Aer Lingus cleared for OW
Jul 22, 1999 | 7:29 pm
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Aer Lingus cleared for OW
Aer Lingus cleared for Oneworld partnership
(Adds Aer Lingus statement, Salomon Smith Barney report)
By Braden Reddall
DUBLIN, July 22 (Reuters) - Ireland's state-owned airline Aer Lingus won clearance on Thursday to join the world's largest airlines alliance, Oneworld, offering the airline greater global reach in an increasingly competitive market.
The government ruled out selling a stake in the airline to its new partners to fill funding gaps, estimated to be 150 million Irish pounds ($200 million) for the next 12 to 18 months, and said an initial public offering would be considered.
"Selling a stake to the strategic partners would not provide the scale of funding required by Aer Lingus," Minister for Public Enterprise Mary O'Rourke said in a statement.
The government would explore other sources of funding to meet Aer Lingus' capital requirements, including an initial public offering, she said.
Aer Lingus said additional capital would be required in the coming years to ensure growth, but said its focus was on the alliance and it would step up efforts to complete contractual negotiations.
Chief Exective Garry Cullen said membership in the alliance would offer more destinations, additional services and a one-stop shop for all passengers in a global network.
"Today marks the start of a process which will see significant benefits for Aer Lingus' customers, existing and new," he said in a statement.
O'Rourke said Aer Lingus was one of the few airlines in Europe outside a strategic alliance, and said if the carrier remained independent it would cut profits by around 20 million Irish pounds annually.
Last year, Aer Lingus raised pre-tax profit 14 percent to 52.4 million Irish pounds on turnover of 901 million.
The government's decision followed a study that found the benefits of an alliance with Oneworld's main partners, British Airways Plc and American Airlines , would outweigh those of other alliances.
Salomon Smith Barney, which published the study, said a minimum of 150 million punts would be needed to fund Aer Lingus' growth opportunities and cushion it against a potential industry downturn.
BA and American Airlines had previously indicated they were willing to take a 10 percent stake in Aer Lingus between them, but the stake sale was deemed insufficient. Aer Lingus is currently 95 percent government-owned, with five percent held by its staff.
Oneworld includes British Airways, Cathay Pacific Airways Ltd , AMR Corp's American Airlines, Qantas , Canadian Airlines Corp , Finnair , Iberia Aereas de Espana SA and LanChile .
It is one of four major airline groupings, which have come together through code-sharing agreements, equity swaps and common servicing arrangements in a bid to secure markets, clinch customer loyalty and cut costs.
Aer Lingus, facing tougher competition on international routes and a domestic row with no-frills airline Ryanair Holdings Plc , had been left outside those alliances, bound by state ownership and lacklustre performance.
A deal with Oneworld would give Aer Lingus access to a network with strength in the United States, Europe and Asia through code-sharing agreements.
(Adds Aer Lingus statement, Salomon Smith Barney report)
By Braden Reddall
DUBLIN, July 22 (Reuters) - Ireland's state-owned airline Aer Lingus won clearance on Thursday to join the world's largest airlines alliance, Oneworld, offering the airline greater global reach in an increasingly competitive market.
The government ruled out selling a stake in the airline to its new partners to fill funding gaps, estimated to be 150 million Irish pounds ($200 million) for the next 12 to 18 months, and said an initial public offering would be considered.
"Selling a stake to the strategic partners would not provide the scale of funding required by Aer Lingus," Minister for Public Enterprise Mary O'Rourke said in a statement.
The government would explore other sources of funding to meet Aer Lingus' capital requirements, including an initial public offering, she said.
Aer Lingus said additional capital would be required in the coming years to ensure growth, but said its focus was on the alliance and it would step up efforts to complete contractual negotiations.
Chief Exective Garry Cullen said membership in the alliance would offer more destinations, additional services and a one-stop shop for all passengers in a global network.
"Today marks the start of a process which will see significant benefits for Aer Lingus' customers, existing and new," he said in a statement.
O'Rourke said Aer Lingus was one of the few airlines in Europe outside a strategic alliance, and said if the carrier remained independent it would cut profits by around 20 million Irish pounds annually.
Last year, Aer Lingus raised pre-tax profit 14 percent to 52.4 million Irish pounds on turnover of 901 million.
The government's decision followed a study that found the benefits of an alliance with Oneworld's main partners, British Airways Plc and American Airlines , would outweigh those of other alliances.
Salomon Smith Barney, which published the study, said a minimum of 150 million punts would be needed to fund Aer Lingus' growth opportunities and cushion it against a potential industry downturn.
BA and American Airlines had previously indicated they were willing to take a 10 percent stake in Aer Lingus between them, but the stake sale was deemed insufficient. Aer Lingus is currently 95 percent government-owned, with five percent held by its staff.
Oneworld includes British Airways, Cathay Pacific Airways Ltd , AMR Corp's American Airlines, Qantas , Canadian Airlines Corp , Finnair , Iberia Aereas de Espana SA and LanChile .
It is one of four major airline groupings, which have come together through code-sharing agreements, equity swaps and common servicing arrangements in a bid to secure markets, clinch customer loyalty and cut costs.
Aer Lingus, facing tougher competition on international routes and a domestic row with no-frills airline Ryanair Holdings Plc , had been left outside those alliances, bound by state ownership and lacklustre performance.
A deal with Oneworld would give Aer Lingus access to a network with strength in the United States, Europe and Asia through code-sharing agreements.
