Sir, – Your readers should be aware that the Government is selling its share in Aer Lingus to the International Airlines Group, which in reality is British Airways (BA), for a pittance. For an outlay of about €1.4 billion, BA inherits almost €1 billion in cash at Aer Lingus’s last balance sheet date, December 31st, 2014. Given Aer Lingus’s strong trading performance, that cash position has undoubtedly improved substantially since then. BA also inherits 23 Heathrow slots worth in excess of €600 million at current market values. That is before the value of the fleet and other assets is included.
Many people will be unaware that Aer Lingus has one of the strongest balance sheets of any airline in the world, up there with Ryanair. It handsomely trumps that of BA. To sell it for a return to Irish taxpayers of a paltry €350 million is an abomination. It demonstrates this Government’s propensity to screw up on big financial issues, Irish Water being the benchmark so far, and to sell its assets too cheaply.
The share price offered by BA is 14 per cent higher than the flotation price of 2006, €2.20, but 25 per cent less than the takeover price (up to €3.30) offered by Ryanair at that time. Those prices reflected a much weaker balance sheet and now demonstrate the Government’s abysmal judgment in this matter. This Government now expects shareholders to sell their shares at a substantial discount to the 2006 Ryanair price. Try that one at a cattle mart anywhere in Ireland.
It will surprise most people that the value of Aer Lingus’s slots at Heathrow is not included in its balance sheet. This was confirmed to me and other shareholders by the chairman at the annual general meeting four weeks ago. The reason the slot values are not included is “as we did not pay for them, they are not recorded” (these slots were part of a “grandfather rights” arrangement for many airlines in the late 1980s on condition that “you use them or lose them”).
In contrast, a paltry few million euro for slots at Gatwick are included in the accounts.
Many financial soothsayers claim that Aer Lingus cannot survive and grow in an intensely competitive international marketplace. This line has been trotted out by Ministers in support of a sale. If such were the case, Aer Lingus would have gone to the wall years ago. Any organisation that can repeatedly adapt itself to the changing demands of evolving markets will survive and prosper, irrespective of size. Aer Lingus is such a company.
For Aer Lingus to expand profitably, it can either borrow on the capital markets or launch a rights issue on the stock markets. I have absolutely no doubt that the strength of the balance sheet and its cash-generation capabilities would be a major attraction to investors and that funds to acquire additional aircraft to tap new markets would be readily forthcoming. Otherwise aircraft leasing opportunities are widely available.
Promises have been made by BA that Ireland’s strategic interests would be protected. Utter nonsense. The only strategic interest that will be protected is that of BA itself. That is the duty of its board.
The Government has seriously misjudged its call on this bid. If it seriously wants to capitalise on Aer Lingus’s financial value, then it should not countenance a sale until the company’s market capitalisation is at least €4 billion. – Yours, etc,
BRIAN BERRY,
Malahide,
Co Dublin.
A chara, – The sale of the Government’s shares to IAG presents an outstanding opportunity for the workforce of Aer Lingus. Let us remember past pupils of Aer Lingus who excelled within and outside the organisation – Tony Ryan and Willie Walsh – to name but two. – Is mise,
MICK O’BRIEN,
Springmount,
Kilkenny.
Sir, – The Labour Party’s stance on the sale of Aer Lingus is just another addition to its long list of capitulations to Fine Gael while in Government. – Yours, etc,
BRIAN HUGHES,
Beaumont,
Dublin 9.
Sir, – The deal to sell-off the Government’s shares in Aer Lingus has concluded with members of the Labour Party falling over themselves to fall into line – again. – Yours, etc,
JIM O’SULLIVAN,
Rathedmond,
Sligo.
Sir, – It appears to be forgotten that in 2007 Aer Lingus withdrew all its flights between Shannon and Heathrow and moved its aircraft to its new base in Belfast, despite protestations from government and local business. Perceived better profitability was presumably the motivation. Government, despite the share in Aer Lingus, was unable to do anything about it. Why do we think that by refusing to sell the shareholding at this time we could intervene in a future commercial decision? – Yours, etc,
PATRICK MURPHY,
Bray,
Co Wicklow.