Flotation of Aer Lingus is likely to be delayed

The prospects of an Aer Lingus flotation this year are fading, despite the publication yesterday of a draft Bill to clear the way for an initial public offering on the stock exchange. The Bill is unlikely to be enacted before the Oireachtas rises later this month for the summer recess, yet it is crucial to the flotation process.

But the company is keen to float in the autumn, arguing that it would be in the "best possible position" at this time and that international conditions would be favourable.

The Minister for Public Enterprise, Ms O'Rourke, signalled yesterday that moves to negotiate an employee share option plan (ESOP) will intensify following the Bill's publication.

Ms O'Rourke has said an initial public offering may be possible "towards the latter part of this year or early 2001", but added that this would depend on market conditions and the conclusion of preparations for the stock exchange launch.

The ESOP is a core element of the flotation process and the Minister yesterday invited the airline's trade unions to engage in "formal discussions" with the Department of Public Enterprise and the Department of Finance on a share-option plan.

Yet while a number of meetings are known to have taken place already, a trade union spokesman claimed yesterday that the bodies representing Aer Lingus workers had still not arrived at a common negotiating position.

In addition, the agreement must be written into the legislation and people close to the company's thinking concede that an initial public offering this autumn would be less likely if the Bill is not enacted before the recess.

The ESOP may take some time to conclude. A spokesman said the trade unions were still assessing an independent task force report on the company's joint pension scheme with Aer Rianta, which they received last Monday. Only when this process was complete would a joint position on the ESOP be reached, he said.

While the union spokesman claimed SIPTU had not yet formalised its position, it is known that the pilots' union, IMPACT, wants 14.9 per cent granted to workers in the ESOP. This would be in addition to a 5 per cent stake granted in return for work practice changes agreed under the Cahill rescue plan in the 1990s.

Yet Ms O'Rourke and the airline's acting chief executive, Mr Larry Stanley, have said that no more than 10 per cent of Aer Lingus' stock will be available in the new plan.

The pensions report is thought to state that the fund should be increased by means of significant cash injections from both Aer Lingus and Aer Rianta. It also says annual contributions from both companies should be increased from their current rate of 6.5 per cent of salary, which equals the rate paid by employees themselves.

It is also likely that the scheme would be split in two in advance of the flotation. A section in the Bill published yesterday allows for the creation of a new Aer Lingus fund.