IAG bid offers ‘unparalleled route to growth’

IAG’s offer to buy Aer Lingus comes at a time when the Irish carrier is more challenged than ever and offers an unparalleled route to sustainable growth.

IAG bid offers ‘unparalleled route to growth’

That is according to Aer Lingus chief executive designate Stephen Kavanagh, who made the claim during his appearance at the Oireachtas transport committee hearing yesterday.

The proposed €2.55 per share takeover by former Aer Lingus chief executive Willie Walsh and his International Airline Group will enhance Ireland’s position as a natural hub to North America and allow it to increase its share of the transatlantic market, which currently stands at 2.5%.

At least 200 jobs can be created through immediate expansion of its long-haul network but, by 2020, Aer Lingus job growth could exceed the 500 additional jobs Mr Walsh last week estimated would be added if the deal goes through.

Dismissing members’ suggestions that his estimate of 200 jobs conflicted with Mr Walsh’s projection, Aer Lingus chairman Colm Barrington said that figure merely reflected existing plans that could be accelerated.

“Mr Walsh gave his figure of [an additional] five aircraft between now and 2020; we think we can do a bit better than that and that’s why I mentioned the two [aircraft] that we can accelerate plus what he mentioned… we don’t have to agree with him on everything, he doesn’t own us yet,” Mr Barrington said.

He also dismissed union claims that 1,200 jobs could be lost as a result of the takeover, branding the figure as being without any foundation or background.

The actual figure, Mr Kavanagh said, would be modest but he did accept that some jobs would be shed as a result of rationalisation should the airlines merge.

Mr Kavanagh said the deal offered Aer Lingus a chance to significantly “de-risk” its long-term growth strategy of expanding its long-haul business which would subsequently benefit short haul routes and regional connectivity.

In the absence of a deal, the challenges inherent with that strategy would continue to exist but the upside potential would be significantly decreased while the risk it carries would be exacerbated.

The incoming chief executive insisted that Aer Lingus remains a strong, well-run, and viable business as a standalone entity which would survive in the absence of a deal. Mr Kavanagh reiterated that the proposed takeover would increase its ability to exploit opportunities aimed at expanding its transatlantic traffic.

Strengthening Dublin’s position as a hub for the North American market would continue to secure the viability of services from Cork and Shannon which feed valuable traffic onto long-haul flights, he added.

Mr Kavanagh said the deal would also provide greater opportunities for Kerry and Donegal airports which are serviced by Aer Lingus Regional through Stobart Air.

Stobart chief executive Seán Brogan also gave his approval to the bid, saying it would impact positively on the airline.

Mr Barrington dismissed claims that senior Aer Lingus executives stand to share a €30m windfall from the sale of the airline.

Whether Aer Lingus would retain an independent board was unclear, the committee heard, but Mr Barrington said he would expect this to be the case as it is with the other airlines operating under the IAG umbrella.

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