The Irish government finally set the wheels in motion for a €1.2bn (£810m) flotation of its national airline, Aer Lingus, yesterday, unveiling plans to list the company on both the London and Dublin stock exchanges before the end of next month.
The government, which currently owns an 85.1 per cent stake in the airline, will hold on to a significant minority shareholding of 25.1 per cent in the company, but will cash in the remainder of its holding. Aer Lingus's employees currently own the remaining 14.9 per cent stake in the company.
The airline is reported to be looking to raise between €400m and €500m from the float, and is aiming to ensure that at least 50 per cent of the shareholder base - including the government - remains Irish. Retail investors on both sides of the Irish Sea will be invited to participate in the float, but subject to a minimum subscription of €10,000. An extra one share will be awarded for every 20 which are still held by retail investors a year after the float.
The company intends to use the proceeds of the float to expand its fleet, as well as to pay down some of the company's pension deficit. Although the management has been engaged in a long-standing dispute with the unions over its pension fund - insisting that it has no contractual obligation to fund the deficit - it has finally conceded to pay about €100m to the scheme.
The float brings to an end a protracted dispute with the Irish government, which insisted only three years ago that it would never consider selling the airline.
Martin Cullen, Ireland's minister for transport, said yesterday: "This is the right decision for the company, its employees, customers and Ireland, and it is taking place in order to give Aer Lingus both the commercial flexibility and the financial strength to succeed in what is a highly competitive global marketplace.
"The company is to be congratulated for its transformation in recent years and this IPO will now give it the access to capital it needs to develop new routes, and to grow in the years ahead in the best interests of the airline's customers, its staff and its shareholders."
In spite of agreeing to inject funds into the pension scheme, the airline has not yet managed to defuse its dispute with the unions, which have long been opposed to the carrier's flotation on the grounds that it may threaten the job security of its members.
Christy McQuillan, the branch organiser of the Irish union SIPTU, said: "The government's decision is not in the best long-term interests of the country, the travelling public or the workforce, and is a grave strategic error and bad value.
"The Taoiseach, Bertie Ahern, should at this stage appraise himself more fully on the serious factors at stake. Ultimately he has the final opportunity to decide not to press the 'destruct button' on a national airline which the country vitally needs now and into the future."
The company plans to issue the prospectus, along with its initial price range, during the second week in September. The float is then scheduled to take place before the end of the month.
The airline's chief executive, Dermot Mannion, brushed aside the suggestion that the current instability in the airline industry meant that September would be a bad time to float. "The airline industry is the ultimate long-term industry," he said, adding that the sector had already shown its mettle by surviving through a series of difficult times.
Aer Lingus had a brush with bankruptcy only five years ago in the wake of the 11 September terrorist attacks in the US. A flotation has been on the cards ever since, but has always been held back by disputes between the management, the unions and the government.Reuse content