IAG/Aer Lingus
That said some reports this morning are suggesting that the IAG bid valued EI at €1bn, which given that the company's gross cash position (the amount of cash they hold before deducting any debts) is over €900mn makes the valuation extremely low and, IIRC not too far off the old FR bid of some time ago.
Its like saying your house is worth a million but the mortgage is 900k, what you get out of it is 100k, not the million.
Also remember EI has to fork out €190 million.
Valued after taking account of debts so its the net cash that is of interest.
Think valuation is a bit on the high side but then again companies borrowing lots to buy stuff as yet another merrygoround takes off.
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If IAG bought EI, there's no point in both BA and EI doing DUB/LHR, because from a regulatory/competition point of view, they are the same company. Same with BHD. KLM would return to DUB and possibly ORK because that code share would be toast. 24 EI slots combined with how many BA for DUB? 7? And how many for BHD? Between the 2 carriers we are talking well over 500 million pounds in slot pairs to the Island of Ireland. I can see maybe 10 being operated by EI widebodies from DUB, with the current schedule being maintained from the other 3, with UK competition authority and Irish government insisting on maybe 8 being given to somebody else, but who? I doubt FR would be interested, or BE. Stobart? No way. Cityjet....there's a thought..... but yes I think it's a dead cert EI would be moved to T5 in IAG, I mean Iberia are there aren't they?
So who would take it on?
VS have been burnt on short haul.
FR has stated that it will not operate out of LHR, CDG, FRA.
None of BE, Sobart, Cityjet have adequate sized aircraft, and can they afford LHR slots?
Only KL (EU open skies would allow it) or U2 look like contenders, but it’s a long shot.
So BA and EI get the slots back, and they may decide to consolidate on to larger aircraft where they each have departures times close to each other, and then reallocate slots, but not that many, as business pax demand frequency on shorthaul routes.
However, at this time BA is not short of LHR slots, it is short of longhaul aircraft.
T5 is full to the rafters and there still are some BA services operating from T3, Expandion would be needed. IB services are only on 1 route and at most 2 gates are required . Vueling remains non T5, residing at 3.
As others have said IAG are most likely pursuing EI as a growth strategy in the event the UK Govt once again decides not to make a decision on LHR R3 next year. They would also be keen to make sure EI and it's LHR slots do not fall into other hands at some point.
There is no reason why BA North Atlantic passengers to/from the UK regions or mainland Europe need to be funnelled through LHR. With EI firmly in the IAG camp these passengers could over time be hubbed through DUB on EI aircraft carrying BA's code. Over time this would free up seats on BA's LHR network for growth - be it higher yielding point to point passengers, or new connecting passengers currently using other routes.
If as a result IAG can consolidate EI/BA frequencies slightly on LHR-DUB and free up a few slots, that would be the icing on the cake for them.
There is no reason why BA North Atlantic passengers to/from the UK regions or mainland Europe need to be funnelled through LHR. With EI firmly in the IAG camp these passengers could over time be hubbed through DUB on EI aircraft carrying BA's code. Over time this would free up seats on BA's LHR network for growth - be it higher yielding point to point passengers, or new connecting passengers currently using other routes.
If as a result IAG can consolidate EI/BA frequencies slightly on LHR-DUB and free up a few slots, that would be the icing on the cake for them.
Last edited by Logohu; 21st Dec 2014 at 01:36. Reason: typo
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Again, put a number on adding more connections over DUB. Aer Lingus and Dublin Airport are stretching existing facilities today, they have less tha ten aeroplanes on the pond and a handful of US destinations. It is in now way, strategic growth. There is *every* reason to keep squeezing more and more via LHR as that's where the clear majority of IAG connections are, not to mention American. The hard product on an AA B763 on DUB-US is inferior to anything on a B777 out of LHR.
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FDF--- wouldn't Star Alliance want any slots that had to be surrendered? Surely all of the alliances currently at LHR would want them. It's probably not enough to attract an outsider such as U2 though.
I'd be surprised if IAG would throw EU1bn around just for a short term punt. They must see some long term strategic value as well. Walsh is also astute enough to know that he wouldn't get away with asset stripping EI for it's LHR slots and wiping it off the map like he did with BMI. EI has a stronger brand and market loyalty in Ireland than BA will ever have, and is currently profitable. As such it would most likely remain as a complementary stand alone operation and brand within the IAG group.
Yes of course IAG will continue to squeeze as much traffic through LHR as they can, that's their model. But having a secondary hub available in DUB (and with the benefit of US pre-clearance to boot) gives them options and a safety valve in the longer term especially if LHR R3 gets kicked into the long grass again.
I doubt the hard product on AA's 763s and 752s from DUB even entered their thinking. Some of those aircraft are getting new interiors, and the rest will be gone in the next few years to be replaced by 787s, or A330/A350s from the former US Airways fleet. Meanwhile their target EI already has A330s, with A350s on order.
