Richard Curran: we sell the company aer Lingus is too low?

  • Richard Curran: we sell the company aer Lingus is too low?
    Independent.t. E.
    Last week I was lucky enough to fly home to Ireland after a very enjoyable summer holiday. The Aer Lingus flights from Geneva to Dublin, like many others I took with the airline for several decades.
    https://www.independent.ie/business/irish/richard-curran-did-we-sell-aer-lingus-too-low-37220381.html
    https://www.independent.ie/business/article37220380.ece/31925/AUTOCROP/h342/2018-08-16_bus_43273906_I1.JPG

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Last week I was lucky enough to fly home to Ireland after a very enjoyable summer holiday. The Aer Lingus flights from Geneva to Dublin, like many others I took with the airline for several decades.

It’s always nice to see the logo of Aer Lingus, the sound of the Irish accent and the familiar tone of reassuring company aer Lingus flight captain (probably from Clontarf) that the weather in Dublin is “not quite as good as here in Geneva”.

Perhaps the most encouraging part of the entire customer experience, how little has changed in the three years after the takeover of Aer Lingus British Airways parent group IAG.

The brand remains the same as the presence in Dublin the top management team, positioning the airline for consumers and the overall feel of it.

However, a huge amount has changed in the Aer Lingus over the past three years. This week at the 2015 shareholders by an overwhelming majority (95pc) to approve the seizure of the aircraft in Gro.

The ransom was facilitated by the government’s decision to return €1.5 billion takeover, which provided €335 million salary for the state of 25.1 PC of shareholders.

After pushing the two lower offers for the stake, the government approved €2.50 per share offer put on the table of the head of IAG Willie Walsh.

Since then, the group’s financial position has changed dramatically. The company aer Lingus has reported revenues of 468 million rubles in the first six months of 2015, the airline was in the throes of a takeover offer.

In the first half of 2018, revenues amounted to €899m, 92pc increase in three years. In the first half of 2015, the airlines to achieve operating income of €34.5 m. It was €104m height in the same period this year.

Keep in mind, the company aer Lingus is also to the North of €640m in net cash on the balance sheet at the time of application.

Such was the rapid growth of income and profit that raises an obvious question – does the government have to sell too cheaply?

The answer is speculative and needs to estimate how much the growth of the airline in the last three years without a seizure NFP. In addition, the cost is the price someone is willing to pay for it.

Before Willie Walsh came knocking on the door of Aer Lingus, the company’s stock was trading at 1.50 €each, business valuation of €900m. The magician paid the full €1 a share more in the capture.

And of course there is the question of what would happen if the airline insisted to do it alone. He would not be able to catch industry cycle in the same way, in the last three years and may have seen its stock price to suffer even more.

Operating profit of the airline in the first half of 2015 was not only a third of what they are now, but fell by 10pc in 2014.

The key to the extraordinary growth of Aer Lingus under Gros was its expansion on new transatlantic routes in the development of Dublin as a place of transition.

Little has changed in my Geneva to Dublin flight last week, with the exception of the number of travellers who were not in Switzerland or Ireland, and who flew from Dublin to North America.

Since then, the company has added aer Lingus routes from Dublin to Philadelphia, Seattle, Newark, Los Angeles, Connecticut, and Miami.

There are two more route should be announced in the coming weeks. The airline also ordered four new long-haul Airbus A321. This should help it to achieve even more.

CEO of Aer Lingus Stephen Kavanagh said that the airline conducts an analytical study on dozens of U.S. cities, is studying the demand of passengers and correlating it with cities that can do the deal on landing charges.

In an interview at the weekend, he said that it is not absurd Aer Lingus to more than double the current transatlantic daily loads during the period of work, as well as further investments in the European network.

One of the shortcomings of international engagement, for the Irish firm is the fact that the local government should make an investment case with HQ for resources to expand and grow.

We see this with us multinationals with large operations in Ireland such as Microsoft, Apple or Intel.

However, in the case of Mr. Kavanagh, he makes the case for capital investment for Ireland, for the head, which used to do its work. He probably has pros and cons, but overall a much better situation.

And Mr. Kavanagh is perhaps too much right now to open the door with iag. The company aer Lingus was a “star” in the wider IAG group.

Between March and June, for example, its Operating margin was 20.8 PC. Iberia was 10.4 PC, while British Airways managed to 15.4 PC. Operating profit of the airline vueling was 9.3 PC.

But it’s really from the rates of return on invested capital, the company shines aer Lingus to iag. Its RoIC in the last four quarters was a massive 27.8 PC. This dwarf other airlines within the group, with Iberia at 12.2 PC of vueling 13.1 PC, British Airways 16.9 PC and a shared Group drawing is performed by 16.2 PC.

This suggests that the magician controls the milk a very substantial profit relative to the capital he had to expend to achieve them. The question of how cheaply he raises his head a bit again. The government not to take the offer from the hands of Willie Walsh three years ago, but instead rejected two lower offers and negotiate hard to secure basic commitments.

The whole country was obsessed with retaining the Heathrow slots after the capture three years ago. The government received the commitment of the slots are held by Aer Lingus. They were more reliable safeguards than what had existed before, but are not necessarily legally binding.

The company aer Lingus also pledged to continue to exploit every day, winter and summer scheduled frequencies between London heathrow and Dublin, cork and Shannon for at least five years and two more if airport charges do not increase above a certain level.

At that time, the IAG believes that the company aer Lingus is able to deliver up to 2.4 million passengers in 2020, and the airline will have a capacity of 150 new employees has increased to 635 new jobs by 2020.

The state put €335 million of revenue from sales to the special Fund of communication within the Irish strategic investment Fund (isif), of which €93 million had been invested so far. Given that the isif approximately €7 billion to invest an additional €335 million, does not seem too significant, but it can be useful post-quarter and the month when it comes to investing in new delivery infrastructure and export routes to Europe, which is to circumvent the UK. Dublin airport this week announced a new €16m transfer passenger, which ties in well with planned expansion of Aer Lingus. The number of passengers using the Dublin to transfer from one flight to another, has increased from 550 000 to almost 1.6 million in 2013.

Aer Lingus capture is achieved, the magician promised and more. But obviously, Willie Walsh bought it at the right time and for the right money.

But possible clouds on the horizon. If other European airports secure immigration rights registration, the expansion of Dublin may face new competitors. The President of the United States Donald trump de-stabilization of a trade war can seriously affect the growth of transatlantic passenger traffic. Leaving the UK remains very uncertain question. As fuel prices continue to tick, the company’s management is always aware of the cycle in the industry.

Perhaps the real test of the value of the seizure in Ireland of ink may occur in difficult times, not good. If there is a recession, how fast Dublin to a wider group will be truly tested?

But three years after the sale of the company aer Lingus as an independent Irish company with positive Outlook. Willie Walsh may have got a bargain, but Ireland Inc. should do well, too.

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