Several international institutional investors are believed to have expressed an interest in Aer Lingus if equity in the airline is made available in the future, writes Emmet Oliver.
While some institutions are not supportive of aviation stocks at present because of concern over fuel prices, several have made private inquiries about the airline in recent months. In some cases, contact was made through sources in Dublin.
According to senior market sources, among the institutions who may come forward in any placement are Fidelity Group, the Capital Group and Barclays.
All three have long-standing shareholdings in the aviation industry. Fidelity is a large shareholder in Ryanair, easyJet and British Airways, while Barclays and Capital Group are also shareholders in British Airways.
Because the institutions maintain large holdings across several sectors, making investments in rival carriers such as Aer Lingus and Ryanair does not necessarily present a difficulty.
A Cabinet sub-committee, chaired by the Taoiseach, Mr Ahern, is studying the future of the airline, although nothing is expected to happen on the issue until after the Government reshuffle next week.
A preliminary report by investment bank Goldman Sachs was submitted recently to the members of this sub-committee. The report, while sounding a note of caution about the airline sector generally, said that if the timing was right institutional investors would be prepared to come forward to take a stake in Aer Lingus.
Market sources have dismissed recent suggestions that concerns over fuel prices could effectively scupper the Aer Lingus sale or at least seriously reduce the chances of the airline securing a high valuation. They have pointed out that Aer Lingus is hedged for fuel for the remainder of the year and about 70 per cent is hedged for 2005.
If the Government sanctions some kind of sale, it could choose from two options. One would involve the State simply selling a stake in the airline to various institutions in a private placement. It could also sanction the issue of new shares, which would bring in new investors and dilute the Government's shareholding.
In that model, the revenue raised could be used by Aer Lingus to purchase a new long-haul fleet and address its other capital commitments.
However, the Government is believed to be nervous about any sale plan and the Minister for Tourism and Trade, Mr O'Donoghue - a member of the sub-committee - has already indicated his reservations about the Government selling any part of its stake.
During the summer, management at Aer Lingus, led by chief executive Mr Willie Walsh, sought permission to develop an "investment proposal" for the airline but this failed to get approval from the Department of Transport.
It has also been reported that Fermanagh businessman Mr Seán Quinn has expressed an interest in the airline, although this has been strongly denied by sources close to the Quinn Group.
