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Any sale of government's Aer Lingus shares would face Dáil vote

The airline’s proposed buyer has said it will keep Aer Lingus as a separate business.

Updated 5.30pm

ANY FURTHER SALE of the government’s stake in Aer Lingus would be required to go to a vote in the Dáil, Pascal Donohoe has said.

Speaking before the Seanad today, the Minister for Transport said, “The state’s 25.1% shareholding cannot be compulsorary acquired. And therefore it is for the government to decide, having examined the matter carefully, whether to accept or reject any offer.”

Referencing the Aer Lingus Act of 2004, Donohoe went on, “the Minister for Finance, in whose name the State shareholding is held,  may not dispose of any share in Aer Lingus without the general principles of the disposal being laid before and approved by Dáil Eireann.”

In the course of his speech Donohoe drew attention to a statement that IAG had made in which they “recognised the importance” of maintaining air connectivity to Ireland.

oireachtas paschal donohoe Source: Oireachtas.tv

Yesterday…

This comes after the government were yesterday accused of being intent on selling its stake in Aer Lingus to build a war chest ahead of the next election.

Fianna Fáil’s transport spokesperson Timmy Dooley made the claim after the board of Aer Lingus gave the green light for a €1.35 billion buyout of the Irish national carrier – a deal which could still be scuppered through political roadblocks.

The Cabinet met yesterday to consider the proposal but no final decision was taken by ministers.

Transport Minister Paschal Donohoe said that an expert group comprising of several government departments, agencies and advisors is examining the matter.

Speaking in the Dáil, Taoiseach Enda Kenny said that Fine Gael and Labour will consider the bid “very carefully and very comprehensively”.

Kenny said that, as “the guardian of the public interest”, the government has “to take into account the implications of any such offer”. However, he noted that the government is “only one component” of Aer Lingus and that the views of other stakeholders will have to be considered.

Earlier, Dooley had claimed that the government’s intentions were borne out of “a desire to put in place a war chest to fight the next election”.

“It’s quite obvious that it would facilitate the government in investing in projects that would be beneficial to some of their members who are finding it difficult to walk down the street at the moment,” he told reporters at Leinster House.

The Clare TD said the sale was “not in the best interests of Ireland” and said that the previous Fianna Fáil government’s privatisation of the airline had put in place safeguards that still made it a “strategic asset” for the State.

IAG offer

Yesterday morning, the airline announced its board had recommended an offer from British Airways parent IAG that values the domestic carrier at €2.55 a share.

A final decision will now be up to Aer Lingus shareholders, which include Ryanair with a near 30% stake and the Irish government’s 25% piece.

Two lower bids for the airline have already been knocked back by its board.

In this morning’s statement to the stock market, the board said:

Having considered this request, the Board has indicated to IAG that the financial terms are at a level at which it would be willing to recommend, subject to being satisfied with the manner in which IAG proposes to address the interests of relevant parties.

The protection of Aer Lingus slots at Heathrow has been prioritised by the Government as part of any deal. The airline’s brand and livery would also be kept in a deal similar to that done when Spanish national carrier Iberia merged with British Airways to become IAG in 2011.

Cabin Crews Disputes Disruptions Source: Leon Farrell/Photocall Ireland

Strings attached

IAG said its offer was “subject to certain pre-conditions” and laid out its intentions for the airline after a buyout, including:

  • Aer Lingus would run as a separate business with its own brand, management and operations
  • The airline would continue to “provide connectivity to Ireland” while taking advantage of being part of a bigger group
  • It would become part of the Oneworld alliance, which includes British Airways, American Airlines, Qantas and others. Aer Lingus was a member but left in 2007
  • Join IAG’s joint business with American Airlines over the Atlantic, benefiting from the “natual traffic flows” between Ireland and the US and Dublin’s “advantageous” position

Political hurdles

The Irish exchequer stands to make about €335 million from the sale, but any government agreement needs to clear the Dáil – where it still faces significant hurdles.

Transport Minister Donohoe yesterday said the government’s priorities were ensuring the future of the Aer Lingus brand and guaranteeing connectivity and choice for passengers was maintained.

1 12/2014 Tourism Irelands Marketing Plans Transport Minister Paschal Donohoe Source: Sasko Lazarov/Photocall Ireland

Speaking yesterday, Donohoe said that the potential sale of Aer Lingus to IAG is in “the early stages” and said careful consideration would be given to proposal before any decision is taken.

An expert group, chaired by his department and consisting of representatives from the departments of Finance, Public Expenditure and Reform and NewERA, as well as external advisors, is examine “the issues around a potential offer for the State’s shareholding in the company”.

“They will report back to me shortly on these key issues and the matter will then be considered by the Government before any final decision is taken,” Donohoe said in a statement.

Labour’s way?

But the proposition of a sale has got a more frosty reception from Labour, with former minister Joe Costello saying there were too many unresolved issues about the deal.

Other backbenchers have voiced their concerns yesterday with several Labour TDs based in north Dublin, where Aer Lingus has its headquarters, expressing reservations.

Those likely to be concerned from their constituents’ point of view include backbenchers Brendan Ryan, Sean Kenny, and John Lyons, as well as junior minister Aodhán Ó Riordáin and even the Tánaiste Joan Burton.

Cork South-Central TD Ciarán Lynch said Labour’s concerns were not confined to deputies based in the capital, saying:

“Aer Lingus currently operates flights from Cork Airport to capital and major cities throughout Europe, of which the most important are their Heathrow slots. All those flights need to be protected.”

Independent TD for Dublin North Central, Finian McGrath, had this to say:

‘Asset stripping’

The IMPACT trade union has warned up to 1,200 jobs at Aer Lingus could go as part of a merger if cuts follow the pattern of those that happened at Iberia after it was swallowed up.

Sinn Féin said it was against any deal which might lead to “asset-stripping” at Aer Lingus, including the loss of its prized Heathrow landing slots.

Meanwhile, Fianna Fáil finance spokesman Michael McGrath told RTÉ’s Morning Ireland that his party also didn’t support the sale going ahead.

“I think assurances given at this time, when (IAG) is trying to take over Aer Lingus, need to be viewed with a degree of skepticism,” he said.

“One question that would arise immediately after whether those assurances are absolutely legally binding and I don’t see anything in the Aer Lingus statement yesterday that would reassure us on that issue.”

The proposed merger would also have to get approval from European competition regulators.

- additional reporting from Peter Bodkin, Hugh O’Connell, Michael Sheils McNamee and Órla Ryan 

First published on 27 January 2015

READ: One in four Aer Lingus workers could lose jobs in airline takeover >

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