While each of these reservations about the proposed privatisation of Aer Lingus may not be "deal breakers", their combination suggests that privatisation is a step too far:
- The amount to be raised via the IPO is "small beer" in the context of the airline's total needs and surplus funds at the disposal of the Exchequer
- The cost of the IPO and related ongoing costs will erode the IPO proceeds and future profits.
- Key benefits of the investment programme might be achievable without privatisation.
- The market-related strengths that Aer Lingus might bring to new, capital-intensive, long-haul routes are very limited.
- The investment programme is excessive given the airline's financial base and any disruption to profits could undermine the business.
- To maintain its stake post-privatisation, the Government would need to re-invest which defeats a key reason for privatising.
- The initial market capitalisation may not be sustainable given its likely premium to shareholders' funds, cyclic nature of the airline business and (apparent) intention not to pay dividends.
- If dividends should be paid, the cumulative outflow over time would reduce profit retentions and undermine the airline's capacity to borrow and expand.
- If the airline industry should go "pear-shaped" for any reason, Aer Lingus might need State assistance, irrespective as to whether it is in public or private ownership or what the EU says, for national strategic reasons.
- If the State's stake is diluted, it will be powerless to ensure that Aer Lingus is not subject to assets stripping or a hostile takeover.
- The proposed deal with the trade unions is too expensive and would restrict future profitability and flexibility.
- Can the proponents of privatisation guarantee that the eircom experience (stock market ping-pong, under-investment and general belligerence) will not recur with Aer Lingus.
Letter published in the Sunday Business POst on 9th July 2006.