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Politicians back Aer Lingus deal

Published 28/05/2015

British Airways owner IAG says it will not up its 1.4 billion euro offer for Aer Lingus
British Airways owner IAG says it will not up its 1.4 billion euro offer for Aer Lingus

Ireland's parliament has voted in favour of selling off the state's share in Aer Lingus as part of a 1.4 billion euro takeover bid by British Airways owner International Airlines Group (IAG).

After two days of lively debate in the Dail, the coalition government easily clinched the majority backing it needed, clearing another hurdle for the controversial deal which has been trenchantly attacked by opposition parties.

One prominent backbencher, junior coalition partner Labour's Michael McNamara, broke ranks to vote against the ruling parties after declaring his fears for the takeover.

Mr McNamara, whose Clare constituency is home to Shannon Airport, faces being thrown out of his parliamentary party for his dissent.

But the vote to sell off the quarter stake was passed by 74 in favour to 51 against.

Paschal Donohoe, Transport Minister, said the deal was in the best interests of Ireland, at a time when many former state-owned airlines had been subsumed into larger groups or had collapsed.

"I and this government do not want to leave it to chance that there will be a forced decision in difficult circumstances in some time in future," he said.

The Irish state had retained a 25% stake in the airliner after it was publicly floated on the Irish and London Stock Exchanges in 2006.

IAG chief Willie Walsh has been wooing the Fine Gael/Labour government for more than a year in his ongoing attempt to buy out Aer Lingus, where he cut his teeth as a pilot and later rose to become chief executive.

Mr Donohoe said an IAG takeover would strengthen Aer Lingus in what is an extraordinarily volatile and demanding industry. He signalled two new services would be launched by the carrier by next year.

But Mr McNamara said he did not have confidence in guarantees given to the government as part of the deal, particularly over the security of routes in and out of his constituency.

"There are questions I have ... questions unanswered, and, in that context, I am not prepared to gamble with what I believe is the key to the economic development of all of this state,'' he added.

IAG confirmed earlier today it would not up its offer for Aer Lingus amid speculation that major stakeholder Ryanair will play "hard ball" over the deal.

The low-cost airline, which owns 29.8% of the Irish flag carrier, has become "kingmaker" in the deal since it received the backing of Dublin.

During a charm offensive in the Irish capital, Mr Walsh said it was a "compelling offer" and that he expects Ryanair, controlled by flamboyant boss Michael O'Leary, to "behave in a rational way".

A stock exchange announcement from the group today said: "IAG confirms that the offer price is final and will not be increased."

Earlier this week it was announced that terms on a deal have been agreed by the Aer Lingus board and details of the recommended offer are being sent to shareholders but Ryanair has been keeping its cards close to its chest.

The airline said that its position has not changed, that it has yet to receive any offer, and that it will "consider any offer on its merits, if and when an offer is made".

Mr Walsh said that he has not talked to Ryanair in recent weeks and could not cut any deal with the low cost carrier on routes or other arrangements, under competition and takeover laws.

IAG is offering Aer Lingus shareholders 2.55 euro in cash per share, under the proposed deal backed by the airline's management but disputed by trade unions as well as opposition parties in Ireland.

Mr Walsh said that offer "was the limit" and suggested he was not expecting Ryanair to frustrate the bid.

"'I believe Ryanair will see the merit of the case we have made, the value we are offering in terms of this takeover and will want to see the deal go through,'' he said.

Under terms struck with the Irish government, "legally binding" commitments have been given on routes in and out of Ireland, as well as the Aer Lingus brand being retained and the airline being headquartered in Dublin.

The background to the transaction is complicated by a long-running battle fought by Ryanair against UK competition authorities, which have ordered it to cut its stake in Aer Lingus.

Analysts at Jefferies have described the low-cost carrier as the "kingmaker" in the deal, saying it "may yet prove troublesome".

They said that given its own frustrated track record with Aer Lingus and its current position of strength - after it earlier this week posted a 66% rise in annual profits - they "would not be surprised to see Ryanair play hard ball".

Aer Lingus welcomed the Dail vote to sell off its shareholding in the carrier.

Chairman Colm Barrington said it was a "compelling transaction" for Aer Lingus, shareholders, employees, customers and for Ireland.

"Shareholders will realise an attractive return through the premium that the IAG offer provides over the level of our share price immediately prior to the announcement of IAG's offer," he said.

"Aer Lingus will reap the commercial and strategic benefits of being part of the much larger and globally diverse IAG Group and as a member of the oneworld alliance of 17 airlines that together carry over 500 million passengers.

"This access to greater global scale will accelerate growth across our network, enhance Ireland's position as a natural gateway connecting Europe and North America, give Irish tourism access to major traffic flows and customer loyalty programmes, and provide better access for business interests and to cargo flows.

"This in turn will lead to an increase in jobs at Aer Lingus, in support activities and the tourism sector and, importantly, will strengthen connectivity to and from Ireland."

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