Aer Lingus Management Buy-out

Victor

http://www.rte.ie/business/2004/0702/aerlingus.html

Aer Lingus trio's investment plan
July 02, 2004 19:45

Three senior members of the Aer Lingus management team, including chief executive Willie Walsh, have asked Transport Minister Seamus Brennan to allow them to develop what they describe as an investment proposal for the company.

A statement from the three - Mr Walsh, chief financial officer Brian Dunne and chief operations officer Seamus Kearney - said they had also advised the Aer Lingus board of their request.

The statement also said they would 'fully comply and co-operate with any specific corporate governance procedures put in place.'


Aer Lingus's has been transformed in the last couple of years into a profit-making low cost carrier.

Legislation brought in last year allows the Minister for Finance to sell his Aer Lingus shares but beyond that, no firm way forward has been agreed at the Cabinet table.

This evening, a spokesman for Transport Minister Seamus Brennan said the letter from Aer Lingus raised issues of corporate governance, potential conflicts of interest, and transparency, adding that it had raised the spectre of a management buy-out.

The biggest union at Aer Lingus, SIPTU, has repeated its opposition to any privatisation of the company.

SIPTU's national industrial secretary, Michael Halpenny, said that the first it had heard of plans by senior management to arrange a buy-out of the airline was in media reports this evening.

Mr Halpenny added that the commercial viability of Aer Lingus had been delivered by the sacrifices of the workforce.

http://www.rte.ie/news/2004/0703/aerlingus.html

Minister considers Aer Lingus buy out
03 July 2004 20:52

The Minister for Transport, Séamus Brennan, has said he is seeking expert advice on a proposal for a mangement led buy out of Aer Lingus.

It came from the airline's Chief Executive Willie Walsh, Chief Financial Officer Brian Dunne and Chief Operations Officer Séamus Kearney, who said they had also advised the Aer Lingus board of their request.

Aer Lingus is valued at between €500 and €600 million.

The statement also said they would 'fully comply and co-operate with any specific corporate governance procedures put in place'.

Meanwhile, John Sharman, British aviation financier and member of the board of Aer Lingus, has accepted an invitation from the Transport Minister to serve as the interim chairman of the company.

Victor

http://home.eircom.net/content/irelandcom/topstories/3517401?view=Eircomnet

Aer Lingus chiefs submit buyout plan to Brennan
From:ireland.com
Saturday, 3rd July, 2004

Aer Lingus executives yesterday put a dramatic proposal to pursue a management buyout of the airline to the Minister for Transport, Mr Brennan, write Colm Keena & Arthur Beesley.

The Government will be briefed on the development by Mr Brennan over the coming days. Such a sale would be unprecedented in the State sector.

Last night, the Tánaiste, Ms Harney, left open the possibility that the Government would back the proposal. She said she was very impressed with the turnaround of the company by its workers and management and believed that, for its continuing success, it would need access to private capital.

She said all proposals for the airline "should be considered in a fair and objective way".

SIPTU reacted negatively, with its president, Mr Jack O'Connor, saying the union remained opposed to the privatisation of Aer Lingus.

The proposal is likely to force the Government finally to make a decision on the issue of privatisation, something it has been shying away from for some time.

Aer Lingus is considered the jewel in the crown of the commercial semi-State sector. Market sources say the airline is worth in the region of €500 million. Legislation is in place for the sale and an employee share option trust would be likely to be offered a 14.9 per cent stake. Such a stake would be worth around €75 million.

The airline's chief executive, Mr Willie Walsh, along with chief financial officer, Mr Brian Dunne, and chief operations officer, Mr Seamus Kearney, yesterday wrote to Mr Brennan, seeking his consent to develop an investment proposal for the company.

They advised the Aer Lingus board earlier yesterday of their intention to seek the consent. It is understood Mr Brennan was aware for the past number of days that Mr Walsh was considering such a move. Sources close to the three Aer Lingus executives said there were no agreed backers behind the proposal.

Last year, Aer Lingus made an operating profit of €83 million, up from €63.8 million the previous year. The average number of employees last year was 4,281, compared to 6,108 in 2001. However, the airline needs substantial investment in the future, particularly for fleet replacement.

Mr Walsh is known to believe that now is a good time to seek private investment in the airline. He is concerned that a delay of a few years could see another economic downturn create a fresh crisis for Aer Lingus.

There are also EU restrictions on aid for State companies.

Mr Brennan pointed out last night that the Government had made no decision to sell Aer Lingus. "Therefore this request is a matter for the Government to consider in the context of its ongoing deliberations on the future of the airline, the need for openness and transparency, the avoidance of conflicts of interest, and consultation with stakeholders."

The Government was presented with a discussion paper on the future of Aer Lingus some months ago, but no decision was made on the matter. Possible options are a flotation, or a partial or full sale to private investors.

A Government source said the move by Mr Walsh prior to any Government decision "has come as a surprise".

It is expected that any consent from Mr Brennan would lead to a number of proposals being made to the airline. A process would have to be put in place to manage a sale while the airline was still being run by figures linked to one of the bids. Mr Walsh and his partners would be seeking a stake in a privatised Aer Lingus.

The airline was close to going bankrupt a few years ago and is one of the few European flag carriers to have bounced back from the crisis caused by the September 11th attacks and the growth of low-cost airlines.

SIPTU said it was seriously concerned by the development. "Contrary to misconceptions promoted by some vested interests, there is no prohibition in EU law on the Government investing in Aer Lingus as a commercial venture," said Mr Michael Halpenny, national industrial secretary.

He said the union had very serious concerns about the airline, which he said was essential to the development of the economy, being delivered into private hands, especially should control pass to interests outside the State or should it come under the control of another airline.

http://www.breakingnews.ie/2004/07/03/story155422.html

Labour calls on Govt to reject Aer Lingus buy-out
03/07/2004 - 18:04:49

The Labour Party has called on the Government to reject the proposed buy-out of Aer Lingus by senior executives at the company.

According to Labour's transport spokesperson Róisín Shorthall, no convincing argument for privatising the company has been put forward, and it is in the country's best interest to keep the national carrier in public ownership.

As an island nation, and with our high dependency on tourism, Aer Lingus plays a "critical and strategic role", she said.

Victor

http://home.eircom.net/content/unison/national/3517618?view=Eircomnet

Airline chiefs propose €250m buyout
From:The Irish Independent
Saturday, 3rd July, 2004

AER Lingus boss Willie Walsh and two co-directors yesterday asked the Government for permission to make a management buyout offer for the airline.

The unexpected development means the executives want to lead a consortium that would buy a majority stake in the airline worth up to €250m with the backing of venture capitalists.

