How soon could Aer Lingus be floated on the stockmarket? It appears that no sooner had the report from the company been submitted to Minister Mary O'Rourke than she had given the nod to the idea of an initial public offering (IPO) of company shares. Provided the consultants she has hired to advise on the Aer Lingus report - Salomon Smith Barney - agree, then the IPO could happen towards the latter half of next year.
Technically, with the negotiations with the strategic alliance partners likely to be tied up by July/August and full regulatory approval for all aspects of the alliance likely by early in 2000, the flotation could come even sooner. But with the Government also considering an IPO for Aer Rianta, Aer Lingus may have to take its turn and late 2000 or early 2001 appear the most likely dates for the IPO.
The main motivation, of course, would be to raise capital for massive investment in fleet replacement which the airline would need. Aer Lingus, on its current trend, would need £400 million (€507.90 million) to £500 million to invest over the next five years. As the alliance is expected to aid growth, this figure could easily rise to £600 million to £700 million.
The likely spending for the airline is well spread out, so there is no immediate need to rush to the market and float. But nor, once the alliance is tied up, will there be a reason to hold off on flotation.
The Minister gave a cautious initial response to the idea of British Airways and American Airlines taking a 10 per cent stake ahead of the flotation. This stance reflected trade union unease. However whatever about the 10 per cent stake, a share float would have obvious attractions for the staff. Under the Cahill plan some £22 million in equity has been distributed to the staff and no further equity sharing is due under than plan, although the shares will still qualify for an annual dividend.
Not only would a float give the unions an open door to argue for more shares for staff, it would also give them a market for the shares they already own, thus the unions are likely to swing round behind the idea.
