Aer Lingus sale by Irish Government looking more likely as resistance softens

The sale of the Irish Government’s 25% stake in Aer Lingus to British Airways and Iberia owner International Consolidated Airlines Group (IAG) is looking more likely as the centre-left Labour Party’s opposition to a deal softened during the weekend.

Last month, the Irish national flag carrier’s board of directors recommended IAG’s improved offer of €2.55 per share, which values the company at €1.36 billion ($1.52 billion), as the Anglo-Spanish group made its third attempt to take over the Dublin based company.

The purchase bid includes a cash offer of €2.50 per share plus a dividend of €0.05 per share.

The chances of a deal stalled because of political opposition led by the coalition Labour party.

Aer Lingus

Aer Lingus, one of the world’s safest airlines, is Ireland’s national flag carrier.

Former Labour Party leader Pat Rabbitte said IAG’s Irish CEO Willie Walsh’s series of public appearances in which he pledged to expand the airline appears to have persuaded those in the party who had been against the transaction.

Reuters quoted Mr. Rabbitte, who said on the sidelines of the Party’s annual conference:

“I think the mood has changed. I think it is very difficult to rebut the case that he made.”

 

Mr. Rabbitte said he expected the deal to go ahead, given that it now has the Labour Party’s support.

Irish Government’s list of demands

IAG said it would consider a list of demands made by the Irish Government last week, including the extension of a guarantee of connections between airports in Ireland and London’s Heathrow for at least five years.

The demands have softened considerably compared to the Irish government-coalition’s stance one month ago.

The Sunday Independent has learned that an AIG commitment to retain Heathrow slots for “seven or eight” years could be enough to secure the Irish Government’s support for the sale.

Finance Minister Michael Noonan, of the centre-right Fine Gael Party, is among those said to be a supporter of selling Ireland’s second-largest airline. Transport Minister, Paschal Donohoe (Fine Gael) is known to be “very open” to an improved offer.

Willie Walsh

IAG’s CEO Willie Walsh was CEO of Aer Lingus.

The Independent.ie quotes one Fine Gael minister, who said:

“The mood has certainly changed in the past two weeks. The Oireachtas hearings have had an impact. Hearing voices like economists Colm McCarthy and John Fitzgerald has had an impact. There is not enough support for a sale yet, but there has certainly been a sizeable shift in opinion toward considering a sell-off.”

IAG wants to buy Aer Lingus because it aims to increase the number of takeoff and landing slots at Heathrow Airport, its home base. Aer Lingus is the airport’s fourth-busiest airline, after BA, Lufthansa and Virgin Atlantic.

If IAG manages to get Aer Lingus, it will have more than half of all available slots.

Aer Lingus employs more than 3,600 workers, has a fleet of 47 aircraft and over 77 destinations. Based at Dublin Airport, is has operating bases at Shannon, Cork, London-Gatwick and Belfast-City.

Ryanair Limited owns 29.82% of the Aer Lingus, the Irish Government 25.11%, and “others” 45.07%.

IAG big jump in profits

IAG reported a significant jump in annual profit and improved its forecast for 2015.

For the year to December 31, 2014, it reported pre-tax profits of €828m (£601m).

The impressive performance was driven by the use of new fuel-efficient aircraft and a “remarkable” turnaround at Iberia.

The company’s operating profits almost double to just over €1 billion.

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