Mr Walsh, chief finance officer Brian Dunne, and chief operations officer Seamus Kearney yesterday gave a letter to Transport Minister Seamus Brennan advising him of their position. The sudden nature of the request caught the Government and trade unions by surprise.

Last night, Siptu expressed "serious opposition" to any plans to sell a majority of the airline to private investors.

The Government has been working on plans to privatise the airline but has not yet reached a decision on whether to float the company on the stock market or seek private investment.

Mr Walsh said yesterday he "was confident that an attractive proposal could be developed and financed" if granted consent.

If the Government agrees to the request, it would have to appoint corporate finance advisors to conduct a sale process.

The advisors would adjudicate on offers from Mr Walsh and other investors who express an interest in buy a stake in airline.

It is understood that Mr Walsh believes the ownership structure at the company must change.

At present, workers in the company hold a 14.9pc share but the rest of the airline is owned by the State.

EU regulations block the Government from injecting finance into the airline.

As a result, Mr Walsh is keen to bring in fresh funding from a private investors to help finance an expansion of the carrier.

Aer Lingus wants to buy seven Airbus 330 aircraft that cost €90m each but would need investment to purchase the new planes and renew existing aircraft.

The management team also believes the ownership has to be changed to allow the company follow its ambitions as a fast-growing budget airline.

Mr Walsh recently told the Government he believed the best course of action would be for a private investor to take a stake in the airline and this would be followed by a stock market flotation. A spokesman for Mr Brennan said the minister had held discussions with the Cabinet about the future for the airline and planned to work on privatisation proposals this autumn.

It is understood Mr Walsh now prefers private investment because the management team is cautious to ensure the sale process is a complete success, whereas a stock market offering could be more risky.

The most likely shape of a management buyout would see the three executives with shareholdings and a venture capital group financing the purchasing of a stake in the airline.

Aer Lingus is currently valued at between €400m and €500m, which would mean a majority stake could cost as much as €250m for the management team.

David Murphy

Victor

http://home.eircom.net/content/irelandcom/breaking/3519531?view=Eircomnet

'No convincing argument' for Aer Lingus privatisation
From:ireland.com
Saturday, 3rd July, 2004

The Labour Party has called on the Minister for Transport to reject a management buyout of Aer Lingus.

Three senior executives at the State airline yesterday put the dramatic proposal to pursue the buyout to Mr Brennan.

Last night, the Tánaiste, Ms Harney, left open the possibility that the Government would back the proposal. She said she was very impressed with the turnaround of the company by its workers and management and believed that, for its continuing success, it would need access to private capital.

She said all proposals for the airline "should be considered in a fair and objective way".

But Labour's spokeswoman on transport, Ms Roisin Shorthall, said today that "no convincing argument" had been made for the privatisation of Aer Lingus.

"Aer Lingus is of crucial strategic importance to this country as an island nation, heavily dependent on tourism and one of the few EU members without a land link to the European mainland," Ms Shorthall said in a statement.

"When the Minister for Transport, Seamus Brennan, introduced the Aer Lingus Bill last October I warned that its primary purpose was to facilitate the privatisation of the company.

"The question that now arises is, had Minister Brennan prior knowledge of this move by the three executives? Has there been behind the scenes 'tick-tacking' between the Minister and the executives, with a view to furthering the Brennan/PD privatisation agenda?" Ms Shorthall asked.

SIPTU reacted negatively to the proposal, with its president, Mr Jack O'Connor, saying the union remained opposed to the privatisation of Aer Lingus.

The proposal is likely to force the Government finally to make a decision on the issue of privatisation, something it has been shying away from for some time.

The airline was close to going bankrupt a few years ago and is one of the few European flag carriers to have bounced back from the crisis caused by the September 11th attacks and the growth of low-cost airlines.

jbkenn

If you want an airline that badly Willie, do a Ryanair, F%$k off, and start your own,. Just because you did the job you were paid to do, does'nt entitle you to buy Aer Lingus, and contrary to your own beliefs, you or your management team did'nt do it on your own.
Can you imagine if 3 pilots or cabin crew or ground staff made the offer, would they be taken seriously.

jbkenn

p.s. I am not an employee of Aer lingus or involved in any branch of the aviation business.

BuffyBot

If you want an airline that badly Willie, do a Ryanair, F%$k off, and start your own,. Just because you did the job you were paid to do, does'nt entitle you to buy Aer Lingus, and contrary to your own beliefs, you or your management team did'nt do it on your own.

No they didn't. Then again, no one else did it on their own either? I'm no fan of what Aer Lingus has become, however Walsh et al have made signifigant progress in turning Aer Lingus around. It involved a lot of cuts, some good and some bad - but you can't deny that Aer Lingus is in healthier shape then it had previously been. The Walsh management team have been fairly instrumental in that

Can you imagine if 3 pilots or cabin crew or ground staff made the offer, would they be taken seriously.

I guess it would depend on the plan put forward. Somehow I suspect the management are in a better position to know the information nessescary to put it together, plus they have the experience needed to run an airline.

Victor

http://home.eircom.net/content/irelandcom/topstories/3527025?view=Eircomnet

1,300 Aer Lingus jobs may go in business plan for airline
From:ireland.com
Monday, 5th July, 2004

Up to 1,300 jobs may go in Aer Lingus in a new business plan for the State airline, whose top managers have asked the Government for permission to develop a bid to privatise the company.

The Government and Aer Lingus will move separately to take legal advice today on the proposal from the airline's chief executive, Mr Willie Walsh, and two colleagues to pursue a management buy-out of the company.

The Aer Lingus board is likely to appoint a subcommittee to take overall responsibility for the day-to-day control of the airline while the Government decides its response to Mr Walsh.

It is understood that Mr Walsh and his colleagues have indicated a willingness to co-operate with whatever structure is put in place as the process develops.

Informed company sources said that a new business plan being prepared for the airline's board was likely to call for up to 1,300 redundancies as the company attempts to reduce the cost of its European service. The plan is likely to be finalised by the end of the summer and a dialogue with the airline's unions has already begun.

The company sources said some 600 cuts were likely in the airline's catering division and about 120 would be sought from its ground-handling division at Shannon airport.

The bulk of the remaining cuts were likely in the airline's freight division, they said.

While the Minister for Transport, Mr Brennan, is expected to bring an aide mémoire on the management buy-out proposal to tomorrow's Cabinet meeting, there will be no immediate decision on the substance of Mr Walsh's move to lead a bid for the company.

The Department of Transport has told Mr Walsh to do nothing further in relation to the approach until the Government decides its stance.

