IAG given clearance by Irish government to buy its 25% shares in Aer Lingus takeover
International Airlines Group (IAG), the owner of British Airways, is set to take over Aer Lingus in a deal that values the airline at €1.4bn after the Irish government agreed to sell them its 25% stake. The Dublin government’s agreement to sell their stake was critical for the deal to progress. Donohue said: “IAG has provided additional information and certain commitments in relation to its proposal.” IAG has further extended guarantees about routes to Ireland from Heathrow, from five to seven years, although they remain some way short of the decade-long commitment Dublin had sought. The guarantees also are dependent on airport charges being limited to inflation. The government has secured important guarantees on the maintenance of Aer Lingus’ iconic brand, and its head office staying in Ireland. There are also some assurances over protecting existing Irish jobs at Aer Lingus, which wants to continue to use Irish crew bases. Ryanair still owns 29% of Aer Lingus shares. About 46% is owned by Aer Lingus. The 24 landing slots Aer Lingus controls at Heathrow are among the most lucrative for BA. The Heathrow-Dublin link is one of the busiest in Europe, and highly profitable.
IAG given clearance by Irish government for Aer Lingus takeover
The Irish government is to sell its 25% stake in Aer Lingus to British Airways owner International Airlines Group. British Airways owner offers extended guarantees about routes to Ireland from Heathrow in deal that values Dublin-based flag carrier at €1.4bn.
By Henry McDonald, Ireland correspondent (Guardian)
The owner of British Airways is set to take over Aer Lingus in a deal that values the Dublin-based flag carrier at €1.4bn after the Irish government agreed to sell its stake to International Airlines Group.
Paschal Donohue, Ireland’s transport minister, confirmed that the sale of the former Irish state carrier to IAG can now go ahead.
The Dublin government owns 25% of the airline but its agreement, after six months of consideration, was critical for the deal to progress.
Following a Cabinet meeting on Tuesday evening, Donohue said: “IAG has provided additional information and certain commitments in relation to its proposal. Following detailed consideration of this and all of the issues surrounding a potential disposal of the state’s shareholding in Aer Lingus, the government has decided that it will support IAG’s proposal.”
IAG has further extended guarantees about routes to Ireland from Heathrow, from five to seven years, although they remain some way short of the decade-long commitment Dublin had sought. The guarantees also are dependent on airport charges being limited to inflation.
Donohue added: “This proposed offer has been the subject of very detailed discussions and negotiations with IAG since the board of Aer Lingus indicated on 27 January that it was prepared to recommend the offer. The government has secured important guarantees in respect of Ireland’s future connectivity, particularly to London Heathrow, and on the maintenance of Aer Lingus’ iconic brand and of its head office in Ireland.
“IAG has set out ambitious growth plans for the company and the government is confident that supporting IAG’s offer for Aer Lingus is the best way of securing Aer Lingus’ future in an increasingly-competitive global airline market and of enhancing Ireland’s connectivity with the rest of the world and our potential for growth and development into the future.”
Earlier on Tuesday, Aer Lingus chief executive officer Stephen Kavanagh wrote to the minister with some assurances over protecting existing Irish jobs at the airline in the event of the takeover. Kavanagh and the Aer Lingus board had backed IAG’s plans once it took control of the carrier.
Kavanagh told the minister that “the airline’s preference is to continue to use Irish crew bases – provided it continues to be as competitive and efficient as at present – and to only restructure its business when required.”
Later on Tuesday evening, an IAG spokesman confirmed that the takeover was going ahead.
A spokesman for Ryanair, which owns 29% of the shares – but has been told by competition authorities that it must sell down its stake after its own takeover bids were blocked – said the its position remained unchanged. “The board of Ryanair has not received an offer and will consider any offer on its merits, if and when an offer is made.”
The sale of the Irish state’s 25% share in Aer Lingus has been opposed by the two main opposition parties – Fianna Fáil and Sinn Féin – along with a host of leftwing deputies in the Dáil.
Reports in the Irish media earlier on Tuesday suggested that IAG gave the Fine Gael-Labour coalition commitments about routes, regional airports and jobs in its takeover bid. The commitments also include the continued use of Cork and Shannon airports for routes principally to the UK.
There were further claims that IAG had promised to introduce four new transatlantic routes from Ireland creating a further 635 jobs by 2020. SIPTU, the largest trade union at Aer Lingus, had, alongside the Labour party, sought these concessions if it was going to accept the takeover deal.
The 24 landing slots Aer Lingus controls at Heathrow are among the most lucrative for Willie Walsh, IAG chief executive, to capture in the takeover with the Dublin-to-London route the busiest intercity air connection in Europe.
The Dublin route is highly profitable, with a projected 28 million passengers expected to pass through Ireland’s premier airport by 2022.
The takeover would see Walsh again at the helm of the airline where he made his name as chief executive – and started his aviation career as a pilot. He has championed consolidation in the European airline market, and created IAG with the union of British Airways and Iberia in 2011 – with the latter finally turning a profit on the back of a savage cost-cutting and redundancy regime this year. Walsh has since added Vueling, a Spanish low-cost carrier, to the group.
Ryanair owns over 29% of Aer Lingus stock and the Irish state owns over 25%. The state had previously held an 85% shareholding until the Government’s decision to float the company on the Dublin and London Stock Exchanges on 2 October 2006. The principal group companies include Aer Lingus Limited, Aer Lingus Beachey Limited, Aer Lingus (Ireland) Limited and Dirnan Insurance Company Limited, all of which are wholly owned.