The Government's retention of a significant stake in Aer Lingus could damage the performance of the airline's shares, the sales prospectus issued last night has warned. Emmet Oliver reports.
The 380-page document, which values the airline after privatisation at up to €1.3 billion, includes a warning that the presence of the Government and an employee share block could be a major disadvantage for all other shareholders.
The prospectus also warns the expansion plans of Aer Lingus are "heavily dependent" on the development of Dublin airport and additional capacity being made available. It says if deadlines are missed for Terminal 2 at the airport, it could impact on growth strategy.
The assertions about the Government stake and Dublin airport are included as risk factors in the prospectus, which was approved yesterday by the Irish and UK stock exchanges. Minister for Transport Martin Cullen claimed the airline was entering an "era of opportunity", but union concerns remain.
Last night, Siptu, the largest union at the airline, warned a ballot on the business plan was not yet completed. "In the Government's rush to sell our national airline at bargain basement prices, it has proven . . . difficult to finalise . . . important local issues with the workforce," said Michael Halpenny, national industrial secretary.
However, the company said the airline was in a position to capitalise fully on opportunities with its new funding base. It published financial results for the first half of the year, showing a pre-tax profit of €20 million, compared with €15.5 million in 2005.
The airline's present value is judged between €600 and €775 million but, once the fundraising is completed, this is set to rise to between €1.1 billion and €1.3 billion. Shares in the company are being offered at between €2.10 and €2.70.
The Government is set to net between €190 million and €293 million, depending on what prices the shares eventually reach. It will also retain a stake in the airline, which could range from 25.1 per cent to more than 30 per cent. The final stake the Government will hold will be decided towards the end of the month. The Government should net between €510 million and €661 million, although this figure includes whatever stake it retains.
According to the prospectus, the Government and the employee shareholding - known as the Employee Share Ownership Trust (Esot) - "may exercise significant influence over the company following the offer".
It says the interests of these two "may differ from the majority of other shareholders".
It says the two shareholders could influence the outcome of director elections and the approval of "significant transactions". While it is customary for a prospectus to outline a wide range of risk factors, the inclusion of a reference to the Government's shareholding will give ammunition to critics who believe it should have sold its entire stake.
The prospectus points out that the Government is the sole shareholder in the Dublin Airport Authority, which operates the airline's principal base. It also indicates the Government regards landing slots at Heathrow airport as being of strategic interest to Ireland.
The other risk factor cited is the lack of an "open skies" deal between the EU and US. The airline needs this to be agreed so it can fly into more US cities. The prospectus points out that Mr Cullen has promised to get agreement on this with the US authorities even if the EU cannot come to agreement soon.
r Last night, the Chambers of Ireland welcomed the valuation put by the prospectus. The chairman of its Air Transport Users Council, Dan Loughrey, a former Aer Lingus board member, said: "The quoted value will mean that the new owners of the airline will have to commit to significant investment in fleet expansion and replacement. Aer Lingus has to seize the new opportunities available for low-cost, long-haul flights in markets such as Asia and the Americas."