The department also told Mr Walsh that he could not assume that Mr Brennan would support the proposal.

While Aer Lingus says it needs private investment because State investment is ruled out under EU rules, there was a recognition in Government circles that the approach from Mr Walsh is highly sensitive politically.

With informed sources emphasising that the Government would have to maximise transparency, it was speculated that the Government might yet opt for a stock market flotation if it decided on privatisation.

This may be favoured over a management buy-out in order to rule out any suggestion that the management team would be a major beneficiary of the process.

Mr Brennan moved on Saturday to appoint a British-based Aer Lingus director, Mr John Sharman, as interim chairman of the airline as he continues the process of selecting a permanent chairman to replace Mr Tom Mulcahy, the former AIB chief executive who resigned in May.

Mr Sharman will meet today with the company secretary in Aer Lingus, Mr Greg O'Sullivan.

Informed sources said the legal advice to the Government and Aer Lingus will centre initially on the corporate governance issues raised by the approach from Mr Walsh, along with the airline's chief financial officer, Mr Brian Dunne and its chief operations officer, Mr Séamus Kearney.

Sources said the Government would have to publicly ensure that its interest, as the major shareholder in the airline, is protected if the company is being run by managers who want to take it private.

A meeting of the Aer Lingus directors, who received a brief synopsis of the proposal on Friday, has not yet been called. It is likely, however, that Mr Sharman will call a meeting this week. Mr Walsh and Mr Dunne, who are board members, are likely to be excluded from such a meeting because of their declared interest in the process.

With unions saying they will oppose the surprise proposal, opposition to the plan has already surfaced within Fianna Fáil.

"I have serious doubts personally over the privatisation of the State airline and would need to be persuaded," said one north Dublin TD.

Victor

http://home.eircom.net/content/unison/national/3527244?view=Eircomnet

Aer Lingus bosses at odds with ministers on buyout
From:The Irish Independent
Monday, 5th July, 2004

THE three Aer Lingus executives who are leading a buyout of the airline are set for a head-on clash with the Government.

Aer Lingus boss Willie Walsh and his team want the Cabinet to immediately appoint corporate advisors to guide on a sale of the company, which is worth up to €500m.

But last night Government sources said ministers would not be rushed into a verdict on such a complex and sensitive issue.

Sources said the earliest date a decision would be made by Cabinet would be in September or October.

However, Mr Walsh and executives Seamus Kearney and Brian Dunne believe a delay of this kind would mean the company would not be sold until next year as the sale would take some months to complete.

They are concerned if the notoriously turbulent airline industry hits a downturn, it could be much more difficult to secure finance for privatisation.

The issue is to be raised by Transport Minister Seamus Brennan at the Cabinet tomorrow.

His spokesperson said he would raise the corporate governance issue of dealing with a management team that also wanted to lead a buyout of the airline.

When asked if the minister would raise the question of setting up a Cabinet sub-committee to manage privatising the airline, she said that was an option that could be examined.

It has emerged the three Aer Lingus executives decided to go public with their request for the Government to give them the green light to make a management buyout offer after they became concerned the Cabinet was delaying a decision on the airline.

Sources close to the three businessmen said the Department of Transport had carried out all the preparatory work on Aer Lingus last April and Mr Brennan was in a position then to bring a proposal before the Cabinet.

But Government sources said the decision required input from the Department of Finance, Department of Transport and the airline itself. A further difficulty on a quick decision is that some ministers will be missing from the three remaining Cabinet meetings before the summer break.

The process of examining options for privatising Aer Lingus have also been made more complex as the three most important executives at the airline have a conflict of interest in any privatisation consultations as they wish to buy the company themselves.

Over the weekend, Mr Brennan moved to fill the vacuum at board level of the company as he appointed British businessman John Sharman to temporary chairman, filling the position left vacant by Tom Mulcahy, who resigned over the AIB tax scandal.

Meanwhile, Mr Brennan is already under pressure as he faces the threat of a transport strike at CIE and is still seeking a Cabinet decision on the Metro.

David Murphy Deputy Business Editor

Victor

http://www.timesonline.co.uk/newspaper/0,,2765-1167741,00.html

July 04, 2004
Aer Lingus plots cheap global fares
Jane Suiter and Tom McEnaney

IRISH passengers could soon fly to America and back for as little as €100. Aer Lingus bosses plan to turn the airline into an operator of no-frills long-haul flights.
They hope to emulate the cheap flights offered by Ryanair between European destinations with bargain-basement return fares to America and beyond.

The plans were revealed in a request by the company’s top executives to buy the airline from the government.

The executives want to fly to 16 American cities, with an average return flight of no more than €200 on some routes. Aer Lingus’s lowest fare to New York and Boston is currently €257 each way for travel this month. Other destinations would include cities in Asia, Australia and South Africa.

The plans underpin the ambitions of Willie Walsh, the chief executive, and two of his fellow directors to take the company private. Walsh asked the government’s permission to undertake a management buyout in order to raise the estimated €1 billion needed to fulfil the executives’ vision. The airline needs about €200m for a new fleet of aircraft. The government is barred under European competition law from investing in the state-owned airline.

The plans will meet strong resistance from unions. Siptu, Aer Lingus’s biggest union, has already voiced its opposition to privatising the airline. Roisin Shortall, the Labour TD, also called on the government to reject the proposal.

An industry source said that the airline plans to cut costs on in-house aircraft services, staff, baggage handling and has examined the possibility of leasing out cargo space on its aircraft. Walsh wants to cut the company’s headcount by 1,000 from its present level of 4,000.

Ryanair is already considering making some of its flights open to carry-on luggage only, a change that would dramatically cut costs. That would allow the hold to be leased out to freight companies, who would provide their own staff.

The cabinet is to discuss the Aer Lingus executives’ proposals on Tuesday. Seamus Brennan, the transport minister, said he is seeking expert advice. Ministers will be concerned that the state is not seen to enrich senior airline executives at taxpayers’ expense. Financial sources speculated that a stake of 10% in the airline for the three executives — not unusual in management buyouts — would generate €50m between them if sold.

The government is unlikely to reach a decision until after the summer but sources said there is “a growing realisation that standing still is not an option”.

Walsh, Brian Dunne, the chief finance officer, and Seamus Kearney, the chief operations officer, want to lead a consortium of venture capitalists to buy a majority stake in the airline, currently worth €500m to €600m. The executives have told the government they will walk unless the €1 billion investment they are seeking is found.

The government will be reluctant to repeat the experience of Go, a British Airways subsidiary sold for £160m (€240m) in a management buyout. A year later, it was sold for £374m.

“If that happened here it would be political mayhem, particularly after our whole Eircom debacle,” said one government source.

