herald

Monday 18 December 2017

Donohoe's '€300m gamble' as he seeks more for Aer Lingus

The chairman of CityJet airline has blasted the Government's decision to reject IAG's bid for Aer Lingus as "gombeen politics at its worst".

Transport Minister Paschal Donohoe yesterday mounted a €300m gamble by rejecting airline giant IAG's latest bid to buy Aer Lingus.

Mr Donohoe has sought a range of new assurances - despite IAG chief Willie Walsh previously indicating that he was not willing to budge.

IAG offered a series of sweetners to the Government last Friday in the areas of jobs, passengers and connectivity.

The Herald can reveal that Mr Walsh wrote to Mr Donohoe's department pledging to create hundreds of jobs, bring millions of new passengers to Ireland and create five new North American destinations.

REJECTED

But despite the incentives on offer, the minister has recommended that the bid be rejected pending more detail and assurances being given by Mr Walsh.

In particular, he highlighted that the Government is seeking guarantees that the Heathrow slots will be retained for longer than the five years Mr Walsh has promised.

This morning, CityJet chairman Pat Byrne said he believed the Government's handling of the crisis has been "reckless".

"It's pretty shocking really. It's gombeen politics at its worst," Mr Byrne said.

The Government's 25pc stake would be worth more than €300m if IAG were to buy the airline for the reported €1.3bn on offer. Government sources last night said Mr Donohoe was playing "hardball" in a bid to ensure the State gets the best possible deal.

However, he may face a determined opponent in Mr Walsh who previously told and Oireachtas committee that the offer wasn't an "opening gambit".

"If my proposal is rejected I may remove the proposal or I may reduce it, but I can tell you for definite that I am not prepared to increase it," he warned TDs.

Since those remarks, Mr Walsh offered additional pledges in the areas of jobs, passengers and new routes.

On employment, Mr Walsh told Mr Donohoe in correspondence with his office that 635 net jobs would be created by 2020.

IAG promised to bring in the additional 2.5m passengers over the next five years, of which one million would be long haul.

Mr Walsh also pledged to create five additional destinations between Ireland and North America by 2020, but did not say which locations.

It's understood that this element of the offer was intended to alleviate concerns about Ireland's connectivity.

Mr Donohoe has sought details of these destinations as well as a timeframe for the creation of the additional jobs.

His decision to recommend that the Cabinet reject the offer is being viewed as a gamble in political circles but it's understood he's open to the idea of a sale if Mr Walsh can come back with an improved offer.

"The ball is back in Willie Walsh's court," said a Government source.

A spokesperson for Labour leader Joan Burton said the party supports Mr Donohoe's stance that there are still concerns outstanding, including over the Heathrow slots.

Labour's so-called 'Aer Lingus seven' - which has mounted major opposition to the sale of the stake - is scheduled to meet to discuss the development today.

The group is due to submit a motion aimed at rubber-stamping Labour's opposition to a sale prior to the general election.

noconnor@herald.ie

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