The Government's decision to sell its 25 per cent stake in Aer Lingus to IAG has been some months in negotiation. It appears that the concessions made by IAG as part of this process are significant and have answered many of the initial concerns about the deal. In particular, the deal looks the best option to boost connectivity to and from Irish airports in the years ahead and to ensure competition on key routes.
Predictably, the announcement that the Government will sell its stake has led to some objections. These are understandable, up to a point. Some jobs will be lost and new ownership in a business always creates uncertainties. However, overall the deal looks set to boost connectivity, employment and growth and to underpin the future of the airline.
Much of the debate has been based on the false premise that the Government’s 25 per cent stake allowed it to control the airline. This is not the case. The State sold down most of its shares when Aer Lingus floated in 2006. As things stand, it has a limited ability to influence events at the airline. The deal, as structured, gives it a seven-year guarantee on the use of the slots in Heathrow for Irish traffic and an ongoing veto on the sale of these slots.
It also promises growth in traffic. Of course there are risks, but on balance the future of Aer Lingus would look more secure under the IAG umbrella rather than the current ownership structure in which the largest shareholder, Ryanair, is likely to have to sell down its stake due to a UK competition ruling. New routes to North America and new aircraft for the Aer Lingus fleet will boost activity and jobs.
It is in IAG’s interest to grow and develop Aer Lingus and to increase the number of people flying through Irish airports. No other bidder has emerged during the process, and while Ryanair has tried to take over Aer Lingus in the past , its ambitions would surely continue to be blocked on competition grounds. For Irish consumers it also makes more sense to have two airlines competing for business rather than one dominant player.
The crunch issue for the wider economy is international connectivity. This will be boosted by the IAG takeover, opening up new flights directly from Dublin, allowing easier access to the British Airways and Iberia networks and to the American Airline network with which IAG partners in North America.
The Aer Lingus brand will be maintained and its headquarters will remain in Dublin, with guarantees also of service levels from Cork and Shannon. Of course overall control will move to London, but if Aer Lingus can continue to run and develop existing and new routes there is no reason why it should not prosper under IAG ownership.