The airline’s board is also to call an emergency meeting within days. Yesterday Brennan appointed John Sharman as the new interim chairman. Its previous chairman, Tom Mulcahy, resigned in May.

http://www.timesonline.co.uk/newspaper/0,,2765-1167160,00.html

Leading article: Let Aer Lingus fly free

There is no compelling reason for a nation state to own an airline in the 21st century. The aviation market has been changed fundamentally by the arrival of low-fares carriers, by the prohibition of state subsidies and by the onslaught of competition. Airlines must now survive or die, their destiny in their own hands.
Willie Walsh, the chief executive of Aer Lingus, has done the Irish government a service by seeking permission to pursue a management buyout of the company. His action will force it to make a decision: to privatise or not to privatise. Mr Walsh is clearly confident that the airline’s prospects are sound, and that he and his team, who have already engineered a remarkable turnaround in its fortunes, have a strategy for the future. Implementing that vision will require investment which the government cannot provide.

There is little doubt that selling all or part of the airline to ensure its future makes sense: the only decisions that remain relate to timing, the extent of the initial sale, and the price to be paid for the business. There is a case to be made for a staggered sale of the state’s holding in the company, an approach that would give Aer Lingus access to the private funds it requires to fund its growth, while allowing the state to benefit from the uplift in value. The priority must be to secure the best possible price for taxpayers, and that could count against Mr Walsh. Management buyouts, by their nature, imply a low price and a relatively swift secondary sale because the backers of the deal are in the business of making a quick turn on their investment. It would be embarrassing, and wrong, for the government to sell cheaply only for the airline to be resold in a matter of years at vast profit.

Privatisation will be resisted on principle by the unions, but a sale would be good for Aer Lingus, good for the state and good, in time, for those employees who remain with the company after it has further rationalised its cost base. Seamus Brennan, the minister for transport, should seize the opportunity and bring forward detailed proposals for the airline’s privatisation without delay

Victor

http://www.thepost.ie/web/DocumentView/did-599852968-pageUrl--2FThe-Newspaper-2FSundays-Paper.asp

Aer Lingus staff to share €175m stake
04/07/04 00:00
By Ed Micheau and Sean Mac Carthaigh

Thousands of Aer Lingus employees stand to benefit from an Eircom-style windfall of up to €175 million if senior executives at the airline succeed in their plan to buy the state-owned company.

A maximum stake of 24.9 per cent will be offered to staff to entice unions and employees to support the management-led buyout, The Sunday Business Post has learned.

Aer Lingus chief executive Willie Walsh will outline plans to take the company into 100 per cent private ownership if the government allows the team to go ahead with the buy-out. A sale, which would be backed by a private equity house, would be followed by a stock market flotation in two to three years' time.

The management team's plans could include a provision for the state to take preference shares, enabling the exchequer to benefit from an increase in the airline's valuation between now and the flotation.

Analysts value the airline at between €500 million and €700 million. Aer Lingus has lined up NCB Stockbrokers to advise them on the deal, which could see overseas investment in the company.

A decision by the European Court of Justice in November 2002 paved the way for European investors to buy into the national carrier.

Before the case, Irish investors had to own at least 51 per cent of the airline under a bilateral agreement with the United States. Several private equity houses in London are thought to be interested in the airline, including Alchemy Partners.

The move by Walsh to offer staff a 24.9 per cent stake would be similar to the recent privatisation of Eircom.

Staff at the airline currently hold a 14.9 per cent stake. On Friday, Michael Halpenny, a secretary at Siptu, said the union was opposed to the airline being ``delivered into private hands''. The government is anxious to avoid another Eircom-type debacle.

Aer Lingus employs 4,100 people, but wants to reduce staff by about 700. Staff in a reduced workforce of 3,400 would each hold a stake worth between €38,000 and €54,000 in a private company.

Aer Lingus director John Sharman yesterday agreed to a request by transport minister Seamus Brennan to become interim chairman of the airline.

Sharman's first act will be to convene a special meeting of the board of Aer Lingus tomorrow or Tuesday. Sharman, who was appointed to the board in March last year, runs his own aviation financing company.

On Friday, Walsh asked Brennan and the board of Aer Lingus for permission to develop an investment proposal for the company.

Walsh's plan is supported by the airline's chief financial officer, Brian Dunne, and its chief operations officer, Seamus Kearney.

Victor

http://home.eircom.net/content/irelandcom/breaking/3530550?view=Eircomnet

Siptu accuses Aer Lingus of 'underhand tactics'
From:ireland.com
Monday, 5th July, 2004

Siptu has accused the Aer Lingus executive of "underhand tactics" after reports the airline's bosses were seeking a management buy-out.

The union, which represents most of the State carrier's workers, also said it would vigorously fight any attempt to impose further job cuts and labelled the executive's buy-out bid as "unprecedented" and a rejection of the social partnership agreement.

Siptu's Aer Lingus branch secretary, Mr Christy McQuillan poured cold water on reports that up to 1,300 jobs could go at the State airline, claiming that it was "questionable whether the company could continue to operate" if yet more swingeing cuts were piled on top of the 3,000 redundancies achieved over the last three years.

He said Siptu is already dealing with 102 scheduled job losses at Shannon but claimed axing positions at the company's freight and catering division - where there are 240 staff employed - was "entirely unexpected" and accused the management of fobbing off the union in its latest business strategy.

"It's a total fob-off," he said. "We've been waiting for the last seven months for the company to tell us exactly how they were planning on achieving the costs cuts targeted in the 2004 business plan, only to be told a three-year business plan was under way which would subsume this year in full.

"Then over the weekend they come out with this management buy-out proposal. It all flies in the face of the social partnership model."

Despite what Mr Maquillan describes as "growing anger" amongst workers at the management's buy-out proposal, he ruled out any possibility of strike action, claiming employees had sacrificed too much in turning Aer Lingus around to "jeopardise the company's finances in such a manner".

Mr Maquillan said the union is instead organising a "three-airport strategy committee" that was originally formulated, "as a central platform to negotiate the anticipated three-year business plan, but will now deal with the weekend's developments."

He said the union is looking for early engagement with the Minister for Transport, Mr Brennan, on the latest proposals from the company's management and claimed "any future changes at the company wil have to be discussed with all parties".

He also said the union was now wary of negotiating with the Aer Lingus executive after the weekend's buy-out bid strategy and the stalled hand over of a 14.9 per cent stake in the company due to workers under the 2002 annual report.

secret_squirrel

sheesh usual mix of facts and speculation from the usual suspects.

