Cabinet may wait until autumn to make decision on Aer Lingus

The Government is unlikely to decide on Aer Lingus's future before autumn, it has emerged.

The Government is unlikely to decide on Aer Lingus's future before autumn, it has emerged.

Last week, the airline's chief executive, Mr Willie Walsh, and his colleagues, chief financial officer Mr Brian Dunne and chief operations officer Mr Séamus Kearney, asked the Department of Transport for permission to assemble a management buyout (MBO) bid.

That will be discussed at a Cabinet meeting today, where it is expected that Minister for Transport Mr Brennan will tell Government colleagues that he favours a process that will allow both the management bid and competing offers for the State airline.

However, Department sources last night predicted that it would be unlikely that the Government would decide on the best way forward for the airline at either this Cabinet meeting or next month's, which is the last before the Government breaks for summer. "It will be autumn at least before any decision is made," one source said.

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If the Government decides to allow management to put together an offer, it is thought that it will appoint a sub-committee of the board to consider that and other bids.

The Irish Times understands that the three executives will not step down from their posts if the Government agrees to allow them to bid for the company, as they do not believe that this would create a conflict of interest.

Sources yesterday said that if Aer Lingus was privatised, it would inevitably end up as a plc. The money is likely to be raised from institutions and venture capitalists, who will seek a return in three to five years.

A stock market flotation would be the easiest way of getting that return.

The management is understood to be keen for a decision to be made quickly. Aer Lingus requires around €1 billion to invest in its fleet and to cover a planned expansion.

However, EU law prevents the Government from giving it any cash. The State can invest as a "commercial shareholder" but is unlikely to do this for political reasons.

Aer Lingus's management believes that privatisation is the only realistic option for raising this cash. They are keen to press ahead with privatisation, as the investment is needed to ensure that the airline can compete and grow its market share.

Aer Lingus also wants to open more transatlantic routes, and will configure its aircraft to cut down on business class seating to allow it to offer high volumes of cheap flights to the US.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas