VZCZCXRO3705
RR RUEHIK
DE RUEHDL #0093/01 0270722
ZNR UUUUU ZZH
R 270722Z JAN 06
FM AMEMBASSY DUBLIN
TO RUEHC/SECSTATE WASHDC 6429
INFO RUCNMEM/EU MEMBER STATES
RHEFHLC/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUCPDOC/USDOC WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS SECTION 01 OF 02 DUBLIN 000093 
 
SIPDIS 
 
SIPDIS 
 
USDOC FOR ITA/MAC/MCLAUGHLIN 
USDOC FOR ITA/ADVOCACY CENTER/NUGENT 
DHS FOR OFFICE OF FIELD OPERATIONS, JAYSON AHERN, ASSISTANT 
COMMISSIONER 
 
E.O. 12958: N/A 
TAGS: EAIR ECON PREL PGOV ETRD EI
SUBJECT: AER LINGUS CEO DEBUNKS REPORTS ON AIRBUS DECISION 
 
REF: DUBLIN 89 
 
DUBLIN 00000093  001.2 OF 002 
 
 
¶1.  (SBU) Summary: In a January 25 meeting with Charge and 
Emboffs, Aer Lingus CEO Dermot Mannion said that recent media 
reports on the airline's alleged plans to purchase Airbus 
aircraft were inaccurate.  Mannion noted that, while a 
decision had not been made, Aer Lingus regarded two Airbus 
A330s as a good fit for urgent interim short-lift needs. 
This consideration was not linked to the airline's 
deliberation on longer-term, long-haul aircraft, and Boeing's 
787 offer remained under serious consideration.  Aer Lingus' 
long-haul aircraft decision was tied to progress on the 
airline's privatization, for which there was increasing 
public and media support.  Labor opposed the move, however, 
due to concerns about the airline's pension deficit.  Mannion 
noted separately that Aer Lingus, U.S. carriers, and Post 
shared interests in working with the Dublin Airport Authority 
(DAA) to resolve passenger congestion and other problems with 
U.S. Customs and Border Protection (CBP) pre-screening at 
Dublin and Shannon Airports.  End summary. 
 
Aircraft Procurement and Aer Lingus' Needs 
------------------------------------------ 
 
¶2.  (SBU) Recent publicity regarding Aer Lingus, decisions 
on aircraft procurement was inaccurate and premature, Aer 
Lingus CEO Dermot Mannion told Charge, Senior Commercial 
Officer, and Econoff in a January 25 meeting.  (The January 
22 Sunday Times had reported that the airline planned to sign 
a USD 400 million deal for four short-range Airbus A330s, 
presumably linked to a future purchase of as many as 14 
long-haul Airbus A350s, rather than Boeing 787s.)  Mannion 
committed to inform Post about any aircraft decisions ahead 
of the media.  Aer Lingus, he said, had two stages of 
aircraft requirements: long-term (with deliveries no sooner 
than 2010-11), and interim lift needs.  While stressing that 
a decision had not been made, Mannion observed that the "best 
option" at this point for the airline's urgent interim lift 
needs was to purchase two A330s for delivery in 2007.  The 
two planes, he added, were valued at USD 200 million, with 
one-third of the value in GE engines.  He said that Boeing 
had presented an interim lift proposal with its 777 model, 
which remained under consideration, at least formally. 
Mannion also indicated that difficulties, including with 
unions, related to switching fleets (which is mostly Airbus 
for Aer Lingus currently) would be an important part of the 
decision.  When pressed, he said a final decision in favor of 
the interim A330s, if it is made, would not weaken the case 
for a long-haul deal with Boeing. 
 
¶3.  (SBU) Mannion elaborated that, contrary to press reports, 
there was "no linkage" between this urgent interim need and 
the desire for the next generation of long-haul aircraft.  He 
said that no long-haul decision had been made, that 
discussions with Boeing and Airbus were ongoing, and that the 
deal would stand on its own merits.  He noted that the 
long-haul aircraft decision would not be made "until the way 
forward was clear" for privatizing Aer Lingus (now 85 percent 
government-owned).  He observed that the government was 
making progress on privatization behind the scenes, despite 
negative pressure from several quarters.  The Government, 
moreover, might give approval to the timing and structure of 
privatization (IPO vs. institutional placement) in as early 
as three weeks.  Mannion was non-committal on a specific time 
frame for the decision on long-haul aircraft, pending a 
decision on the company's privatization, noting that fleet 
transition issues were difficult to pursue while 
privatization issues existed.  He underlined that Aer Lingus 
management was slowly winning over the public and the media 
on the merits of privatization. 
 
Pension Issues Weaken Labor Support on Privatization 
--------------------------------------------- ------- 
 
¶4.  (SBU) Airline labor was withholding consent to Aer 
Lingus, privatization, due partly to concerns about a 
pension deficit of several hundred million Euro, observed 
Mannion.  Labor, he said, had downplayed the need for 
privatization as a revenue-generating mechanism to cover the 
pension deficit, arguing that the Government would cover the 
shortfall for a state-owned company like Aer Lingus.  Mannion 
pointed out, however, that Aer Lingus could place a portion 
of cash proceeds from privatization under control of 
workers, trustees for pension purposes.  He believed that 
this "cash now" solution would be more attractive to airline 
 
DUBLIN 00000093  002.2 OF 002 
 
 
retirees (mostly living in Prime Minister Bertie Ahern's 
North Dublin constituency) than the vague hope of a 
Government pensions bail-out.  Mannion added that, in any 
event, Ireland's major unions would not hold up pending 
"Social Partnership" negotiations on a new national 
wage-benchmarking agreement over the issue of Aer Lingus' 
privatization. 
 
Working with Post/the Dublin Airport Authority on CBP Needs 
--------------------------------------------- -------------- 
 
¶5.  (SBU) Separately, Mannion offered to work with Post and 
the Dublin Airport Authority (DAA) to address passenger 
congestion and other problems with U.S. Customs and Border 
Protection (CBP) pre-screening at Dublin and Shannon 
Airports.  (Per reftel, in a January 19 meeting in Dublin, 
CBP officers requested expanded airport facilities for more 
complete screening procedures, while the DAA asked for more 
CBP personnel before making facility commitments.)  Mannion 
noted that Aer Lingus, interests tracked with those of U.S. 
carriers in improving CBP operations at Dublin and Shannon to 
develop those airports as more convenient trans-Atlantic 
hubs.  He added that CBP pre-screening would be an attractive 
selling point in Aer Lingus, efforts to expand service 
to/from the Persian Gulf, as a proportion of the passengers 
would proceed from Ireland to the United States.  Mannion 
believed that the DAA's senior leadership understood CBP's 
value in boosting Aer Lingus' passenger volume, and he hoped 
that this point would not be "lost in translation" with DAA 
personnel involved in Dublin Airport's expansion plans. 
KENNY