Just a few thoughts :

£200m is peanuts you would need more than that for a decent fleet - especially for transatlantics.

Absolutely no-one is shocked about Catering and cargo getting the chop - this has been speculated on for the last year or more.

Note how the amount of redundancies varies wildly, as per usual in this sort of speculation.

Christie is plain wrong - as long as they are prepared to loose/outsource services like cargo and catering there is plenty of wood to be chopped. (not that I necessarily support that chopping)

And YAWN yes big payouts again!! Will believe it when I see it in my bank account.

I work for them btw and all views expressed are my own

antoinolachtnai

200m would seem like enough to get going to expand the fleet. This would basically be the down-payment. You could raise the rest through issuing some sort of debt (which is basically a fancy term for saying you would buy the planes on the never-never).

The problem is that the government is unlikely to be able to invest the cash that is needed, for a variety of reasons. It doesn't have the cash for one thing; for another, it is unlikely to be permitted to invest money in a semi-state airline under EU rules.

The government and a private investor with a minority stake are unlikely to be comfortable bedfellows, and that is the case that O'Farrell is no doubt making for bringing the company private.

While we hear talk about a 'management buy-out', it wouldn't really be O'Farrell and Co. who would be buying the company. They would get a stake, but venture capitalists would end up holding most of the equity (not surprising, seeing as they would be the people who would be paying for it).

The management have obviously got the signals from the holders of capital that they have the confidence in them to put the money up to allow the management to take full control of the company from the existing owners. It is unlikely that venture capitalists would have the same degree of confidence in a group of pilots or cabin crew (although there were times there with Aer Lingus where they would have been more likely to get the cash than the actual management would have been.)

The question goes beyond a simple left-right issue of privatisation. The question is really: do we want Aer Lingus, an Irish company, to expand on the international stage as a private company, or do we want to keep it as a fairly small local airline, which serves the country's specific requirements.

Both of these are legitimate choices. Both of them can be justified. It is pretty clear that we cannot do both, however.

The decision also has to be coloured by the state of the international airlines business. It is full of massive players with global ambitions and direct access to cash. It is unlikely that Aer Lingus can continue to be as commercially successful as it is if it continues to concentrate only on the small Irish marketplace. It will eventually be undermined by someone with access to more money. That is unlikely to be good for Aer Lingus or for Ireland.

thejollyrodger

06/07/04

Harney backs Aer Lingus sale
By Fionnán Sheahan, Political Correspondent

MARY HARNEY last night backed the privatisation of Aer Lingus, saying only Communist states’ governments wanted to own airlines.

Ahead of a Cabinet meeting today, where a buy-out from the airline’s managers will be considered, the Tánaiste said the millions raised could pay for health, education and care of the elderly.

The PD leader is tipped to become Transport Minister in the forthcoming Cabinet reshuffle.

“In the modern world you don’t need a State airline and the only two countries where governments are not trying to get out of the airline business are North Korea and Cuba,” Ms Harney told Today FM.

thejollyrodger

Im in favour of this plan. The time of a national airline belongs to the middle of the 20th century. If we dont sell it of now, its going to crash and burn.

The government doesnt have the money to purchase all those new planes. Hopefully we will get something out of this, €200 million sale isnt a lot

secret_squirrel

Just caught a feature on sky ireland - bertie and his boys have knocked it on the head for a few months. Whats the betting this will last until Mary gets the Transport ministers job in berties reshuffle? Then can blame those nasty PD's when it all goes wrong.....

thejollyrodger

ja i seen the same show on Sky Ireland.

Listen, were going to have to dump this national airline thing. Its going to take €1bn Euro for new planes to keep the thing going :eek: :eek:

Victor

It's interestesting that they talk of expanding services while cutting staff. while it can be done, I'm not sure if it's the diplomatic way to do things.

Originally posted by thejollyrodger
Listen, were going to have to dump this national airline thing. Its going to take €1bn Euro for new planes to keep the thing going :eek: :eek:

And many people take out €300,000 mortgages. Debt (assuming it isn't excessive) is not a bad thing if there are assets behind it.

Financing €1bn over the 20 year life span of an aircraft might cost €70m per year, which is less than current profits and well less than expected profits.

http://home.eircom.net/content/irelandcom/topstories/3533771?view=Eircomnet

Brennan backs idea of allowing airline MBO
From:ireland.com
Tuesday, 6th July, 2004

The Minister for Transport, Mr Brennan, will tell the Cabinet today that he favours the principle of allowing top managers at Aer Lingus to develop a bid for the State company.

However, sources said he will stress such an approach should be allowed only in the context of an open and transparent process in which rival bids would also be considered.

With political resistance building against the surprise approach last week from the airline's chief executive, Mr Willie Walsh, and two of his colleagues, Mr Brennan will brief the Cabinet today on the development.

They have sought permission to develop a bid for the airline, whose future ownership has been under Government consideration for some time.

Although Mr Walsh wants to develop a proposal before autumn, senior Government sources played down the prospects of a Cabinet decision before the summer break ends.

The Government does not want to be seen to be forced into a decision by Mr Walsh. Given the political sensitivity that surrounds a possible bid for a State asset by the public servants, it will also seek to maximise the transparency of any privatisation process.

The Government is widely expected to ask Aer Lingus directors to appoint a subcommittee of the board to oversee day-to-day control of the company by Mr Walsh in advance of any decision on ownership. Its other priority in the next three weeks will be to appoint a permanent chairman to the airline to replace the former AIB executive, Mr Tom Mulcahy, who resigned in May.

While the interim chairman, Mr John Sharman, considered the situation yesterday with the Aer Lingus company secretary, Mr Greg O'Sullivan, he is not expected to call a board meeting until after the Cabinet meets.

It is understood that Mr Brennan will outline three scenarios to the Government when it begins its consideration today of the approach from Mr Walsh.

The first option will be for the Government to do nothing to change the ownership of Aer Lingus, despite volatility in the aviation industry and the airline's requirement for up to €1 billion for investment in new fleet. The second option would allow the privatisation of a stake in the airline - through flotation or trade sale - but to exclude the airline's management from the process.

The third option would allow involvement from all interested parties, including the management.

Of those three choices, Mr Brennan is understood to favour the third. He is said to be opposed to the option of doing nothing, given the commercial pressures the airline faces. He is likely to argue that management should not be penalised by being excluded from the sale process.

He is also likely to suggest that the possible retention of a strong Irish management team to protect the airline's commitment to the domestic market.

http://www.rte.ie/business/2004/0706/aerlingus.html

Cabinet forms group to consider MBO

July 06, 2004 16:58
The government is to establish a cabinet sub-committee to examine the issue of the future ownership of Aer Lingus. The decision was announced following the regular weekly cabinet meeting.

