Shannon would ‘happily negotiate’ deal with IAG on connectivity

Mike Dwane

Reporter:

Mike Dwane

Rose Hynes, chairman, Shannon Group plc
SHANNON Airport would be happy to negotiate a mutually beneficial long-term deal on connectivity and charges in the event of an IAG takeover of Aer Lingus, according to Rose Hynes, chairman of the Shannon Group.

SHANNON Airport would be happy to negotiate a mutually beneficial long-term deal on connectivity and charges in the event of an IAG takeover of Aer Lingus, according to Rose Hynes, chairman of the Shannon Group.

The statement comes amid speculation that IAG’s reluctance to extend its guarantee of Shannon’s three daily Heathrow services beyond five years is concern that it could be held to ransom on airport charges.

IAG has been urged by Transport Minister Paschal Donohoe to improve the five-year offer on connectivity at Heathrow and the issue is understood to be one of the few remaining stumbling blocks between IAG and the government, which owns 25.1% of Aer Lingus.

Talks are continuing this week between IAG and the interdepartmental group appointed by Minister Donohoe to assess the company’s takeover approach, which has the backing of the Aer Lingus board.

Speaking this Wednesday, Ms Hynes said: “our focus in relation to Shannon-Heathrow connectivity is on ensuring safeguards are in place that will not alone protect connectivity but enable us grow services and passenger numbers with the airline at Shannon”.

“We have already made it clear in contacts with the Interdepartmental Working Group that we would happily negotiate a 10-year deal now with IAG on connectivity and airport related charges. Such an arrangement would provide certainty for both parties and would be beneficial for the airline, Shannon and the regional and national economy,” Ms Hynes stated.

The board of Aer Lingus has backed the takeover offer, which IAG says will not be formalised unless the backing of the government is also secured.

This Wednesday, meanwhile, James Hogan, CEO of Etihad Airways, indicated the Gulf carrier would be willing to sell its 4% stake in Aer Lingus to IAG.

Industry commentators have grown increasingly confident in their predictions that agreement will be reached between the government and IAG.

This is despite Transport Minister Paschal Donohoe’s apparent rejection of the existing IAG offer last month. In a statement at that time, Minister Donohoe urged IAG to extend the five-year guarantee on Heathrow landing slots at Irish airports and also called upon the airline to spell out its growth plans for Shannon and Cork.

According to industry analysts, one of the reasons Mr Walsh is so reluctant to extend the guarantee beyond five years is anxiety over tying the company down to such a long tenure in Shannon without having a deal on landing charges into the future.

Analysts who have spoken to the Financial Times have suggested that a cap on landing charges at Irish airports could be a way for IAG to extend the shelf-life of its guarantee on the Heathrow slots. Mr Walsh’s sensitivity to the issue of landing charges was made clear during his appearance before the Oireachtas transport committee last month in which he touched upon the Shannon-Heathrow controversy of eight years ago and the more favourable terms made available to Ryanair at that time.

“In 2007, Aer Lingus terminated the Shannon-Heathrow service. I watched that with great interest because the principal reason for it was that Shannon Airport made a deal with a competitor of Aer Lingus to facilitate its entry into the Shannon-London market,” Mr Walsh said.

“The competitor was receiving free services or low charges in Shannon and Aer Lingus was paying the rack rate for services. Aer Lingus was being significantly disadvantaged as a result of a competitor being given much cheaper access to Shannon. Commercially, it is madness.

“I cannot understand why Shannon Airport did what it did at the time,” Mr Walsh said of a deal that was done by the old regime at Shannon before its separation from the DAA two years ago.