Cabinet agrees to sell State’s 25% stake in Aer Lingus

The sale of the State's 25 per cent stake in Aer Lingus to International Airlines Group (IAG) has been recommended by the Cabinet and will go before the Dáil on Wednesday.

Announcing the move, Minister for Transport Paschal Donohoe said the seven-year guarantee on the company's slots at Heathrow and commitments on jobs were among the key elements which swung Coalition support.

He said the deal would create 150 net new jobs by the end of 2016, with the possibility this could rise to 635 by 2020.

The existing rights of all Aer Lingus employees “will be safeguarded”, Aer Lingus is a “great company” and selling it to IAG means it will continue to serve Irish people in future, he added.

Mr Donohoe said there would be an additional four transatlantic services, with two introduced next year. Legally binding guarantees have been provided on all of the airline’s existing slots at Heathrow Airport for an “unlimited” period of time.

The current daily services between the London hub and Dublin, Cork and Shannon will be maintained for “at least” seven years, with the final two years conditional on airport charges not increasing beyond specified levels.

For five years, Aer Lingus' remaining Heathrow slots, currently operated from Belfast would "continue to be operated to/from routes on the island of Ireland. " The Government says this will offer greater certainty than is currently the case with the State's minority shareholding.

The Minister for Finance will retain a share in the company, designated as a new class of share, which will only allow any changes to connectivity to be made with the consent of the Government of the day.

A legally binding commitment has also been provided to protect the Aer Lingus brand, as well as ensuring it is headquartered in Ireland.

The group of Labour TDs who had concerns about the deal are understood to be broadly happy after being briefed on Tuesday evening. However, Clare Labour deputy Michael McNamara, whose primary concerns are around connectivity, said he wants to see the details of the deal rather than just be briefed on it.

Mr McNamara said he will vote against the sale in the Dáil if he is not shown the full details of the deal beforehand or is not satisfied with it. The proceeds of the sale are to be used for investment in other transport projects, as well as in areas such as broadband.

The deal being would see the establishment of a so-called “connectivity fund”, which would be administered by the Strategic Investment Fund. The sale of the stake will yield around €400 million for the State but any investment will be in the form of public-private partnerships.

Aer Lingus chief executive Stephen Kavanagh has told the Minister for Transport he does not foresee compulsory redundancies or outsourcing of jobs in the event of IAG buying the Government's 25 per cent stake in the company.

In a letter sent to Paschal Donohoe, seen by The Irish Times, Mr Kavanagh moved to reassure the Government as it decided on whether to approve the sale.

In the letter, Mr Kavanagh said Aer Lingus believed collective agreements currently in place provide “flexibility and mobility across our workforce without unduly restricting other possible approaches”.

He added that the company had committed to “expanding the scope of these registered agreements where appropriate to include staff groups not covered by the current agreements.”

“The IAG model is that all employment and union relations issues are strictly the responsibility of the operating companies within the IAG group. As such Aer Lingus will engage in a process of consultation governed by agreed structures with out staff and their representatives when any restructuring is required and we do not foresee a likelihood of either compulsory redundancy or non-direct employment”.

He concluded his letter by saying the IAG approach brings a “significant opportunity for growth” that is in the interest of Aer Lingus and its staff.

Mr Donohoe said IAG has given additional information and commitments relating to its proposed bid. “Following detailed consideration of this and all of the issues surrounding a potential disposal of the State’s shareholding in Aer Lingus, the Government has decided that it will support IAG’s proposal,” he added.

IAG said both it and Aer Lingus have confirmed details of the bid, which they say will value the Irish airline at a total of €1.4 billion.

Aer Lingus chairman Colm Barrington described it as a "compelling" deal for the airline, its shareholders, staff, customers and the country.

He predicted it would “lead to an increase in jobs at Aer Lingus, in support activities and the tourism sector, and, importantly, will strengthen connectivity to and from Ireland”.

IAG's Irish chief executive, Willie Walsh, said that it would benefit Aer Lingus and the country.

“Aer Lingus would maintain control of its brand and operation while gaining strength as part of a profitable and sustainable airline group in an industry that’s consolidating,” he added.

Aer Lingus shareholders will receive the formal offer from IAG within 28 days.