State should sell Aer Lingus, urges management

AER LINGUS management has recommended that the best interests of the company would be served by a swift Government decision to sell up the airline.

The airline’s chief executive, Willie Walsh, said privatisation, although not necessarily a management buyout, was the best option for the future development of the national carrier.

In his first public appearance since details of a controversial privatisation proposal emerged last month, Mr Walsh stressed that senior management at Aer Lingus had never sought Government approval to develop a specific management buyout proposal.

Yesterday Mr Walsh told the Oireachtas Committee on Transport that he and other senior managers had merely sought permission to examine private investment options in general. He defended such action on the basis that it was incumbent on management “to be proactive”.

The Aer Lingus boss reassured TDs and senators that no further action on such a proposal would be taken without prior Government approval.

He rejected a suggestion by Fianna Fáil senator Tim Dooley that it would be more prudent to “step aside” due to the perception that it might involve a conflict of interest.

“We have acted at all times in the interest of Aer Lingus to ensure that it is a successful and profitable airline,” said Mr Walsh.

Commenting on the State ownership of the airline, Mr Walsh said it created additional responsibilities as well as resulting in a slower decision-making process for management.

He reminded the committee that the Government was on the record as stating it would not invest any further in Aer Lingus, although the company requires a €600 million capital fund under a 2007 business plan which will be presented to the company’s board of directors at a meeting next Monday.

Mr Walsh, who said he was personally opposed to State aid for airlines, also expressed concern that an attempt by the Government to invest more money in Aer Lingus would inevitably result in challenges under EU competition legislation.

He predicted such a scenario would give the airline’s competitors an opportunity “to pore over detailed, sensitive information”.

The committee heard that while the company’s balance sheet remained strong, it would still require further substantial savings to guarantee the airline’s future. Mr Walsh said the 35% savings in unit costs since 2001 would have to be matched going forward.

However, he tried to alleviate concerns about large-scale job cuts by pointing out that 80% of savings had been achieved through resources other than staffing to date.

Mr Walsh predicted the average cost of flights would continue to fall as Aer Lingus rolls out a new pricing structure. He said Aer Lingus would have no difficulties in adopting a low-cost business model on transatlantic routes.

Earlier, Transport Minister Seamus Brennan told the committee that a decision on the future of Aer Lingus would be taken in September.