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Aer Lingus posts loss, attracts investor

Aer Lingus has posted red figures for the first quarter of the year but the carrier has also attracted the interest of what could turn out to be a major investor.

The quarterly amounted to €36.1m but the former Irish national airline said that higher revenues per passenger mile would compensate for growing costs, most especially for fuel.

Aer Lingus said losses were nearly a third lower than in the first quarter of 2011 and that the business is usually loss making in the quarter, the Irish Independent reported.

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Aer Lingus chief executive, Christoph Mueller, said the airline was now more upbeat about the future and that if current trends continued, overall 2012 operating profits should match that achieved last year.

Meanwhile,Abu-Dhabi-based airline Etihad has purchased 2.987 percent of the Aer lingus shares in recent days, a move that is prompting speculation that Etihad, well known as the sponsor of the Manchester City soccer club, might make a bigger move aimed at buying the Irish government's 25 percent stake in Aer Lingus.

The Irish Times reported that Aer Lingus had confirmed discussions with Etihad in relation to reciprocal code-sharing arrangements. The two airlines are also investigating the possibility of joint procurement opportunities.

Aer Lingus said Etihad had given an undertaking it does not intend to increase its shareholding pending the outcome of these discussions while Aer Lingus said that there was no certainty as to the outcome of the discussions.

"This is the clearest signal yet of Etihad's desire to become a key strategic investor in Aer Lingus and indicates its strong interest in buying the Government's 25 per cent stake when it is put up for sale," the Times report stated.

Other areas of co-operation being investigated by the airlines include joint marketing arrangements and the possibility of Aer Lingus flying routes to the Middle East.

Etihad has used Bank of America and Merrill Lynch to buy about 11 million Aer Lingus shares on its behalf, the report added.

"Under stock market rules, Etihad is not required to disclose its shareholding until it has passed the 3 per cent threshold. Etihad used a similar tactic last year with Air Berlin. In December it increased its 2.99 per cent stake in Air Berlin to 29.2 per cent via the purchase of €73 million of new shares in the German airline."

That deal also included a code-share deal, and Etihad agreed to provide five-year financing of up to $255 million (€193 million) to support Air

The report said that Aer Lingus "could potentially feed Etihad's hub in Abu Dhabi with connecting traffic for Asia and Australia. Similarly, Etihad could provide traffic for Aer Lingus's network."

Etihad already operates a service linking Dublin with Abu Dhabi and, together with Aer Lingus, is the primary user of the new Terminal 2 at the airport.

Aer Lingus, once entirely owned by the Irish public through the government, is now owned by various companies as well as staff members. Rival airline Ryanair owns 29.8 percent and along with the governments 25 percent this covers over half the airline's share. Businessman Denis O'Brien, who has emerged triumphant in the battle for Independent News and Media, Ireland's largest media company, owns three percent.

The Irish government plans to offload its stake in Aer Lingus as part of its program of state asset sales agreed with the EU/ECB/IMF troika. The timing of such a sale has not yet been revealed.