Aer Lingus wants US partner to buy State holding

AER LINGUS’S senior management team has held talks with US low cost carrier JetBlue Airways about it taking a stake in the Irish airline.

According to informed sources, JetBlue is the Aer Lingus management’s preferred trade investor at a time when the Government is planning to sell its 25 per cent holding in the airline.

The preference for JetBlue as a trade investor might stem from the fact that the two airlines operate similar business models and don’t compete head-to-head on any routes.

Aer Lingus and its preferred partner are already connected, via a sales agreement launched in April 2008.

This allows the Irish carrier’s passengers flying into Boston and New York to connect with JetBlue’s services to 37 destinations in the US.

It also enables JetBlue’s customers to connect with Aer Lingus’s services to Ireland.

Following the release of its full year results in February, Aer Lingus said about 100 passengers a day are connecting between the two airlines and that the total number would “fill JetBlue for one day of the year”.

The US carrier is based in New York and reported pretax profits of $145 million for 2011.

The listed airline is valued at about $1.4 billion and closed 2011 with cash and short-term investments of $1.2 billion.

The Government’s stake in Aer Lingus is worth €116 million, which would be within the scope of JetBlue’s resources.

While the sale of the State’s stake in Aer Lingus is entirely a matter for the Government, the airline’s management would hope to play a role in where it is placed.

It also remains to be seen if rival Ryanair would sell its 29.8 per cent holding at the same time. This could be crucial for any potential trade investor in Aer Lingus.

Minister for Transport Leo Varadkar has indicated that the Government would seek at least €1 per share for its holding.

This would net the State about €134 million. The shares closed on Friday at 87 cent.

Separately, Aer Lingus is believed to be in discussions with Middle East airline Etihad about a commercial partnership.

This is likely to comprise some form of code sharing or sales agreement, whereby the Irish carrier and Etihad would supply passengers to each other’s flights.

Speculation has mounted in aviation circles here that Aer Lingus might even operate flights to Abu Dhabi, Etihad’s domestic hub, to supplement the Middle East carrier’s 10 flights a week from Dublin.

The Irish carrier previously operated point-to-point flights from Dublin to Dubai.

Offering passengers connecting services from Abu Dhabi to destinations in Australia and Asia via Etihad would be a different proposition commercially.

Such a move would also turn up the heat on Emirates, which launched a Dubai-Dublin service in January.

Etihad has expressed an interest in buying the Government’s stake in Aer Lingus.

It is understood to have held discussions recently with New Era, an arm of the National Treasury Management Agency charged with advising on State assets.

The talks are believed to be wider than just the Aer Lingus shareholding.

According to sources, they extend to how Etihad might help to develop passenger services at Dublin airport’s Terminal 2.

The talks are thought to include the use of so-called Fifth Freedom flying rights.

This would allow Etihad, for example, to fly from Abu Dhabi to Dublin, pick up passengers here and then continue on to the US. This is prohibited at present.

Such a move could prove attractive to Etihad given the availability of US customs and border protection facilities at Dublin airport.

Etihad has previously had a code sharing arrangement with Aer Arann, which operates Aer Lingus’s regional services.

Aer Lingus has a number of successful code sharing deals, including with British Airways and Air France KLM.

Speaking after the publication of its 2011 results, Aer Lingus chief executive Christoph Mueller said the airline would shortly announce a “new era of strategic partnerships”.

“We will report on that soon,” he added.

Aer Lingus declined to comment on either matter yesterday.