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.