Willie Walsh rules out Aer Lingus bid

David086

http://www.guardian.co.uk/business/2011/sep/16/willie-walsh-rules-out-aer-lingus-iag

The boss of British Airways and Iberia has ruled out bidding for his former employer, Aer Lingus, as he confirmed interest in bolting BMI and Portugal's TAP onto the International Airlines Group empire.

Willie Walsh, the chief executive of IAG, also said the government's decision not to proceed with the third runway at Heathrow because of environmental concerns was "laughable" when a countries such as China were building 100 new airports.

Outlining his vision for the newly formed IAG – which owns BA and Iberia – he said he wanted to create £400m in "synergies" within five years through cost savings and new revenues and wanted to turn the company into a "multinational, multibrand" similar to other sectors.

Speaking at the London Irish Business Society in London on Thursday night, he said he was not interested in Aer Lingus because of its €400m (£350m) pension deficit.

The Irish government is under pressure to sell its 25% stake as part of the IMF/EU bailout programme. Officially the airline is not for sale, but it is on a list of state assets that could be sold and the government is said to have privately decided its stake is no longer of strategic interest.

However, it is concerned that its slots at Heathrow be maintained – they are a vital lifeline to Ireland's export economy – and that the airline should not be sold at firesale prices. The airline is worth just €93m at the current €0.67 share price.

Ryanair, which owns 30% of the airline, made two failed offers when shares were valued much higher – at €2.80 and €1.49.

Walsh said he believed the airline was not in a fit state for any buyer because Aer Lingus, which has cash reserves of €385m, is not legally responsible for the deficit, so a buyer would have to take on the obligation – though some lawyers think Aer Lingus could be forced to pay into the fund.

"I know a lot about pension deficits – there's one thing you don't want to do and that's go looking for one. While that uncertainty exists, it's not going to be easy for anybody to progress the sale of Aer Lingus … The uncertainty is definitely going to discourage people from looking at Aer Lingus. There's plenty of other things I can be doing, so I'm not going to waste any time thinking about what might happen when you have airlines like TAP in play."

He said IAG was in acquisition mode. It was not going to be "rushed" or "driven by predetermined deadlines" but "by getting the right airlines at the right time for IAG. We've made no secret of our interest in BMI and no secret in the merit of looking at TAP."


Now what, who'll buy it if the government sells it's 25% stake?

Hannibal

Hopefully no one buys it. It's absolute madness of the government to sell off state assets, they're hoping to make a quick buck while selling the family silver. They will only get one chance to sell Aer Lingus, ESB, Bord Gais etc.. and these companies are worth far more long term to the Irish people to remain in state ownership or at least partly owned by the state rather than sold off, broken up and practically asset stripping the Irish people.
If this is the cost of EU membership maybe we should consider our future within the EU and taking orders from Brussels and the IMF. Lisbon has brought no jobs and this present government of FG/Labour has made the situation worse so they're making up for their defecit by selling anything and everything.

Tenger

Not sure how IAG would integrate Bmi? Use them as a Europe only sub-company of BA? I assume IAG (BA) would want to get Bmi to prevent other airline groups increasing their foothold in Heathrow.

LOccitane

Dotsey wrote: »

If this is the cost of EU membership maybe we should consider our future within the EU and taking orders from Brussels and the IMF. Lisbon has brought no jobs and this present government of FG/Labour has made the situation worse so they're making up for their defecit by selling anything and everything.

It's unfortunately the price of the total loss of sovereignty, the price of policy inaction. Not to get away from the topic, but I think that several sell offs, such as that of the ESB are clearly warranted. The situation is much more clear cut, the proceeds are significant/material and there is the potential to drive far greater efficiences in these companies than is presently the case under semi-state control.

However, the case of Aer Lingus is far more complex. The sale proceeds are not material and the current Social Welfare bill would absorb them in a very short time span.

EI's situation as a company is now somewhat stable, having been more fragile than stable for more than two years until relatively recently.

On the subject of the Pension Deficit: I don't think that this will be solved easily, the Unions will be determined and the perpetual excuse will be that Aer Lingus is sitting on a large cash pile and should therefore make a contribution.

LOccitane

Delancey

Tenger wrote: »

Not sure how IAG would integrate Bmi? Use them as a Europe only sub-company of BA? I assume IAG (BA) would want to get Bmi to prevent other airline groups increasing their foothold in Heathrow.

I suspect such a bid for BMI would attract very close scrutiny by both European regulators and the British Monopolies and Mergers Commission.

cson

LOccitane wrote: »

It's unfortunately the price of the total loss of sovereignty, the price of policy inaction. Not to get away from the topic, but I think that several sell offs, such as that of the ESB are clearly warranted. The situation is much more clear cut, the proceeds are significant/material and there is the potential to drive far greater efficiences in these companies than is presently the case under semi-state control.

However, the case of Aer Lingus is far more complex. The sale proceeds are not material and the current Social Welfare bill would absorb them in a very short time span.

EI's situation as a company is now somewhat stable, having been more fragile than stable for more than two years until relatively recently.

On the subject of the Pension Deficit: I don't think that this will be solved easily, the Unions will be determined and the perpetual excuse will be that Aer Lingus is sitting on a large cash pile and should therefore make a contribution.

LOccitane

I would agree with that; in terms of materiality Aer Lingus isn't worth more than a footnote on any State asset sale document. Currently it's 25% of €93m [~€23.25m] which in the greater scheme of things is nothing. It's costing the Government nothing to hold onto the stake.