Aer Lingus to acquire 17 jets for €850m

AER LINGUS is to expand its European fleet with 17 new Airbus jets worth €850m as the Government introduces legislation to transfer stakes in the State-owned company to the private sector.

In two separate announcements yesterday, Aer Lingus said it was to add 17 new A320s as Transport Minister Seamus Brennan published the Aer Lingus Bill 2003 providing the legal framework to facilitate private investment in the airline and the transfer of a 14.9% stake to employees.

Mr Brennan and the Aer Lingus board have to approve the aircraft purchase, the company’s biggest ever spending spree, before it can go ahead.

Goodbody airline analyst Joe Gill said the company would be able to finance the acquisition of the new aircraft from its current resources and predicted the investment would increase the carrier’s capacity by as much as 30%.

He also said that the move set the scene for Aer Lingus development of its North Atlantic business, where the company already uses long- haul Airbus jets.

“If anyone can do low cost on the Atlantic its Aer Lingus,” he said. “While other national carriers were saying the Ryanair low-cost model would not work Aer Lingus were embedding it into their culture and benchmarking their costs against Ryanair.

“Once bilateral agreements on US routes are sorted out, I can see Aer Lingus adding a significant number of new destinations in the US.”

Aer Lingus said it plans to add 15 new European routes using the new aircraft, which will be in place by 2005. A company spokeswoman said there would be no additions to the staff of 4,000, explaining improved flexibility and increased capacity would enable the expansions.

It is understood that routes to destinations like Athens, Berlin, Bilbao, Dubrovnik and Krakow are under consideration.

It is believed that Aer Lingus secured significant discounts from Airbus SAS, the world’s second-largest plane maker, to purchase directly seven A320. It also has options to purchase a further 10 jets.

The remaining 10 jets will be purchased by aircraft leasing company ILFC which owns a portfolio valued at more than $30bn, consisting of more than 600 jet aircraft. It is a subsidiary of insurance and financial services group AIG.

Aer Lingus has sold seven of its ageing fleet of 11 737s to ILFC on a lease-back basis but it is expected these leases will be extinguished as the Airbus jets come on stream.

Aer Lingus chief executive Willie Walsh said he was delighted at the outcome of a 15-month bargaining process which also included US plane makers Boeing.

“The move to a single aircraft type is a key element in our business strategy, bringing very significant cost savings while increasing capacity and greatly improving our operational flexibility.”

Airbus expects to deliver 300 aircraft this year compared with 280 for arch rival Boeing. Meeting the goal would enable the Toulouse-based company to surpass Boeing for the first time.