Belfast Telegraph

Aer Lingus spurns bid from BA owner

The owner of British Airways has made an approach to buy Dublin-based carrier Aer Lingus, it was revealed today.

International Airlines Group, which also owns Spain's Iberia, said its proposal was rejected by the Irish company's board, adding that there was no certainty that a further proposal or offer will be forthcoming.

Aer Lingus operates a fleet of 47 Airbus aircraft and carries more than 10.6 million passengers a year.

Aer Lingus is well known to IAG boss Willie Walsh as he ran the airline between 2001 and 2005 before taking the helm at British Airways.

A takeover battle for Aer Lingus could pitch Mr Walsh against rival Michael O'Leary's Ryanair airline, which still owns just under 30% of Aer Lingus. The Irish Government retains a 25% stake in the carrier.

Ryanair has been frustrated in its attempts to buy Aer Lingus and was last year told by UK competition authorities to sell down its stake because it potentially distorted the market for flights between Ireland and Britain.

Last year, Ryanair offered to sell its stake to any other European airline that makes an offer for Aer Lingus and wins the backing of a majority of Aer Lingus shareholders.

Ryanair previously made three attempts to buy Aer Lingus, with its most recent bid blocked by the European Commission.

Mr O'Leary has said the demands for it to reduce its stake in Aer Lingus were ''bizarre and manifestly wrong''.

Aer Lingus is the fourth busiest operator at London's Heathrow behind British Airways, Lufthansa and Virgin Atlantic.

The company said it received a "preliminary, highly conditional and non-binding approach" from IAG on Sunday.

It said: "The board has reviewed the proposal and believes that it fundamentally undervalues Aer Lingus and its attractive prospects."

Aer Lingus informed IAG of its decision to reject the approach on Tuesday.

Aer Lingus shares rose 10%, boosting the airline's stock market value to 975 million euros (£764 million).

Last month, chief executive Christoph Mueller reported the airline's strongest summer trading performance since the financial crisis, with operating profits up 19% to 112.9 million euros (£88.5 million) in the quarter to September 30.

It carried nearly a quarter more long-haul passengers in the period than a year earlier while increasing its revenue per seat.

The airline plans to launch a new Dublin to Washington service next May and will also increase services on existing transatlantic routes.

IAG was formed from the merger of British Airways and Iberia in 2011.

It has around 430 aircraft and employs more than 60,000 people. A restructuring programme at the previously loss-making Iberia has seen 2,500 staff leave the airline under a voluntary redundancy programme.

IAG recently forecast it will make a bigger than expected profit this year, stepping up pressure on rivals Air France-KLM and Lufthansa.

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said IAG was keen on additional Heathrow runway slots and the opportunity to deliver more industry cost efficiencies.

He added: "Prior acquisitions of both British Midland and Iberia have served IAG well, with the airline potentially placing further pressure on rivals Lufthansa and Air France. The move also comes at a time when the core industry cost of fuel, allowing for individual airline hedging policies, is falling."

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