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Ireland considering sale of Aer Lingus stake

Aer Lingus is no longer seen as strategic because the airline’s prized slots at London’s Heathrow Airport have become less important

Ireland is considering the sale of its 25% stake in airline Aer Lingus which it no longer considers a strategic asset, the transport minister said on Wednesday.

The government has committed to raising around €2bn (£1.77bn) from sales of state assets to reduce high public debt, but it had indicated that it saw its stake in Aer Lingus as a lever to maintain competition in the sector.

“It’s certainly under consideration, it’s definitely one of the candidates,” Leo Varadkar told state broadcaster RTE.

Aer Lingus is no longer seen as strategic because the airline’s prized slots at London’s Heathrow Airport had become less important due to the increase of direct flights from Dublin to other European hubs, Varadkar said.

“That stake in the past was held for strategic reasons,” Varadkar told Newstalk radio. “I don’t think that really stands any more.”

A government-sponsored report published in April recommended that the state sell its 25% stake in the airline as soon as is opportune. It also named the Dublin Airport Authority and the Irish Aviation Authority as possible privatisation targets.

The sale of one of the terminals at Dublin airport could be complicated by the Dublin Airport Authority’s debt pile, Varadkar said.

The government has indicated its priority is to maintain competition in the aviation sector, making a sale to rival airline Ryanair which already holds a near-30% stake unlikely.

Britain’s Office of Fair Trading is currently investigating whether Ryanair’s ownership of the stake hampers competition in the sector.

Ryanair said in a statement it would not bid for the stake if the government indicated that such an offer would be unwelcome. It said it would work with any new investor and would consider selling its own 30% stake.

One argument against a quick sale would be Aer Lingus’s low share price, which has lost more than 80% of its value since early 2007.

Concerns that Aer Lingus may have to contribute to cover a €400m deficit in a pension fund for staff has weighed on its share price in recent months.

“I can’t see an institutional investor coming forward until there is clarity over the pension deficit,” said Stephen Furlong an analyst with Davy Stockbrokers in Dublin.

It may be difficult to find a trade buyer as there is a queue of medium-sized airlines that may come on to the market soon, he said. The governments of Hungary, Poland, the Czech Republic and Portugal have all publicly expressed interest in selling their flag carriers.

The government is also considering the sale of equity stakes in state-owned Irish energy companies, Varadkar said.

“What you can expect in some cases is partial privatisation, where there will be the sale of an equity stake in a state company, and that could raise a lot of money in the case of the energy companies,” Varadkar said.

A government report in April called for the sale of parts of former monopoly energy provider ESB and gas provider Bord Gais. The chief executive of ESB told Reuters in February that the government could raise between €6bn and €8bn from privatising the entire company.

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