
Thats a good point. I hadn't thought of it like that. But basically you're saying its running as public service with the routes that are profit making paying for the routes that are not profit making. The only way to keep those routes is not to privatise it.

Oh, I suspect all (except start-up) routes make (enough) profit. The thing is BA could make more profit (longterm, maybe not short term) by buying Aer Lingus, changing all the Dublin-Heathrow flights (using medium sized aircraft) to Dublin-Luton/Stansted and using the time slots at Heathrow to do Heathrow-North America / Far East (using large aircraft).

This would be a sustantial burden to Irish business, as people would have to go elsewhere to get flights to non-European/North American destinations.

Occidental

BMi also operate Dublin-Heathrow and have no intention pulling off the route no matter what BA or Aer Lingus do. It's worth rembering that BA operate Heathrow as a hub and Aer Lingus provide a valuable feed to this hub. If BA or Aer Lingus moved Irish traffic out of Heathrow, people would vote with their feet and connect in Paris, Amsterdam, Frankfurt etc. BA may be a bit thick, but they are not totally stupid.

It's also worth noting that many other carriers operate routes from Ireland and that the number of airlines and routes is growing. If Aer Lingus ceased to exist tomorrow it would leave a vacuum for a few months, but it wouldn't be the end of the world. We're not in the bad old days of the sixties and seventies any more, when you had a choice of Aer Lingus or boat.

Victor

http://www.rte.ie/news/2004/0529/aib.html

Aer Lingus chairman resigns in AIB scandal
29 May 2004 15:22

The Minister for Transport, Seamus Brennan, has accepted the resignation of the chairman of Aer Lingus, Tom Mulcahy.

Mr Mulcahy, who is a former senior executive with AIB, has resigned from his position with the airline as a result of the latest scandal at the bank.

He is understood to be one of five executives who had what were described by AIB as 'tax issues', due to arrangements unconnected to the controversial scheme.

RicardoSmith

Originally posted by Victor
Oh, I suspect all (except start-up) routes make (enough) profit. The thing is BA could make more profit (longterm, maybe not short term) by buying Aer Lingus, changing all the Dublin-Heathrow flights (using medium sized aircraft) to Dublin-Luton/Stansted and using the time slots at Heathrow to do Heathrow-North America / Far East (using large aircraft).

This would be a sustantial burden to Irish business, as people would have to go elsewhere to get flights to non-European/North American destinations.

I was actually thinking about the regional routes around Ireland. The red eye from Cork to Dub for example. Many of which I've heard are not profit making.

Victor

http://home.eircom.net/content/irelandcom/topstories/3290008?view=Eircomnet

Aer Rianta break-up may push fees up
From:ireland.com
Saturday, 29th May, 2004

Another report has suggested that passenger charges at Dublin Airport may need to rise to €9.50 as a result of the proposed Aer Rianta break-up, writes Emmet Oliver.

The report, by a leading corporate finance house, agrees with a finding by PricewaterhouseCoopers (PwC) that a ceiling on charges at the new Dublin Airport may need to rise from €5.29 to between €9.45 and €9.50 between now and 2008.

The increase will be needed to "deliver sustainable financial ratios", says the report. It was carried out by IBI Corporate Finance and presented to the Aer Rianta board in recent days. The report contains a review of various projections, some from Aer Rianta and some from other sources.

The PwC report suggests that an independent Dublin Airport would have to raise the cap on airport charges to meet interest payments. This is because the Minister for Transport, Mr Brennan, intends to shift the debts of Shannon and Cork onto the balance sheet of Dublin Airport.

The IBI report points out that Aer Rianta's projections indicate that Shannon Airport will eventually become self-financing after once-off "transformation costs" of about €15 million.

However, it points out that the PwC report envisages "transformation costs" of €20 million, plus additional funding of €10 million. The IBI report says that the PwC report does not take account of a potential shortfall in the Aer Rianta pension fund.

It says that financial ratios at Dublin Airport will be "significantly out of line" with international airports in 2005, particularly without the increase in airport charges. It acknowledges, however, that significant "re-balancing" is expected by 2008 if passenger charges are altered and then ratios will come into line with international trends.

The PwC report states that the most complex part of the break- up plan relates to the reserves of Aer Rianta. It points out that an "immediate" distribution of Shannon and Cork is not possible. Instead, it suggests that Cork be leased from Dublin Airport rather than completely spun off.

Meanwhile, the Dublin Chamber of Commerce has called on the Government to "clarify" its plans for Dublin Airport. It says unless there is clarity in relation to terminal facilities at Dublin Airport "tourism will suffer".

"As things stand, expansion work on terminal facilities at Dublin Airport, which was completed in March 2002, will cater for 20 million passengers per annum. However, forecast demand suggests that additional capacity will need to be operational by 2005/06," said chamber spokesman, Mr Cian Connaughton.

Earlier this week, Aer Rianta signalled that its Pier D terminal facility would shortly be abandoned because of a failure by the Government to give a formal go-ahead. The terminal was to be a quick turnaround facility, especially suited to low-cost airlines.

The company indicated that over €7 million of investment might be written-off as a result. These comments angered Ryanair, which accused Aer Rianta of "gold-plating" at the airport.

SoBe

well personaly i dont think it should be privatised,why shouldnt we have a national airline?who wants to see british airways or some other airline buy it?if its not loosing money i think it should not be sold.i always use it and i find their fares more than reasonable.just think if you fly from dublin to new york or chicago etc if british airways own it you will be stopping in london or some place like that.no more direct flights,thiink its the goverments way of making a quick buck to spend on something stupid again or mabey its just me that feels like that.

Slice

The irish aviation industry is already totally liberated, privatising aer lingus isnt going to make any difference except reduce competition if it is taken over by BA

RicardoSmith

Liberated? What does that mean?

silverside

I don't see any benefit in keeping Aer Lingus publicly owned. As with most public companies, the unions still have a lot of power. I believe if it was floated, shareholder pressure would make sure it was run more efficiently.

As it is, british midland, mytravellite, and aer arann provide plenty of competition, and are usually better value. Aer lingus's booking system is still hard to use - basically you can't get cheap one way tickets at all.

BuffyBot

Aer lingus's booking system is still hard to use - basically you can't get cheap one way tickets at all.

Nothing to do with the booking system. Aer Lingus simply don't offer cheap one way tickets.

silverside

Yeah but why not? I reckon they would make more money if they did - everybody else does. But then who am I to tell a big business how to run their affairs ?