Cliff Taylor: Special ‘B’ share central to Aer Lingus sale

Analysis: Share will mean Government consent needed for future sale of Heathrow slots

‘The arrangement is the result of long negotiations between IAG and a special inter-departmental committee appointed by the Government to advise it on the deal’

‘The arrangement is the result of long negotiations between IAG and a special inter-departmental committee appointed by the Government to advise it on the deal’

 

An arrangement under which the Government will hold a special share in Aer Lingus is a central part of the deal in which it will sell its 25.1 per cent stake to IAG.

The share will mean that the consent of the Government is needed for any future sale of the Heathrow slots.

This special ‘B’ share is also the mechanism through which the Government will have a veto on any plan to alter the existing flight levels from Dublin, Cork and Shannon to Heathrow in the next seven years. The share will be held by the Minister for Finance.

The arrangement is the result of long negotiations between IAG and a special inter-departmental committee appointed by the Government to advise it on the deal. It is understood that the European Commission is not likely to object to this specific part of the sale.

However, it also has to conduct a competition investigation and decide within 35 days whether to broadly approve the deal or subject it to further inquiry. Sources believe that the commission is likely to give the deal the green light on the basis that, for consumers, there will still be strong competition on most routes out of Ireland, mainly from Ryanair.

Connectivity fund

The other new development in the final detail of the deal is the Government’s decision that the proceeds – around €340 million – will go into a special “connectivity fund”. This will form part of the strategic investment fund set up with the proceeds from the former National Pension Reserve Fund and intended for investment in key State projects.

While few details were announced, sources believe this fund will go to significant transport infrastructure projects. There was speculation that some of it could be deployed to develop the regional airports and, in particular, to pay down some of the debt of Cork Airport, but decisions on this are unlikely for some months.

Minister for Transport Paschal Donohoe said “the Government considers that a sale would be the best means of securing and enhancing Ireland’s connectivity”.

IAG has given a commitment that Aer Lingus will continue to operate its current daily schedules between Heathrow and Dublin, Cork and Shannon for at least seven years. The final two years of this period are subject to a condition that airport charges would not increase beyond certain levels.

Existing services

For consumers, this will mean a continuation of existing services to London’s main airport, with new routes also promised to North America and increased connectivity with other locations via Heathrow and Madrid, where IAG owns Spanish airline, Iberia.