Aer Lingus could prove difficult to sell in the short term because of adverse trends in the aviation sector, a draft report given to the Government says. Emmet Oliver reports
But it warns that, in the longer term, the airline needs fresh funds to expand.
The report from the investment bank Goldman Sachs, which has been circulated to several Government Departments, says the Government must seriously address the airline's future funding requirements, which some sources have put at more than €1 billion.
The report says access to funds is a major structural issue facing the airline. It may have to be addressed by a change in ownership so that Aer Lingus is properly positioned for the future.
One of the major funding requirements will be a new long-haul fleet. The airline is considering ordering up to 11 aircraft and is believed to be looking at the Boeing 7E7 with a list price of €100 million or the Airbus 330 (list price €122 million).
The report says the airline must also be financially protected from any future "shocks", among them major terrorist attacks. It points out that, under EU rules, the Government can no longer bail out the company if it runs into financial trouble.
However, the report draws attention to the current slump in the aviation sector, with the shares of leading carriers in decline. It says the uncertainty over fuel prices has cast a cloud over the sector, and this might militate against the Government securing a high price for the airline right now.
The Government has set up a Cabinet sub-committee, chaired by the Taoiseach, Mr Ahern, to study the future of the airline. A completed report from Goldman Sachs will form part of its deliberations. A meeting of the committee is expected later this month.
The investment bank submitted its draft report in recent days to several Departments.
It says that, while a sale could be arranged, getting the best value for the airline may prove difficult in the current depressed environment. But it says this should not preclude a decision on a sale at a future date. Officials are studying the report, but little movement on the issue is expected until the Cabinet reshuffle at the end of the month.
The report says some institututional investors in Ireland and overseas are not currently well disposed towards airline stocks, but this could improve next year.
Goldman Sachs has spent the last few weeks talking to leading Dublin brokerages in an attempt to assess their appetite for shares in Aer Lingus.
The bank says it is difficult to recommend the most advantageous sale option because current market trends are so unpredictable. The report is a draft, and further work over the next two to three weeks is being undertaken by Goldman Sachs staff in Dublin and London.
A spokesman for the Department of Transport declined to comment on the contents.
The airline is currently seeking to reduce staff by 1,325, and talks are continuing between management and unions.
A package of nine weeks' pay per year of service has been offered, and this is likely to cost the airline at least €80 million.