The committee is to be comprised of the Taoiseach, Tanaiste, Minister for Finance, Minister for Transport and Minister for Tourism. It is understood that the first meeting will take place next week and that the committee will report back to government as soon as possible.

A statement from Transport Minister Seamus Brennan said that the management team at the airline have been asked not to engage in any further activity regarding their request to be allowed pursue a buyout proposal until the committee has reported.


It is now understood that the management team's proposal is for a 100% management buy out, whilst retaining and possibly increasing the employee share option trust which is currently set to become just under 15%, pending negotiations with unions.

However, the ICTU has come out against the MBO proposals, saying that the proposal required the employees to sacrifice another 1,300 jobs in order to make a few people in senior management wealthy.

Industry sources have confirmed that Aer Lingus chief executive Willie Walsh has already been offered the top job at Swissair and at some other major airlines, but has so far stuck with the national airline.

Separately Aer Lingus is in the middle of drawing up a business plan for the next few years which foresees an expansion of its north American routes using a low cost model approach. Further cost cuts as part of this plan could see up to 900 redundancies at the airline.

http://www.rte.ie/news/2004/0706/aerlingus.html

Aer Lingus management must 'get in the queue'

06 July 2004 22:48
The Minister for Transport, Seamus Brennan, has said that the Aer Lingus management team who are pursuing a buy-out of the airline will have to 'get in the queue' like everyone else.

He said that if the Government took the decision to go ahead with seeking private investment in Aer Lingus it would be a fully open process.

Mr Brennan was speaking after a weekly cabinet meeting at which it was agreed to set up a sub-committee to examine the issue of the future ownership of the airline.

The committee, which will meet for the first time next week, will comprise the Taoiseach, the Tánaiste and the Ministers for Finance, Transport and Tourism.

Management at the airline has asked to be allowed to pursue a buy-out proposal.

Separately, the Irish Congress of Trade Unions has said it is opposed to any privatisation of Aer Lingus.

In a statement, ICTU said it was 'a racing certainty' that a management buy-out would see the company eventually sold on to another airline without regard for Ireland's strategic interest.

Victor

http://home.eircom.net/content/irelandcom/breaking/3535361?view=Eircomnet

Unions urged to weigh up Aer Lingus bid
From:ireland.com
Tuesday, 6th July, 2004

A business lobby group representing air travellers said the Government and unions should seriously consider any proposed buyout of Aer Lingus as this may be the best way of keeping the airline in Irish ownership.

Mr Tadhg Kearney of the Air Transport Users' Council (ATUC) said Mr Willie Walsh's successful transformation of Aer Lingus meant that the future of the company, particularly as an Irish-based company, might best be served by an MBO involving workers and other stakeholders.

Given Aer Lingus's strategic importance, Mr Kearney said that any decision on the airline's future should ensure that it continues as an Irish-based carrier providing a wide range of services, particularly on transatlantic routes.

Mr Kearney said Aer Lingus's strong management and its good financial health merited serious consideration of a buyout and if such a bid can satisfy governance and other transparency issues.

He added: "Before certain interests knock this proposal they should give it the opportunity of a full and unprejudiced examination and only reject it if it does not hold water.

"It is somewhat disappointing that already certain bodies including SIPTU have already come out against the proposal despite the fact that there are suggestions in the media that the employees in Aer Lingus could end up with 25 per cent of the company," Mr Kearney said.

ATUC is affiliated to the the Chambers of Commerce of Ireland.

antoinolachtnai

Victor, I don't think you could really finance an airline at the rates you're talking about. You are assuming that the cost of capital is very low, down around mortgage rates. An investment in an airline is quite a bit more risky than an investment in a house, and the rate a bondholder or bank will charge will be proportionally higher.

That said, I accept that there are some good deals on aircraft financing out there, but I don't think they'll be quite that good.

The government could just borrow the money and invest it in Aer Lingus. But financially, this would be very suspect, if there weren't sound strategic reasons for doing so.

The current profit is just under EUR 70m. This would mean that signficant revenue growth would be needed to cover the payments at the low rate you suggest. This would make a lender reluctant. The lender would probably expect to see at least a proportion of the cash raised as equity.

Aer Lingus has a substantial amound of long-term debt on its books already, as well as the cash, although there's no question but that the company is in a healthy enough financial state.

The other problem is management motivation. The lender would want to know that the current, successful management had the incentive to stick around. A management buyout is the obvious way to set this up.

secret_squirrel

Originally posted by antoinolachtnai
Victor, I don't think you could really finance an airline at the rates you're talking about. You are assuming that the cost of capital is very low, down around mortgage rates. An investment in an airline is quite a bit more risky than an investment in a house, and the rate a bondholder or bank will charge will be proportionally higher.

That said, I accept that there are some good deals on aircraft financing out there, but I don't think they'll be quite that good.

I think you'll find that airline industry finance rates are at an all time low...as is demonstrated by EI's current fleet deliveries and Ryan Air's record breaking boeing deal. As well as making a substantial profit airlingus are also increasing their cash reserves by significant amounts...up from €300m to €400m (off the top of my head) if I remember rightly (its in the last published accounts). Some of that is security against existing finance deals I believe.

Add in the fact that aerospace manufacturers are moving towards a leasing model for aircraft components and the time has never been better to buy aircraft.

As it stands I believe Willie is on record as stating they could run the airline at a straight loss for 6 month with their current cash reserves.

Victor

http://www.thepost.ie/web/DocumentView/did-395741084-pageUrl--2FThe-Newspaper-2FSundays-Paper-2FNews.asp

Japanese group to back Aer Lingus buyout
11/07/04 00:00
By Ed Micheau and Niamh Connolly

The European wing of Japanese financial group Nomura is the main contender to back the planned buyout of Aer Lingus, The Sunday Business Post has learned.

It has also emerged that the cabinet sub-committee overseeing the sale of the airline will push for a buyout clause to protect the Aer Lingus brand name and air routes.

Plans to protect valuable slots held by Aer Lingus at Heathrow and the maintenance of Ireland's economic links with the US have also been examined by the committee.

Sources close to the potential sale of Aer Lingus said the London arm of Nomura, a private equity house, had emerged as the front-runner to finance the €700 million deal. Nomura has an investment bank and a private equity arm and would act as a one-stop shop for the deal.

Aer Lingus chief executive Willie Walsh and finance director Brian Dunne are believed to have reassured fellow Aer Lingus directors at a board meeting late last week that no preparatory work had been done in relation to a possible bid. There has been no direct contact between Nomura and the Aer Lingus executives.

