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Irish government plans to float shares of Aer Lingus

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — Following the success of the Telecom Eireann privatization when more than 570,000 people stampeded to buy shares, the government is now set to float Aer Lingus on the stock market.

Enterprise Minister Mary O’Rourke said the cabinet has given the go-ahead for Aer Lingus to conclude negotiations on an alliance with the One World group of airlines.

A flotation would be examined when the strategic link-up is "bedded down," O’Rourke said.

The initional public offering would give the already cash-rich Exchequer an added boost of between £650 million and £1 billion.

It will also be a bonanza for the airline staff, who already own 5 percent of the company. The Telecom share float left staff with 15 percent of the company and each of them sitting on a £100,000-plus paper fortune.

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Aer Lingus would not be as attractive to investors as Telecom Eireann, which was valued at £6 billion, but with the public making a profit of up to 30 percent on the Telecom float, the government is unlikely to have a problem finding buyers for the shares.

The minister said Aer Lingus expected negotiations to be completed in two to three months. The alliance would link the state carrier with some of the world’s leading airlines and allow it to operate as a one-stop shop for passengers bookings to locations all over the world.

One World already involves British Airways, American Airlines, Australia’s Quantas, Canadian Airlines International, Spain’s Iberia, the Hong Kong-based Cathay Pacific, Finland’s Finnair and Chile’s Lanchile.

The minister said Aer Lingus needed a substantial injection of cash to buy planes and modernize its operations. A new subvention from the state was "not on," she said.

A possible purchase by British Airways and American Airlines of a 10 percent stake would only raise about £50 million and was "not the best way to do the business."

"They need at least £150 million to purchase planes. They have 75 percent of their planes leased, whereas the norm is 50:50 purchase and lease."

Aer Lingus chairman Bernie Cahill has been reappointed for another three-year term in the top job.

He has overseen the ongoing rescue and development plan for Aer Lingus and has previous experience in floating state companies when he brought Greencore, the former Sugar company, to the market.

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