Drop sentimental stance over sale, says CEO Stephen Kavanagh

Aer Lingus’ incoming chief executive has urged those opposed to the airline’s sale to drop their sentimental stance over its change of ownership and embrace the growth opportunities such a move could present.

Drop sentimental stance over sale, says CEO Stephen Kavanagh

While saying the strong level of affinity being shown for the Aer Lingus brand, in recent weeks, has been “encouraging”, Stephen Kavanagh, who formally takes over from outgoing CEO, Christoph Müller this weekend, said the approach from IAG has been “a vote of confidence” in the strength of the airline as a business.

“We can’t let sentimentality and protectionism block growth,” he said, adding that becoming part of an enlarged IAG group (which already features British Airways, Iberia and Vueling) would offer Aer Lingus a real opportunity for growth and accelerated growth into the future.

He added that it would enhance Ireland’s and Dublin’s position as a connection point between Europe and North America.

If a deal failed to materialise, Mr Kavanagh repeated his view that Aer Lingus would still have a viable future, but would grow at a much slower rate and would need to have a more aggressive stance on cost control.

While he said the prospect of another suitor emerging, in time, wouldn’t be unthinkable, he suggested a failure to sell now to IAG should be viewed as “an own goal”.

“That wouldn’t stop us going and scoring two at the other end, though,” he said, noting that the airline’s management views the IAG proposals as having dealt with concerns over jobs and connectivity, while its valuation “stands up”.

However, Mr Kavanagh’s comments coincided with Transport Minister Paschal Donohoe stating that the Government, as 25% shareholder in the airline, could not accept the Aer Lingus bid on the basis of the current commitments being offered by IAG, particularly only a five-year commitment to retain Aer Lingus’ Heathrow landing slots.

The minister said the Government remains open to a revised proposal from IAG, which, in turn, said it had noted the comments and would consider the Government’s statement “in due course”.

Fianna Fáil spokesperson Timmy Dooley welcomed Mr Donohoe’s stance, adding that “in the national interest, what the Government must do now is take a firm stand and publicly state that the citizens’ stake in the national airline is not for sale.”

Mr Kavanagh was speaking yesterday on the back of a strong set of annual results for Aer Lingus — viewed by some as strengthening the case for a sale — and suggested that management was becoming more confident of convincing relevant stakeholders that the sale of the airline to IAG marks its best route to future growth.

He said that despite unions seemingly remaining opposed to a takeover of the airline, no party is approaching talks (Aer Lingus’ management has been meeting and continues to meet employee representatives this week) with a closed mind.

He said that, at this point, nobody is closed to the prospect of a deal and are only in “fact-finding” mode; adding that management will take whatever time is necessary to meet the requests of those wanting more assurances and information.

Mr Kavanagh said while Aer Lingus can continue growing as an independent entity, its future growth as a standalone company will, eventually, come under increased pressure from a consolidating market and bigger players like British Airways and American Airlines jostling for market share on transatlantic routes.

“There will come a time when the constraint of our size will begin to impact, although we don’t envisage that being the case in the medium term,” he said.

Earlier, Mr Müller said that the sale of Aer Lingus should be viewed in an “Ireland Inc” context and that, at around €1.4bn, the deal would rank as one of the largest foreign investments into the country since before the financial crisis nearly a decade ago.

The outgoing CEO described the ongoing talks with the airline’s unions as “very constructive”. He added there was excitement t the company could generate more jobs, as part of a large group network, than would be the case if it remained a standalone entity.

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