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Aer Lingus backs £1bn takeover deal

A £1 billion takeover of Aer Lingus by the owner of British Airways has moved a step closer after the Dublin-based carrier gave its backing to a deal.

The Aer Lingus board said it was prepared to accept a sweetened offer worth 2.55 euros (£1.90) a share from International Airlines Group (IAG), although progress now hinges on major shareholders Ryanair and the Irish Government.

IAG, which owns Spanish carrier Iberia, said it plans to operate Aer Lingus as a separate business with its own brand, management and operations.

IAG wants the Irish carrier to join the oneworld airline alliance, of which British Airways and Iberia are members, and become part of of a jo int business that IAG operates over the North Atlantic with American Airlines.

The FTSE 100-listed company said its proposal would secure and strengthen Aer Lingus's brand and long-term future, while offering "significant benefits" to both the Irish company and its customers.

It added: "IAG recognises the importance of direct air services and air route connectivity for investment and tourism in Ireland and intends to engage with the Irish Government in order to secure its support for the transaction."

The Irish Gove rnment holds a 25% stake in Aer Lingus and will want reassurances from the BA owner over its plans for the key Dublin to Heathrow route.

Ireland's deputy prime minister warned at the weekend that protecting Ireland's air links with Europe and the US was vitally important in terms of inward investment, exports, business and tourism.

Tanaiste Joan Burton told RTE Radio: ''What we will want to do as a Government, and what's absolutely important, is to protect these slots and the connections of direct flights in and out of Ireland.''

It is thought that Ryanair, which owns just under 30% of Aer Lingus following a series of failed takeover attempts, may be tempted to sell at the new offer price of 2.55 euros a share, which is equivalent to 1.36 billion euros (£1.01 billion).

The Aer Lingus board has previously rejected proposals from IAG worth 2.30 and 2.40 euros a share.

Currently, Aer Lingus directly employs 3,900 people, mostly in Dublin, with 2,100 of these described as ground staff in areas such as clerical, operative and back office roles.

IAG's interest in Aer Lingus stems from its desire for additional Heathrow runway slots as well as the opportunity to deliver more industry cost efficiencies.

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

Robin Byde, a transport research analyst at Cantor Fitzgerald stockbrokers, said IAG was seeking to build on Aer Lingus's lucrative niche on transatlantic routes, which offers customs and immigration clearance in Dublin and Shannon for flights to the United States.

He added: ''The other main attraction is Aer Lingus's 23 slot pairs at Heathrow, which we calculate are valued at about 10 million euros (£7.5 million) per pair.''

However, Mr Byde said he was wary about the politics of the deal and the potential for IAG to get ''dragged into prolonged and distracting negotiations''.

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