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Inside the world of business

Aer Lingus tie-up with BA grounded

THE CONFIRMATION that British Airways parent International Airlines Group (IAG) is close to clinching a deal with Lufthansa to buy British Midland International should end talk of a link-up between Aer Lingus and BA.

BMI offered much the same attractions to IAG as Aer Lingus. Both have slots at capacity-constrained Heathrow airport, which is the main hub for BA.

BA has 43.1 per cent of the available take-off and landing slots. BMI is the second-largest carrier, with 9 per cent of the take-off and landing slots. Aer Lingus is fourth with around 2.5 per cent.

BMI also offers BA direct access to the lucrative business market between Dublin and Heathrow, something it should be able to leverage with its global network of flights out of Heathrow.

The price is also attractive, with reports yesterday valuing the deal at £300 million (€349 million), which compares with Aer Lingus’s market cap of €370 million.

And that is before you take into account the execution risks associated with trying to buy Aer Lingus. Ryanair says it is prepared to sell its 29.8 per cent stake, and likewise the Government regarding it 25.1 per cent stake, but there is many a slip twixt cup and lip.

And that is not to mention the deficit in the Aer

Lingus pension scheme, which IAG’s Willie Walsh has identified as one of the major disincentives to moving on Aer Lingus.

The silver lining for Aer Lingus is that British regulators might baulk at the prospect of BA having so many slots at Heathrow and force it to sell some as a condition of the deal.

Aer Lingus could hope to buy some but would face competition from other airlines with much deeper pockets. A less ambitious and more realistic possible benefit is that BMI’s Dublin to Heathrow routes might be under review if the airline has to sell slots as a result of the takeover.

Sherry Fitz trumps as UK sale nets €44m

THERE ARE not too many people left at this stage who can claim to have done shrewd deals at the height of the property boom.

But it looks like one of them has emerged in the shape of Sherry Fitzgerald, the Republic’s biggest estate agency.

It is selling its London business, Marsh Parsons to publicly quoted LSL Property Services in a deal that will net €44 million for the Irish company.

It’s a good return; Sherry Fitzgerald spent a total of €11 million on buying and investing in Marsh Parsons between 2005 and 2007.

The announcement comes at a good time for the Irish estate agent and its shareholders. Sherry Fitzgerald has debts of about €16 million, partly a legacy of its decision to delist from the Dublin market in 2003 and go private.

Its shareholders owe a total of €11 million, dating back to their decision to buy out other investors in 2007.

The proceeds from the Marsh Parsons sale are likely to be used to pay down these debts.

This will leave Sherry Fitzgerald in an almost unique position in its industry, in that it will

have a clean balance sheet and some extra cash in

its war chest, which can be used to invest in the company to position it to make best use of any recovery in the Irish property market.

It is likely that many of its rivals are struggling and that they have cut back their operations to the bare bone.

When it was clear in late 2008/early 2009 that the property market was only heading one way, there was a rash of well-publicised layoffs in the real-estate industry.

Sherry Fitzgerald made some cuts, but it still employs 200 people directly and a further 250 indirectly.

The boost it will receive from the Marsh Parson’s sale will give it more muscle to exploit any opportunities that are out there.

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