Aer Lingus hopes any partner will take equity stake in airline

Aer Lingus is now to enter discussions with a number of international airlines, following a Government decision that it should seek a strategic alliance partner.

The airline has also indicated that its preferred course is for a partner to take an equity stake in the group, followed by a float of Aer Lingus shares on the stock market.

The airline is confident that a number of major international players will be interested in talking to it, although it will be some months before the shape of a likely alliance becomes clear.

The Minister for Public Enterprise, Mrs O'Rourke, is to meet the Aer Lingus chairman, Mr Bernie Cahill, today to discuss the next steps. However speaking after yesterday's Cabinet meeting, Ms O'Rourke said that the Government was giving the go-ahead to the airline to seek a strategic alliance partner and that, in principle, it was open to a partner taking an equity stake in the airline, although the terms of any such arrangement would have to be examined. An Aer Lingus report to the Minister on the strategic alliance issue was published yesterday. It states unequivocally that "the commercial future of the airline can only be secured through participation in a major strategic alliance, of which a strong US partner would be a key component." Membership of such an alliance is vital, Aer Lingus argues, as the international aviation market looks set to be dominated by four to five major groupings, of which the Irish airline must be a part.

The report also says that the end of the current regulation which obliges airlines broadly to fly the same number of Irish -US services from Shannon as from Dublin will be required, if a strategic alliance is to work to its best advantage.

If Aer Lingus is to participate in an alliance involving a major US player, then the US authorities are likely to insist that all restrictions on the Irish aviation market be dropped, in return for clearing the alliance through their regulatory process, according to the document. Aer Lingus argues that business from Shannon could still prosper without the existing regulation, although the issue is likely to prove controversial. The Minister, Mrs O'Rourke, said that as the airline had not yet presented her with its preferred choice of partner, the issue of changing the status of Shannon had not yet been considered.

SIPTU, in a statement on behalf of its members in Aer Lingus, said that it expected "full disclosure of information and participation with Aer Lingus in arriving at a decision on any future partnership." The union added :"The decision cannot be made solely on business criteria alone" as maximising employment, the interests of the travelling public and the conditions of the employees must also be considered.

Meanwhile a spokesman for IALPA, the pilots' association, said that he welcomed the Government decision and believed that an alliance must now be negotiated as quickly as possible. However he said that the pilots did not believe that an alliance partner should take an equity stake.