The ambition of Mr Willie Walsh and other senior managers at Aer Lingus to put together an investment proposal for the national airline has been curtailed, for the time being at least. Mr Walsh and his colleagues withdrew their proposal on Monday and the Taoiseach sealed its fate yesterday when he told the Dáil that he did not think that a management buyout was appropriate for Aer Lingus. Mr Walsh may argue that what he proposed was not a management buyout in the strict sense, but the intent of the Taoiseach's comments is clear. The management of the airline cannot be seen to be cashing in on whatever decision is made on the future of Aer Lingus.
But that decision must be made sooner rather than later. The review of options for Aer Lingus that was prompted by Mr Walsh's audacious approach last summer is dragging on. The Cabinet sub-committee set up to look at the issue is still considering a consultants' report setting out the various options for the airline. And, in the wake of the change of portfolios after the Cabinet re-shuffle, the Tánaiste, Ms Harney, indicated yesterday that she may have different views from the Taoiseach on the future of the national airline.
The review commissioned by the Government looks at a range of options for Aer Lingus but reports, based on early drafts, suggest that the window of opportunity is closing for many of them. The ongoing deterioration in the outlook for the aviation industry has dented the appetite of prospective investors.
The airline industry is notoriously cyclical and the indicators are that it is on the cusp of another downturn. Rising oil prices are pushing up costs and will ultimately affect demand as global economic growth is held back. On top of that, competition amongst low cost airlines remains ferocious.
Aer Lingus is better placed than most to deal with the threatened crisis. It has successfully reinvented itself as a low cost airline and is one of the few European airlines to make a profit on its short haul routes. The company has also embarked on a further round of cost cutting aimed at securing the ground gained over the last two years and rolling out its hybrid low cost model on the transatlantic routes.
The management and staff at Aer Lingus are facing up to the challenge and the Government must do two things to ensure Aer Lingus's future. It has to quickly bring some certainty to the issue of the airline's ownership and address the issue of its short to medium term funding needs.
The obvious route for raising money through a sale of a stake in the airline to outside investors has not been ruled out, although management's role in any such move is set to be circumscribed. Despite having a good story to tell, selling the airline will be difficult, even unwise, in the current environment and is only set to get harder the more the Government dithers. In the interests of Aer Lingusand the taxpayers, a Government decision is overdue.