The Government has set the parameters for the rescue of Aer Lingus. The decision to sell a stake in the national carrier to fund a restructuring, gives Aer Lingus a fighting chance to survive, provided a investor can be found in time.
What is now on the table has something of the air of Plan B about it, after Plan A - to provide Government guaranteed loans - sank on the rock of European antagonism to state aid. The vehemence of the European Commission's opposition to another state bail out took many by surprise and forced last weekend's rethink.
The Government and its advisers are to be commended for the speed with which they have come up with an alternative strategy which should pass muster with Europe. The decision not to match any private-sector money that may be forthcoming, with state aid, reduces the risk of Brussels objections.
Talks between staff and management on the shedding of over 2,000 jobs can now proceed and must make rapid progress. These talks will have to move in tandem with the search for a new investor as the redundancy packages on offer will be a function of the cash raised through the sale of equity.
Worrying signs are already emerging of a split between IMPACT and SIPTU, whose members will bear the brunt of the job cuts. SIPTU is far less enamoured of the idea of part-privatisation and yesterday's march on the Dβil by its members does not bode well . Hopefully, the prospect of a 15 per cent stake in the restructured airline will be a sufficiently large carrot to get the unions on board.
The rescue of Aer Lingus will then hinge on the procurement of a new investor, which will be no easy task. Private investors and finance houses took a look at the airline when a trade sale was mooted prior to the summer. They may still be interested despite the depth of the company's problems and the general sectoral weakness.
A strategic investor offers the best hope and British Airways is very much the front runner. It already has a link up with Aer Lingus via the Oneworld alliance and has looked at buying into the Irish carrier on several occasions. Other Oneworld members, such as American Airlines and Iberia, have also been named as possible investors. The solution may well involve a combination of airline investors.
All the potential investors have their own problems, relating to the terrible events of September 11th. They will need to be persuaded that the strategic arguments for buying into Aer Lingus at this point justifies the expending of very scarce financial resources. If they can be convinced, they can also be expected to drive a very hard bargain. But it should be possible to structure a deal that is fair and will reflect the potential value of Aer Lingus if the rescue succeeds. A claw-back arrangement similar to the one put in place at Telecom Eireann when strategic investors came aboard in the mid 1980s, is the obvious solution. A large number of things will have to go right for the plan to work. Perhaps the Government should start thinking in terms of Plan C.