Aer Lingus will need to raise up to €2 billion in capital funding, not €1 billion as stated in the past, the airline's chief executive revealed yesterday.
Dermot Mannion said the funding was likely to be raised via a privatisation process and borrowings from international financial houses. He was speaking at a meeting of the Joint Oireachtas Committee on Transport. He declined to say how many aircraft the airline would need, although negotiations were continuing with Boeing and Airbus.
Mr Mannion, who was previously a senior executive with Dubai-based Emirates, said the funds would be needed between now and 2010. The disclosure of the higher figure surprised and angered some of committee members.
Labour Party TD Roisín Shortall said: "It just doesn't stack up." Senator Tommy Morrissey said many people regarded the €1 billion figure as "ambitious" and would be even more surprised the airline needed a larger sum. In response to Ms Shorthall, Mr Mannion said any previous figure referred to a different period and did not include certain items.
Aer Lingus sources explained last night that the airline would have to replace existing long-haul aircraft and also purchase new ones. Some additional short-haul aircraft would be needed too.
Mr Mannion emphasised during the meeting that the airline was not seeking all the funds via an equity injection, but needed capital to buy aircraft. He said while the list price of the new generation of aircraft was $100 million (€84.8 million) each on average, the airline would also "need to tool up for spares". He said this extra equipment usually added about 20 per cent to each aircraft.
He said the reason the figure was higher than previous estimates was that his predecessors would not have factored in replacing long-haul aircraft, plus purchasing new ones.
He said the time periods used in previous estimates were different. He said previous business plans concentrated on short-haul options, whereas in his period as chief executive a "twin track approach" was being adopted.
He acknowledged, however, that getting new aircraft was difficult in the current climate and new aircraft might not be available until 2011. He said "interim lift aircraft" could be used in the intervening period.
Mr Mannion said new equity was essential for the airline. "It is a matter of pragmatism. Right now we have a fleet of 27 short-haul and seven long-haul. We are close to maximising the use of that fleet. We can't make it do more," he told the committee.
He said a decision on the method of privatising the airline was likely to be made shortly. He said UBS and AIB Capital Markets were currently working on these issues for the Government.
Mr Mannion also revealed that staff at the airline are to benefit from a "reward proposal" from the airline if certain savings can be implemented. He said a "fly anywhere" agreement with cabin crew was recently signed by unions and management.
Mr Mannion also revealed that the airline expects to carry 9 million passengers in 2006 and will have a staff of about 3,500. The airline carried almost seven million passengers in 2004.
