A new delay in securing congressional approval for the Open Skies agreement between the US and the EU is being tipped... (8/21/2006)

A new delay in securing congressional approval for the Open Skies agreement between the US and the EU is being tipped to affect Aer Lingus long-haul expansion plans.

It is being felt that the development could also dampen investor appetite in the run-up to its IPO in London and Dublin.

This month's alleged attempt by terrorists to target transatlantic flights from Heathrow airport had already cast a shadow over the float, scheduled for late September, with some analysts warning it could be delayed. But Aer Lingus has insisted it will press on with the IPO, reported The Observer. The airline, which is 85 per cent owned by Ireland's government, hopes to raise around 600m pound from the offering as the first stage in a 2bn pounds expansion plan, it added.

In Open Skies deal is important to Aer Lingus because it will allow the Irish flag carrier to expand its operations in the lucrative but highly restricted market for transatlantic flights. Aer Lingus runs flights to four destinations in North America but would like to run more. However, the agreement has not yet been ratified by politicians in Washington, forcing US negotiators to admit last week that there will be no deal until March 2007 at the earliest. The delay is a disappointment for the airline industry, which had expected Open Skies be signed off in October, the publication reported.

According to Reuters, chief executive Dermot Mannion recently made light of news that wrangling between European Union and US negotiators was likely to disrupt the timing of an Open Skies aviation services deal expected to conclude in October. Agreement on open Skies which would mean Aer Lingus could fly into an unlimited number of American cities instead of the five it currently services, was seen as a boost for the partial flotation of the flag carrier in September.

We've always had a Plan B in mind, Mannion had said. It's true that we had anticipated Open Skies some time in 2007, but Plan B has always been to grow capacity on our existing routes to North America and look at other opportunities eastbound from Ireland, and we'll obviously continue to do that.

He also said there were no plans to postpone the initial public offering, despite intensifying pressure on the industry from soaring fuel prices and recent security chaos. the industry does have a history of bouncing back very quickly indeed from this type of security incident, he said.