IMPACT national secretary Matt Staunton has written to the Minister for Transport, Tourism and Sport, Paschal Donohoe TD, outlining the concerns of IMPACT members at Aer Lingus about the consequences of a successful takeover of the airline by International Airlines Group (IAG).

Matt wrote to the minister as speculation continues to mount about the imminent possibility of a third bid for Aer Lingus, following the rejection of two IAG bids for Aer Lingus last month.

Matt wrote that the proposed takeover of Aer Lingus by IAG represents significant risks to Irish interests, in terms of accessibility to Ireland for both business and tourism. “It also represents a significant risk to the security of employment for Irish workers employed directly or indirectly by Aer Lingus” he said.

Matt urged the minister to consider a number of key points of national interest if a sale of the State shareholding to IAG is to be considered:

• As an island nation the State should maintain some holding in an airline that serves to maintain strong links with EU, US and other critical trading partners.
• The sole purpose of IAG’s bid is to expand its own commercial interests, and the cost of such expansion to Aer Lingus and the Irish market are likely to be secondary considerations.
• Heathrow airport is a vital hub connection for Ireland. Aer Lingus is the third largest holder of slots in Heathrow. IAG is the largest.
• These slots will make greater returns for IAG if they are used to service the London - US market rather than the London - Dublin market. In such circumstances they would also encroach on the successful direct connections provided by Aer Lingus between Ireland and the US.
• It is in the best interests of IAG to funnel as many passengers from UK provincial and Irish airports through its Heathrow hub at Terminal 5. Over one million passengers per year travel from UK provincial airports to use Dublin Terminal 2 as a hub to the US. This is lucrative long haul business that British Airways / IAG would like to reclaim.

“IAG’s business plan, in the event of a successful takeover bid, remains unknown. Our best guide to the company’s likely actions can only be informed by IAG’s participation in the last takeover bid by Ryanair. That bid involved dismembering Aer Lingus between three entities: Ryanair, IAG and Flybe. The proposal sought to carve up assets, including the Heathrow slots, transatlantic operation and the Aer Lingus brand, between the three companies” he said.

Matt added that there were very limited undertakings from IAG as to the eventual use of the Heathrow slots after an initial period of three to five years. “There is no evidence to suggest that the current IAG bid is not similar in its intentions” he said.

Employment and Industrial considerations

Currently, Aer Lingus directly employs 3,900 people. The overwhelming majority (90%) of these employees live and work in Dublin. 2,100 of the total work exclusively on the ground in areas such as clerical, operative, and other ‘back office’ roles.

Matt advised the minister that, for the purpose of the takeover, IAG would have to identify cost and revenue synergies which would justify their investment. “One of the primary cost synergies arising would come from a reduction in the Aer Lingus employee headcount particularly in the ‘back office’ where there would be readily identifiable duplication with existing resources in London and, possibly, IAG’s base in Madrid (Iberia). This is also true of some maintenance functions, given the substantial IAG maintenance facilities in London and Madrid.

“Executive and senior decision making would transfer to London, with perhaps a token executive presence in Dublin. Following the IAG takeover of Iberia, the company announced 4,500 job losses. On a like for like basis with Iberia this would represent job losses of between 1,000 and 1,200 in Aer Lingus at Dublin airport.

“We’ve confirmed these estimates with analysts in Dublin and London. Following the rejection of the two initial bids, a research note from Nomura observes that any material bid increase is unlikely to be forthcoming without the ability to drive significant cost synergies” Matt said.

Matt has sought a meeting with the minister to further discuss the issues arising from any potential sale of the State’s 25 per cent holding in Aer Lingus.

Chambers Ireland warns on Heathrow slots

Chambers Ireland has also expressed its concerns regarding the value of the Heathrow slots, and has advised that guarantees should be secured on retaining the slots in the event of a sale of the State’s Aer Lingus share.

In a statement yesterday (Thursday), chief executive of Chambers Ireland Ian Talbot said “Heathrow is a vital hub for Ireland, offering connectivity to key international markets across the globe. Given its strategic importance, we must maintain and secure access to Heathrow from all State airports. The loss of these slots would have significant implications for foreign direct investment, regional economic growth, business tourism and tourism in general.”