Potential investors in Aer Lingus will have to be convinced the airline can deal with the competitive threat from Ryanair on short-haul routes and US carriers on long-haul routes, according to London broker ABN Amro.
A briefing note written by its aviation analyst, Andrew Lobbenberg, a well-known sceptic on Ryanair, is upbeat overall about the airline and its recent history, but it does raise questions about how growth will be achieved.
Mr Lobbenberg also says investors will need assurance that there is enough experience of running public companies among Aer Lingus management and board.
"We would expect investors to question how Aer Lingus can grow, given the competitive threats of Ryanair on short-haul and US carriers on long haul," says the note produced this week.
"Cost control is likely to be key to maintaining or improving profit margins. Given that the previous management left in January 2005, citing a lack of government support for cost and job cuts, investors looking at the company will want to examine the quality of management, industrial relations and the degree of government support for independent decision making," states the note. The note does not put a value on the airline, although Davy recently said the airline could be worth over €1 billion. This figure includes a value for its lucrative Heathrow landing slots.
On long haul, the note stresses that the end of the Shannon stopover could make Ireland a far more attractive market to US carriers.
The stopover rule means that every second flight between the US and Ireland must go through Shannon Airport.
Mr Lobbenberg says this is a significant barrier to entry. Once removed, US carriers would increase their frequencies into Dublin, he predicts.
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