The involvement of a foreign investor in Aer Lingus is a strong possibility after moves to change the rules governing ownership of European airlines. Under the terms of the existing Ireland-US bilateral agreement, at least 51 per cent of Aer Lingus must be owned by Irish interests.

However, the European Commission is moving towards negotiating an `open skies' agreement between the European Union and the US.

Such a deal would replace existing bilateral agreements and allow European, as opposed to Irish, investors to hold a majority stake in Aer Lingus.

It is also understood that the Minister for Tourism, John O'Donoghue, is particularly concerned about protecting the Aer Lingus brand in the event of a sale. Maintaining the brand is seen as essential if the new agreement opens up an estimated 20 new destinations in the US for Aer Lingus.

The cabinet committee, headed by Taoiseach Bertie Ahern, is expected to examine a deal struck by Air France when it bought Dutch flag carrier KLM. Air France gave assurances to the Dutch government that KLM would retain its home base, traffic rights, operating licence and logos and branding for at least five years.

Aer Lingus has been independently valued at €800 million, substantially higher than the €500 million price tag quoted by market sources.

A two-step sale, involving a partial sale, with the state holding a small `golden share', is seen as the most politically expedient way of dealing with the issue, informed sources said.

Victor

http://www.thepost.ie/web/DocumentView/did-640379374-pageUrl--2FThe-Newspaper-2FSundays-Paper-2FNews-Features.asp

Buy-out debt is the big issue for Aer Lingus
11/07/04 00:00
By Ed Micheau

Those who know Willie Walsh well say he is essentially a conservative guy. A former pilot, the chief executive of Aer Lingus likes to move only after he has lined up all his ducks.

Like all good strategists, Walsh likes to back up Plan A with a Plan B.

Walsh's announcement ten days ago that he and two other Aer Lingus executives want to develop a proposal to buy the state-owned airline caught many people by surprise.

But those who know Walsh are in no doubt that the proposal is well planned and conceived.

As revealed in today's The Sunday Business Post, a major international financial player is waiting in the wings for Walsh's proposal to get the green light. The London investment banking arm of giant Japanese bank Nomura has run the numbers on a proposal to take Aer Lingus into private ownership.

As both investment bank and private equity house, Nomura has the intriguing attraction of being a one-stop shop.

Not only does this have a positive implication for fees, it also means that a deal could be done far more quickly than if Walsh and his team had to get the agreement of several institutions.

The likelihood is that other financial institutions are in the picture too. But the presence of Nomura at the head of the queue provides a good indication of what shape the buy-out might take.

The possible involvement of an investment bank such as Nomura points to one outcome - a leveraged buyout (LBO) that would saddle Aer Lingus with debts of hundreds of millions of euro. This would restrict the company's expansion for the foreseeable future.

The LBO model has its origins in Wall Street deals of the late 1980s, including the dramatic $25 billion takeover of tobacco company RJR Nabisco, which inspired the Pulitzer prize-winner Barbarians at the Gate.

Ireland Inc has not been immune from the LBO phenomenon. In recent years, two of the country's largest companies, Eircom and Jefferson Smurfit, were involved in LBOs worth €7 billion.

In layman's language, companies like Nomura buy companies like Aer Lingus with somebody else's money.

Typically, the private equity investor, such as Nomura and management, put up 20 per cent of the equity. The balance - 80 per cent - is borrowed and loaded onto the acquired company's balance sheet.

Valuations for Aer Lingus have ranged between €500 million and €900 million. Its Irish rival, Ryanair, is currently valued by the stock market at €3.5 billion, or a multiple of 15 times profits.

If you apply the same multiple to Aer Lingus's 2003 profit of €69 million, you arrive at a valuation in excess of €1 billion. Ryanair warrants a premium over Aer Lingus for a number of reasons, including the €1 billion cash it has in the bank.

So let's suppose Aer Lingus is sold at a valuation of about €700 million. If the deal is 80 per cent funded by borrowings, it implies Aer Lingus taking on board new debt of €560 million.

Most of the debt would be repaid at interest rates of about 8 per cent. The overall debt would include mezzanine debt, which would carry a charge of about 14 per cent.

From a position last year where Aer Lingus was throwing off free cash, the airline would face an annual interest bill of €50 million. This would make big inroads into the estimated €90 million that Aer Lingus will make in profits this year.

And the principal sum would still have to be repaid.

Such a radical change to the company's balance sheet would have profound implications for the business model going forward.

Under the LBO model, Aer Lingus could forget about touted plans to invest up to €1 billion positioning the airline as a low-cost and low-fares operator on transatlantic routes. Regardless of the ownership issue, Aer Lingus needs to upgrade its existing transatlantic fleet.

The Airbus A330 planes which service this market cost about €90 million each. With such a heavy debt commitment in an LBO vehicle, Aer Lingus would almost certainly have to defer a purchase plan and opt for additional leasing facilities.

There has also been talk about Aer Lingus setting up new hubs in Europe, as Ryanair has so successfully done.

This may make commercial sense, as Aer Lingus already operates a profitable short haul service.

But with capital investment restricted in an LBO vehicle, the financial scope for expansion in Europe would be limited.

Not everybody believes that such a course would be a bad thing. Aer Lingus could emerge as a leaner, meaner outfit, said one corporate financier.

Management has already signalled its intentions to slash costs further, with up to 1,300 employees facing redundancy.

“The LBO route can be very good for a company,” said the financier. “It imposes tremendous discipline on management, who become preoccupied with costs and the bottom line.

“Historically, some of these companies have done very well afterwards. There is no doubt that the company would be run on a shoestring for the first couple of years. But given the numbers, Aer Lingus is a no-brainer at €600 million.”

As `no-brainers' go, few companies provide a better example of the LBO model than Eircom. The telecoms company had net debt of €190 million before the Tony-O'Reilly-led consortium Valentia took the company private in an LBO in March 2001.

Following the LBO, Eircom's debt rose by a factor of 11 to €2.1 billion as Valentia borrowed money to buy the company. Last July, Eircom refinanced its debt with lower interest rates.

It enabled Eircom to pay a special dividend of about €500 million to shareholders, including employees. The private equity investors in Eircom then received a further €500 million from the stock market flotation in March.

After investing about €470 million in Eircom in March 2001, the LBO practitioners got back close to €800 million - netting them a €330 million profit in just two years. So far, so good.

But the LBO success at Eircom came at a price. As revealed in this newspaper earlier this year, Eircom began a secret operation entitled `Pittsburgh' in an attempt to counteract the deterioration in its network over the last few years.

