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Green light for Aer Lingus takeover

Published 26/05/2015

Aer Lingus is the subject of a takeover bid
Aer Lingus is the subject of a takeover bid

British Airways owner International Airlines Group (IAG) looks set to take over Aer Lingus after the Irish government gave the green light to a 1.4 billion euro (£1.03 billion) bid.

Dublin's Transport Minister Paschal Donohoe said the Government - which owns a 25% stake in the national flag carrier - was supporting the proposed deal after seeking reassurances and commitments.

"IAG has provided additional information and certain commitments in relation to its proposal," he said.

"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."

Irish laws mean the Dail parliament will now have to vote to back the government's proposals.

Under the deal, IAG said it has agreed to a number of "legally binding" promises on the future of Aer Lingus, including the development of Dublin as a hub for transatlantic routes.

It has also vowed that Aer Lingus will keep existing slots at Heathrow, continue routes between Heathrow and Dublin, Cork and Shannon for the next seven years, as well as retaining its corporate brand.

The Aer Lingus head office will remain in Dublin, under the agreement.

Willie Walsh, the Irish-born chief executive of IAG, claimed Aer Lingus, Ireland and IAG would all benefit from the deal.

"Aer Lingus would maintain control of its brand and operation while gaining strength as part of a profitable and sustainable airline group in an industry that's consolidating," he said.

"Ireland's vital air links to Europe and North America would be enhanced, creating new jobs, with cast-iron guarantees on ownership of Aer Lingus' Heathrow slots and their use on flights to Dublin, Cork and Shannon."

Mr Walsh said the acquisition would add a fourth airline to IAG, allowing it to develop its network using Dublin as a hub between the UK, continental Europe and North America.

Mr Donohoe said it has also been assured of job creation under the bid, with up to 635 new jobs at Aer Lingus by the end of next year.

"We have very carefully considered all of the issues involved and have concluded that supporting IAG's offer is in the best interests of the airline, its employees, the travelling public, job creation and the economy overall given the vital role that air access plays in our economy as an island nation," he said.

"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."

While bosses at the airline have backed the sale, unions and opposition parties fear job losses, reduced connectivity in and out of Ireland and less competition if the share is sold.

Repeated advances from IAG had been previously rejected on the back of the concerns.

Trade union Impact, which represents cabin crew, pilots and some ground staff at Aer Lingus, insisted the deal remains bad for jobs, workers and for Ireland's connectivity and economic development.

Assurances given by IAG were "no real guarantees", the union said in a statement.

"For the staff at Aer Lingus, there are genuine concerns of compulsory redundancies if the deal goes through, along with the prospect of a further erosion of terms and conditions in the inevitable restructuring of the company," it said.

"Any assurances on the future use of the Heathrow slots will evaporate once the seven-year period has elapsed, after which these vital connection points can be moved to where they will make larger profits for the airline.

"Thereafter, the interests of IAG shareholders will always trump the interests of the Irish economy and the Irish travelling public."

Opposition parties Fianna Fail, Sinn Fein and the Socialist Party have all argued against a takeover.

But Colm Barrington, chairman of Aer Lingus, said the company will reap the commercial and strategic benefits of being part of a much larger group.

"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," he said.

The takeover deal now hinges on Ryanair selling its shares in Aer Lingus to IAG.

Ryanair said it has yet to receive an offer.

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