Irish government veto Aer Lingus Heathrow slots due to expire in September

A government GUARANTEED over how Aer Lingus is using its estimated take-off and landing slots at London’s Heathrow Airport expires in September, with the airline already pledged it as security for a €200m loan facility funded by the Irish Strategic State Investment Fund was received in March.

When British Airways’ owner IAG acquired Aer Lingus in 2015, the government – which owned just over 25 per cent of the airline at the time – received two important binding commitments from the airline group envisaging the takeover.

One was that the 23 airports controlled by Aer Lingus at Heathrow would be used solely to serve routes to Ireland for at least seven years.

This was used in particular to allay concerns from politicians and businesses at Cork and Shannon airports who had concerns that their London connections could be marginalized under IAG.

The government also secured the legal right to veto any sale of these slots – which were then valued at up to €1.2 billion based on previous transactions unrelated to Aer Lingus. But then CEO Stephen Kavanagh put the true valuation number at around 300 million euros.

Lynne Embleton, Chief Executive of Aer Lingus, confirmed today that the airline’s landing pads will be used as collateral if the airline calls down the €200m in new facilities it has received from the Ireland Strategic Investment Fund (ISIF).

She also confirmed that it is the first time the slots have been used to provide security – either provisional or actual – for an ISIF facility for the airline.

Aer Lingus established a base in Manchester last year and now flies direct from the city to destinations in the Caribbean and the United States. Ms Embleton has previously said Aer Lingus could add additional services from Manchester in the future.

“The previous seven-year contract ends this year,” Ms Embleton confirmed in relation to the Heathrow slots. “The previous ISIF setup we had was unsecured at the slots. The new facility that we have agreed upon this year is.”

“In the event that Aer Lingus were unable to repay the debt then the Irish Government and ISIF would have control over how these slots are used but it is obviously our intention to settle this debt after we have paid it off. ” She said.

Aer Lingus previously secured €150 million in funding from ISIF.

Donal Moriarty, Aer Lingus’ chief corporate affairs officer, confirmed that despite having a say over the use of slots at Heathrow, which expires in September, the government will retain a veto power over a potential sale of slots.

Ms Embleton was speaking as IAG – which also owns Iberia and Vueling – presented its first quarter results this morning.

She said Aer Lingus – which lost €110m in the first quarter – has seen strong demand for summer holiday travel to sunny destinations this year.

Luis Gallego, CEO of IAG, said the group will be profitable from the second quarter as the recovery in air travel strengthens. He added that the war in Ukraine has not yet affected demand for travel across the route network.