Heathrow slots main barrier to Aer Lingus deal

Government demand on slots emerging as main issue in proposed sale of airline stake

A Government demand that International Airlines Group (IAG) guarantee the Aer Lingus slots at Heathrow Airport for a decade is emerging as the main barrier to any deal on the proposed sale of the State's stake in the airline.

The Coalition is seeking a commitment from Willie Walsh’s IAG that it will guarantee the Aer Lingus slots at Heathrow Airport for 10-years, which is double Mr Walsh’s initial offer.

However, there is doubt that IAG will provide such a long-term guarantee, since Mr Walsh told an Oireachtas committee earlier this month he would not increase his initial five-year offer.

One Coalition source said: “If [Willie Walsh] comes back with a seven-year guarantee, we won’t accept it.”

IAG has laid out a number of five-year targets for Aer Lingus, should it buy the State’s 25 per cent stake and take control of the airline.

The targets include a net increase of 635 jobs, which would break down as 470 pilots and cabin crew and 165 engineers and ground staff.

Minister for Transport Paschal Donohoe said he wanted more detail on "what those jobs are, how they will be created and by when", while other politicians have said more detail is needed on the jobs which will be lost following any takeover.

Increase passengers

IAG also said they will increase passengers by 2.5 million by 2020, with 1 million coming from long haul flights. An additional five US destinations have also been promised, but no information on the locations of those destinations has been provided.

Additional investment in the fleet has also been promised. IAG has said it will purchase another nine aircraft, seven of which would be suitable for long haul flights.

The Coalition is largely happy with IAG’s valuation of Aer Lingus at €2.55 per share.

A group of Labour backbenchers who initially opposed the sale will meet today to decide whether to table a motion for debate on the issue at this weekend's party conference.

However, the feeling in political circles - both in Government and Opposition - is that a deal is there to be done, but the ball is now in Mr Walsh’s court.

IAG said it would consider Mr Donohoe’s statement in due course, but it is understood the group is more likely to take a positive view of the Government position as outlined.

Even if the Government does not sell the 25 per cent stake, IAG still has the option of changing its approach and bidding for Aer Lingus shares without any commitments to the Government.

Such a scenario would potentially leave the Government as a minority shareholder with no guarantees on anything.