Analysis:Aer Lingus is free to follow its own path, writes Arthur Beesley, Senior Business Correspondent
Aer Lingus has run into a storm of resistance over the withdrawal of its Shannon-Heathrow route in favour of a new service between Belfast and the London airport.
The development comes at an inopportune time for the Government. Taoiseach Bertie Ahern and his Ministers are away on holidays. To virtual silence from the Cabinet, the airwaves have been dominated by dire predictions of economic meltdown from business and tourism interests in the mid-west and trade unionists.
Still, Ryanair will continue to offer flights between Shannon and Gatwick, Luton and Stansted in London. The Aer Lingus decision is at odds with Government regional policy but it is a direct result of another policy: the airline's privatisation last October. Like Eircom, Aer Lingus is no longer an instrument of public policy.
The Government still owns 25.4 per cent of Aer Lingus but the business is not beholden to Ministers. Thus the move to pursue bigger profits at Belfast International Airport is a clear manifestation of the airline's commercial freedom.
Central to the controversy is the reallocation of landing slots at Heathrow to Belfast from Shannon. In going down that path, Aer Lingus has taken a very careful course. After all, the prospectus for its flotation is very clear on the fact that the Minister for Transport, Noel Dempsey, considers that the maintenance of Heathrow slots for Shannon flights throughout the day is "critical" to ensure connectivity with the airport.
The prospectus also says investors holding more than 20 per cent of the airline have the power under its internal rules to call an extraordinary general meeting if the airline moves to dispose of any Heathrow slots.
But such power cannot be invoked in this case. Aer Lingus is reallocating slots, not selling them. In light of EU rules on the free movement of capital, restrictions on the allocation of the slots are not allowed.
The move to Belfast is in line with the airline's plan to expand by developing new hubs outside the jurisdiction. The question of withdrawing the Heathrow routes emerged only in recent weeks when the airline eliminated Birmingham as a possible location for its first international base and opted instead for Belfast.
The Heathrow issue would not have arisen in the Birmingham case. In choosing Belfast, Aer Lingus decided to take advantage of a significantly lower cost base in that location. This means the use of the Heathrow slots there will bring higher profits than at Shannon.
The expansion project was embraced in the business plan for the flotation and endorsed since then at a succession of board meetings. It is understood from airline sources that there was always board unanimity about the plan.
This implies support or an absence of significant opposition from the Government representative on the board - solicitor Francis Hackett, managing partner of legal firm O'Donnell Sweeney Eversheds - and the representative of the staff-owned employee share option trust (Esot) - London-based corporate solicitor Michael Johns.
For all that, an Aer Lingus spokesman said the ultimate decision about the Belfast plan and the withdrawal of the Heathrow route was taken by the executive management team. He acknowledged that the decision was not specifically referred to the board for approval, but said this was in line with normal corporate governance.
But realpolitik - as Aer Lingus well knows - is quite distinct from the corporate governance. While the airline was always going to run into controversy over Shannon, it appears that formal notification to the Government took place only well after the Belfast deal was done.
While airline sources said Government officials were made aware of the plan some time ago, confirmation of the agreement took place only last Friday when airline chairman John Sharman and chief executive Dermot Mannion briefed the Minister for Transport on the fringes of a press event to mark the introduction of a route to Washington.
While Mr Dempsey's representative did not return calls yesterday, the Minister appears to have no appetite to challenge the airline's decision. However, it will fall to him in the first instance to face the political backlash in the mid-west.
Assuming the controversy continues, Mr Ahern will inevitably be drawn into the affair on his return from holidays. That the Taoiseach always appeared a reluctant convert to the idea of privatising Aer Lingus can only increase the pressure on him.
The Government is in a very tricky position because it cannot attempt to force action from Aer Lingus - ie ordering it on the strength of its significant minority stake to pull back from a strategic commercial decision - without seriously undermining its own investment in the airline.
Shannon airport can be expected to offer significant inducements to any other airline which might provide a link to Heathrow. But Heathrow slots are precious.
Given the vote of no confidence from Aer Lingus, attracting another airline will be very difficult.