Etihad enters race for Aer Lingus stake

ETIHAD Airways has entered the race to acquire the Government’s 25% stake in Aer Lingus.

Etihad enters race for   Aer Lingus   stake

A report in the Financial Times yesterday morning suggested that the Abu Dhabi-based airline — which has had an Irish service since 2007 — has begun formal talks with the Government over a deal; but couldn’t confirm how far such negotiations have progressed. Any further information was thin on the ground yesterday afternoon.

Unsurprisingly, Aer Lingus was quick to point out that it was a matter for the Government; but the Department of Transport said that it had “no comment to make on the matter” — although the Minister Leo Varadkar later acknowledged that “considerable interest, both from other airlines and investors, has been shown”.

For its part, Etihad put a little more effort into not divulging much information, by stating: “We never comment on speculation of this nature, except to say that we talk regularly and frequently to many airlines, and a range of other businesses from all over the world, about issues and opportunities.”

Etihad has also, reportedly, been holding talks in Britain with Virgin Atlantic over a potential joint bid for BMI.

It is known, however, that the airline’s Australian-born chief executive, James Hogan, met with the Taoiseach for 30-40 minutes during the recent Global Irish Economic Forum at Dublin Castle.

Mr Varadkar announced last month that the Government could sell its interest in Aer Lingus as part of its overall state-asset disposal programme. However, he added that it would not be sold for less than €1 per share; valuing the 25% stake at around €132.4 million.

Ryanair — Aer Lingus’ largest shareholder, with a 29.8% interest — has already distanced itself from a third attempt to gain full ownership of its rival.

While analysts had been viewing IAG (the holding company of British Airways and Iberia) as the most likely candidate to buy the Government’s stake, there was little surprise over Etihad’s potential involvement.

“Under ownership rules, there would be nothing to stop Etihad buying minority stakes in European airlines, but it would be prevented from buying majority stakes. For Aer Lingus, a resolution of the multi-employer pension deficit will be needed, but certainly Aer Lingus — like TAP and BMI — could find itself the focus of consolidation in 2012. Presumably, there is some attraction with the feeding of traffic to and beyond the Abu Dhabi hub,” noted Stephen Furlong of Davy Stockbrokers.

Aer Lingus’ share price jumped by around 12% yesterday on the news. Last month the IMPACT trade union — which represents pilots, cabin crew and some management at Aer Lingus — urged the minister to think strongly before simply selling out the airline, saying a sale “could expose the Irish economy to further damage at a time when it’s already vulnerable”.

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