Cantillon: Coalition demands put Willie Walsh on the spot about Aer Lingus

The wrangling over Aer Lingus looks set to continue for another while after the Government effectively pitched the ball back into bidder IAG's court this week.

The statement from Minister for Transport Paschal Donohoe has been widely interpreted as the Government at least attempting to signal that it is willing to sell the State's 25.1 per cent stake if IAG makes further concessions.

That would include extending from five years to a significantly longer period the guarantee that Aer Lingus Heathrow slots will be used only to service Irish routes, something IAG chief Willie Walsh recently told an Oireachtas committee he would be "crazy" to do.

His argument against it was simple. By doing so, he would effectively be locking himself into an agreement with the three airports, Dublin, Cork and Shannon, that would leave him with no real bargaining power. That is something that neither he nor any other businessperson in his position would want to see.

Walsh could point at one thing to support his argument that the period he is proposing is reasonable: legislation requires the Commission for Aviation Regulation, a State agency, to review the cap on Dublin Airport's passengers charges every five years. No-one has disputed the time frame, indicating airlines and the airport believe it is fair.

Furthermore, if the Government was to demand that Dublin, Cork and Shannon guarantee charges, for any period, their managements would cry foul. In addition, the carriers’ rivals would point out that such a demand would constitute an illegal State aid.

Given Walsh’s very clear position, you have to wonder why the Government is making the demand. One answer is that it feels it must look out for the various constituencies affected. The other is that if IAG was to say it cannot concede further ground and walk away it would remove from the Government’s shoulders the burden of having to make a decision.