Landing fees could scupper IAG deal for Aer Lingus sale

Government officials are to meet with representatives of IAG again today to hammer out a deal over the sale of Aer Lingus but may be unable to accommodate one of the airline group’s key requests.

IAG is believed to be keen on capping Irish airport landing fees for the duration of any guarantee on the use of Heathrow’s landing slots for Irish routes, in order to offset some of the risk involved.

The Government is hamstrung in that regard, however, as charges are set by the independent Commission for Aviation Regulation which is unlikely to engage in negotiations with a commercial airline.

IAG chief executive Willie Walsh has previously outlined his reluctance to extend the guarantee on the Heathrow slots beyond five years but is believed to be exploring the charge cap as a possible means of doing so in order to secure the sale of the Government’s 25% stake in Aer Lingus.

Last month, the airline’s €2.55 per share offer for the airline was rejected by Transport Minister Paschal Donohoe.

IAG’s eyeing of a potential cap on charges is not surprising, being in line with its focus on striking a commercially sound deal, according to Merrion Capital head of research, David Holohan.

“I think, clearly, IAG have made the case that in extending any guarantee in Heathrow they would look to make it a commercial decision and that may be why they have asked to secure a freezing of the landing charges over the duration of the Heathrow guarantee,” he said.

“However, given that it’s not actually the Government that decides on those fees and it’s an independent body, I think it would be very difficult for the Government to be in any place to dictate what those fees should be.”

At best, the Government and Commission for Aviation Regulation could conduct a scenario analysis to determine the level of fees that could be charged based on projections of the number of additional passengers IAG could bring to Ireland should the deal go through, he added.

Government sources were yesterday remaining tight-lipped over the potential of a deal being struck after the Financial Times had earlier reported that the two sides are closer than ever to a deal.

The new general secretary of Ictu, Patricia King again reiterated the organisation’s opposition to a deal.

“I actually think the sale of Aer Lingus for the State is a bad idea and I wouldn’t recommend that it should be sold,” Ms King said on RTÉ radio.

“For the State as an island nation to have no influence at all on any airline I think is a very bad idea.”