Government ‘powerless’ over Heathrow slots

The Government may be powerless to stop the disposal or reallocation of Aer Lingus’ Heathrow slots should it decide not to sell its 25% stake in the company, it has emerged.

Government ‘powerless’ over Heathrow slots

IAG confirmed over the weekend that it is in renewed talks with Aer Lingus about a possible takeover.

A mechanism created at the time of the airline’s flotation in 2006 means that any disposal of Heathrow slots could only be blocked by the Government if it also secured the backing of an additional 5% of the shareholding, according to a parliamentary question submitted by Fianna Fáil TD Michael McGrath to Transport Minister Paschal Donohoe.

Should IAG buy the remaining 75% of shares from existing shareholders, the Government could effectively be rendered a lame duck shareholder with no potential partner to block any possible disposal.

Additionally, no shareholder approval is required for the reallocation of slots, which could be a more likely option for IAG should it acquire the Irish airline.

The emergence of the clause casts doubt over the State’s power to protect the slots which are of significant strategic importance to the country and its airports and calls into question the effectiveness of the Government retaining its stake. It has said it may retain the stake if it deemed competitiveness or connectivity would be adversely affected by selling its shareholding.

Instead, the revelation increases the pressure on the Government to seek and secure an agreement protecting existing routes to and from Cork, Shannon, and Dublin as part of negotiations over the sale of its stake — a scenario that sources say is preferable to all parties — or, alternatively, attempt to block the bid with the help of other shareholders.

Significant concern has been expressed in recent weeks over the impact a reduction in connectivity could have on Irish airports, particularly Cork.

Mr McGrath said the loss of the Heathrow slots could have huge economic implications.

“The reply from Minister Paschal Donohoe to a Dáil question I submitted raises serious concerns about the future of the 23 Aer Lingus landing slots at Heathrow airport — slots which are currently used for services from Cork, Shannon, and Dublin Airports.

“The importance of the Heathrow slots for connectivity for the people of Cork cannot be overstated.

“The retention of these slots for the benefit of Cork Airport and the people it serves is absolutely vital and every tool at the Government’s disposal should be used to protect the slots… There is no doubt that the potential takeover of Aer Lingus by IAG presents a major risk to the retention of these Heathrow slots.”

IAG is believed to have submitted a revised bid in the region of €2.50 per share. A statement is expected on the outcome of negotiations today.

Mr Donohoe reiterated the Government’s position on the matter, saying that any offer would be given very careful examination before the Government takes any decision in relation to its shareholding.

Mr Donohoe added that the Government would not be willing to sell the shareholding in circumstances which could significantly impact on competition and connectivity in the Irish market.

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