Management at Aer Lingus have signalled their interest in participating in a privatisation of the airline, putting pressure on Dublin to move the Irish flag carrier out of the state sector.

The Aer Lingus management team has sought permission from the Irish government to "develop an investment proposal" for the carrier. Led by chief executive Willie Walsh, this team has turned the carrier around from near bankruptcy to profitability over the past three years.

The move has prompted Dublin to establish a cabinet-level subcommittee to consider the options facing Aer Lingus, with a decision expected by autumn. Dublin-based airline analysts point out that this does not necessarily mean a management buy-out. A key factor behind the management's proposal to take a lead on the sale, appears to be the desire to avoid a protracted, politicised privatisation process. Efforts to privatise national airport operator Aer Rianta, for example, have become bogged down, partly due to union and political issues.

"They may be taking the view that the right time for this will be sooner, rather than later," says one, adding that all options, from initial public offering to trade sale, are on the table.

The management proposal has prompted speculation about who else might be interested in the carrier. Rod Eddington, chief executive of oneworld alliance partner British Airways, has said that the UK carrier is not planning to bid as it is focusing on reducing debt levels.

In its European airline review, Citigroup Smith Barney speculates whether Lufthansa may be tempted to use some of the cash from its recent rights issue to buy into Aer Lingus. Even Ryanair cheekily suggested it might be interested.

However, Dublin analysts point out that political and strategic concerns will be high on the Irish government agenda. "They will want to ensure that the valuable London Heathrow slots are used for Irish services, and that direct transatlantic and European services remain," says one analyst. Ireland has benefited hugely from US investment in recent years. There is also the significant hurdle of bilateral restrictions to be overcome if the carrier is sold to non-Irish interests.

At the end of July, the Aer Lingus board approved a three-year business plan for the company. Despite claims that the airline plans to cut over 1,000 more jobs from its 4,600-strong workforce, Aer Lingus has refused to comment on the plan. It statesonly that it is designed to provide:"the strategic, commercial and financial actions essential to ensure the continuing viability and growth of the business in the highly competitive, low-fares environment." n



Source: Airline Business