Yes of course IAG will continue to squeeze as much traffic through LHR as they can, that's their model. But having a secondary hub available in DUB (and with the benefit of US pre-clearance to boot) gives them options and a safety valve in the longer term especially if LHR R3 gets kicked into the long grass again.
I doubt the hard product on AA's 763s and 752s from DUB even entered their thinking. Some of those aircraft are getting new interiors, and the rest will be gone in the next few years to be replaced by 787s, or A330/A350s from the former US Airways fleet. Meanwhile their target EI already has A330s, with A350s on order.
Yes of course IAG will continue to squeeze as much traffic through LHR as they can, that's their model. But having a secondary hub available in DUB (and with the benefit of US pre-clearance to boot) gives them options and a safety valve in the longer term especially if LHR R3 gets kicked into the long grass again.
Given the cash EI have in the bank, the LHR slots, the assets (they normally own roughly 50% of their fleet right?) and the fact they are a profitable business, I think this was deliberate undervaluation by IAG, they put in a bid they knew would get rejected to put a shot across someone's bow. Either giving the shareholders a heads up that they're interested, or warning a rival that IAG may start a bidding war and make things very expensive.
I don't think the unmentionable will be looking at getting 49% of EI just yet, they are bound to be up to their necks in s*** with AZ now
I don't think the unmentionable will be looking at getting 49% of EI just yet, they are bound to be up to their necks in s*** with AZ now
Given the cash EI have in the bank, the LHR slots, the assets (they normally own roughly 50% of their fleet right?) and the fact they are a profitable business, I think this was deliberate undervaluation by IAG, they put in a bid they knew would get rejected to put a shot across someone's bow. Either giving the shareholders a heads up that they're interested, or warning a rival that IAG may start a bidding war and make things very expensive.
Not really a lot as second hand aircraft are still second hand aircraft and then EI has all its debts that need paying, the redundancy program that follows and eventually after all that you will end up pretty close to the value put on it by IAG.
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Why would BHD go to BA? Aer Lingus could be used as a feeder into the BA network at LHR from BHD. We all know Aer Lingus' cost base is much lower than BA under the current model
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There is no reason why BA North Atlantic passengers to/from the UK regions or mainland Europe need to be funnelled through LHR. With EI firmly in the IAG camp these passengers could over time be hubbed through DUB on EI aircraft carrying BA's code. Over time this would free up seats on BA's LHR network for growth - be it higher yielding point to point passengers, or new connecting passengers currently using other routes.
EI links several (18 is it?) UK airports to DUB.
If as a result IAG can consolidate EI/BA frequencies slightly on LHR-DUB and free up a few slots, that would be the icing on the cake for them.
Again, put a number on adding more connections over DUB. Aer Lingus and Dublin Airport are stretching existing facilities today, they have less tha ten aeroplanes on the pond and a handful of US destinations. It is in now way, strategic growth. There is *every* reason to keep squeezing more and more via LHR as that's where the clear majority of IAG connections are, not to mention American. The hard product on an AA B763 on DUB-US is inferior to anything on a B777 out of LHR.
FDF--- wouldn't Star Alliance want any slots that had to be surrendered? Surely all of the alliances currently at LHR would want them. It's probably not enough to attract an outsider such as U2 though.
U2 is a rank outsider, but who knows. Would only really expect it at LHR in the event of expansion there, but that‘s another very long-running story.
I'd be surprised if IAG would throw EU1bn around just for a short term punt. They must see some long term strategic value as well. Walsh is also astute enough to know that he wouldn't get away with asset stripping EI for it's LHR slots and wiping it off the map like he did with BMI. EI has a stronger brand and market loyalty in Ireland than BA will ever have, and is currently profitable. As such it would most likely remain as a complementary stand alone operation and brand within the IAG group.
As mentioned previously, "BA-Ireland" doesn’t cut it any more than "BA-Espana" or "Iberia-UK" would.
Yes of course IAG will continue to squeeze as much traffic through LHR as they can, that's their model. But having a secondary hub available in DUB (and with the benefit of US pre-clearance to boot) gives them options and a safety valve in the longer term especially if LHR R3 gets kicked into the long grass again.
There is also the strategic reason, that no one else should get their hands on EI’s LHR slots and asset-strip them and compromise "fortress Heathrow". That has to be important in IAG thinking, doesn’t it?
Given the cash EI have in the bank, the LHR slots, the assets (they normally own roughly 50% of their fleet right?) and the fact they are a profitable business, I think this was deliberate undervaluation by IAG, they put in a bid they knew would get rejected to put a shot across someone's bow. Either giving the shareholders a heads up that they're interested, or warning a rival that IAG may start a bidding war and make things very expensive.
I don't think the unmentionable will be looking at getting 49% of EI just yet, they are bound to be up to their necks in s*** with AZ now
Why would BHD go to BA? Aer Lingus could be used as a feeder into the BA network at LHR from BHD. We all know Aer Lingus' cost base is much lower than BA under the current model
Wonderful to be an "armchair" airline CEO isn't it!