With debt and interest repayment a priority under the LBO arrangements, Eircom's network suffered greatly from a lack of investment. Top managers at Eircom now concede that a €1 billion investment is required over the next few years.

With net debt at Eircom still at €1.8 billion, the scope to make such an investment is limited. Just where Aer Lingus would be after three or four years of paying down several hundred million euro of debt, largely to foreign lenders, is anybody's guess.

The details of a bid by Walsh, if permitted, have still to emerge. A proposal could yet have a creative dimension.

But whatever about the nuts and bolts of a possible bid, the wider question on the future ownership of Aer Lingus has yet to be resolved.

The conspiracy theorists were out in force last week.

Walsh would not have stuck his head above the parapet without some form of political cover, never mind without a possible financial backer behind the scenes.

Within the subcommittee of the cabinet formed to deal with the issue, Walsh would look to Tanaiste Mary Harney and Minister for Finance Charlie McCreevy for ideological support. But the government cannot afford to be seen to be bounced into making a decision by an impatient management.

Walsh is too smart not to have factored this into his calculations. Plan B for Walsh must be that a venture capital house or trade buyer or group of pension managers take a substantial minority stake in the company.

It would also enable the executives and staff to copper-fasten their own equity stakes in Aer Lingus.

This alternative has a number of attractions. The state would retain a controlling stake in the airline.

Politically, this is attractive to the government, as it prevents a potentially unpopular disposal to the likes of British Airways before the next general election.

It is also more attractive politically than the LBO route, which could potentially see foreign bankers making massive sums of money as they sweat the assets of the airline.

A decision on the ultimate exit of the state from Aer Lingus could be deferred for a number of years.

This two-step strategy appears to be the most practical outcome for the politicians. It would taxi Aer Lingus down the runway to a privatised future, ready for takeoff.

An Irish solution to an Irish problem. And a Plan B that Walsh and his team could live with.

Victor

http://www.thepost.ie/web/DocumentView/did-354584374-pageUrl--2FThe-Newspaper-2FSundays-Paper-2FNews-Features.asp

Price and routes crux of decision
11/07/04 00:00
By Sean Mac Carthaigh

A crucial element in the government's decision about Aer Lingus lies in its interpretation of the public interest.

A narrow definition would focus entirely on price, leaving the Department of Finance free to extract as much as possible from the buyers on behalf of the taxpayers.

A wider focus would look at `connectivity', and consider whether to build in guarantees that would maintain or enhance the connections between Ireland and Europe and the US for a period of time.

This would become relevant if Aer Lingus were to end up being bought by another airline.

Most industry observers believe that, even if the proposed management buyout is successful, the consortium will sell the firm to another major carrier within a few years.

When the Dutch government sold KLM to Air France last September, the deal incorporated a series of assurances designed to maintain the Netherlands' connectivity.

These included a `fair long-term development of long-haul and medium-haul services' at Amsterdam's Schiphol airport, long-term sharing of `centres of excellence' in aircraft maintenance and in human resources and promotion and the safeguarding of the KLM brand.

Separate operating licences and traffic rights for the two companies and a `multi-hub' system that included Schiphol were also included in the assurances.

The Irish government is considering imposing similar conditions on the buyers of Aer Lingus, a move likely to make it less attractive to the venture capitalists behind Walsh's management buyout.

In April, Aer Lingus chief financial officer, Brian Dunne - one of those involved in the proposed buyout - attended the Joint Oireachtas Committee on Transport. He made a strong case that Aer Lingus should no longer be seen as the key player in Ireland's connectivity.

“There have been significant changes in the market during the past 10 years,” he said. “It is important to recognise precisely where Aer Lingus stands in the context of the Irish aviation market.

“Aer Lingus captures approximately 30 per cent of the London market out of Ireland. It is not a majority player, rather it is a minority player on the London market. Aer Lingus operates to London-Heathrow while other players operate to multiple airports within London.”

On the British provincial routes, Aer Lingus' market share is less than 25 per cent, Dunne said, while Ryanair had a market share on these routes of more than 50 per cent. “It is important to recognise that, in that market, Aer Lingus is, again, a minority player,” he said.

“Our market share across all continental routes is approximately 50 per cent,” he said, adding that Ryanair, German Wings and Basiq Air had recently stepped up the competition on routes to continental Europe.

“That is the backdrop to how Aer Lingus is operating in a completely competitive market in which it is but one significant player in the Irish context,” Dunne said.

http://www.thepost.ie/web/DocumentView/did-645972374-pageUrl--2FThe-Newspaper-2FSundays-Paper-2FNews-Features.asp

Aer Lingus seeks to develop head office
11/07/04 00:00
By Neil Callanan

Aer Lingus management is close to finalising a planning application for a 160,000 square metre development at its head office at Dublin Airport.

However, the airline is still in talks with Aer Rianta about the future ownership of the 13.5 acre site. The land is owned by the airport authority but let to Aer Lingus on a 99-year lease dating from the 1960s.

Aer Rianta confirmed last week that it had met representatives of the airline specifically to discuss the project.

“We are in discussions as to whether their proposals as currently constituted would be compatible with Aer Rianta's masterplan options for the development of the airport over the next 10-15 years,” a spokesman said.

The proposed €500 million development includes the construction of between 140,000 and 170,000 square metres of hotels, shops, aparthotels and offices on the site. Around half of the buildings are expected to be offices.

Henry J Lyons are architects and 4 Front International project managers for the proposed development.

An industry source said the redevelopment would only work if a metro link to Dublin Airport were given the go-ahead. “Somebody needs to grab [the metro project] by the balls and get a move on with it,” he said. “The plan is also probably reliant on the second terminal getting the okay.

“It's a huge undertaking for Aer Lingus and it'll be done over a long number of years.

"The easiest thing would be for either Aer Rianta to buy out Aer Lingus or vice versa. But the government's thinking on Aer Rianta complicates that.”

Other sources suggested that the airline could develop the site through a joint venture partnership, provided it could reach agreement to buy the site.

Under its current status as a semi-state company, it would have to invite tenders before it could name its preferred developer. In addition, the issue of access will need to be addressed, as a road may have to be built through the site to provide access to a new terminal.

If Aer Lingus does buy the head office, the main issue will be how it can proceed with the development of the site in the event of a highly leveraged management buy-out. The need to pay down debt will make it difficult for the company to fund the redevelopment itself.

One solution would be for Aer Lingus to sell off any approved scheme and retain offices for its own use. Fingal County Council's planners have already been consulted about the plan and told the airline they believe the site offers an opportunity for a “creative and imaginative development”.

The airport is zoned Objective B under the Fingal County Development Plan “to protect and provide for the development of agriculture and rural amenity”.