IAG’s takeover of Aer Lingus would secure the former national carrier’s future and could create thousands of jobs that would far outweigh any potential losses, an expert has claimed.
The proposed takeover would position Aer Lingus to further grow its profitable long-haul business while insulating it from economic downturns which could seriously hamper profitability.
Merrion Capital head of research David Holohan said that while the airline is in good shape, it remains vulnerable in a notoriously cyclical industry. He said relying on what is a relatively small airline to buck the trend of national flag carriers amalgamating to ensure their viability, would not be the wisest course of action.
Contrary to fears over potential job losses, which unions claim could total more 1,000 should Aer Lingus be sold, the economic analyst predicted that if IAG were to develop Dublin as a transatlantic hub, thousands of jobs could be created over time that would far outweigh any initial redundancies.
“The short-haul routes are struggling and I don’t see a sea change to that over the next number of years, it’s really only long-haul that they continue to benefit [on] — as a standalone entity that becomes more and more challenging as an airline,” Mr Holohan said.
Serious concerns have been expressed over the last number of weeks by a range of stakeholders who fear any takeover of Aer Lingus could have hugely negative ramifications for jobs, connectivity and regional economic recovery.
Appearing before the Oireachtas transport committee on Thursday, representatives of a number of the country’s chambers of commerce warned a reduction in connectivity to Heathrow could devastate job growth across the country.
Mr Holohan, however, claims rowing back on routes between Ireland and Heathrow is unlikely as it wouldn’t make economic sense, given the profitability of those routes.
While some commentators have suggested that greater profits could be garnered from using the valuable Heathrow slots for transatlantic flights, Mr Holohan countered saying that maintaining the existing routes would be more valuable to the company given the frequency of flights on those routes.
Asked as to whether the routes, if maintained initially, may be curtailed when former Aer Lingus chief executive Willie Walsh steps down as IAG chief executive leaving the power in the hands of an executive less familiar with their importance to the country, Mr Holohan accepted it represented somewhat of a risk but added that if the routes remain profitable they would likely be maintained.
The Merrion analyst also accepted legally binding guarantees on the retention of connectivity would be “very difficult” to secure.
An information vacuum exists at present, however he said, but once IAG completes the confirmatory due diligence it is currently undertaking, it will be in a much clearer position and be able to engage with stakeholders to allay the range of concerns expressed.
Whether the Government decides to sell its 25.1% stake remains fraught with political danger. The growing opposition to a deal has been reflected in uncertainty among investor, with shares down 3.7% yesterday evening.
Separately, IAG announced Qatar Airways has acquired a 9.99% stake in the company.
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