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How Willie wooed the government on Aer Lingus - and what happens next

IAG has crossed one hurdle, but there is still another big one to come.

Image: Sam Boal/Photocall Ireland

IAG BOSS WILLIE Walsh has continued his publicity push over the group’s buyout of Aer Lingus as the focus turns to how Ryanair will play its hand in the deal.

The government yesterday decided to back IAG’s €1.4 billion buyout of the Irish airline after a four-month courtship aimed at unlocking the state’s 25% stake. The deal values the taxpayer-owned share at about €335 million.

It came after the airline group, which includes subsidiaries British Airways, Iberia and Vueling, offered an open-ended commitment to keep Aer Lingus’s valuable London Heathrow slots in the national carrier’s hands.

IAG also wooed the government, which was facing a potential backlash from those reliant on regional airports, with a seven-year pledge to maintain existing connections between Heathrow and Dublin, Cork and Shannon.

At a press conference today, Walsh said Aer Lingus customers would also benefit from more routes to and from Ireland, and better connectivity through IAG’s network.

IAG 044 copy Source: Sam Boal/Photocall Ireland

“As part of IAG, Aer Lingus would have stronger buying power, stronger selling power, more ability to grow and more security to weather the slings and arrows of our industry,” he said.

Ireland will be a major beneficiary of this deal as it will boost economic growth and create new jobs.”

The key IAG promises Transport Minister Paschal Donohoe yesterday highlighted and the group’s chief was at pains to reiterate today were:

  • Plans to grow the airline with eight more aircraft and the scope for 2.4 million extra passengers by 2020
  • Four extra transatlantic routes by 2020, including two next year
  • A net 150 new jobs by the end of 2016, while a total of 635 “could be” created by 2020
  • Better connections for passengers providing a boost to the tourist industry and wider economy

Donohoe Transport Minister Paschal Donohoe

Unions have been fighting the deal on the grounds it would be bad for Aer Lingus workers and for the country, and Walsh today confirmed an expected 50 staff would go from the airline in the short term – although the overall headcount would increase.

There will be duplication … and that will result in some job losses in back office activities, principally in finance and in IT,” he said.

So what now?

With the deal set to be rubber-stamped by the Dáil tomorrow with the blessing of both Fine Gael and Labour, IAG’s attention will turn to Ryanair – which still has the power to stymie the buyout – notwithstanding it getting the approval of competition regulators.

The Ireland-based budget carrier has built up a near-30% stake in Aer Lingus and previously launched several unsuccessful takeover attempts.

Ireland Aer Lingus Source: Associated Press

More recently, Ryanair was ordered by the UK’s competition watchdog to sell down its share to 5% – a decision the airline has been fighting since 2013.

IAG said its proposal was conditional on both the government and Ryanair agreeing to hand over their stakes, however the Aer Lingus suitor has until now focussed its attention almost exclusively on convincing the state owners.

Walsh said IAG would issue formal offer documents to Ryanair within 28 days and he believed it presented a “compelling argument” for the deal to go ahead.

I expect Ryanair to behave in a rational way, as they are a well-run business with proper corporate governance. They have been very clear they will consider the offer when the offer is made.”

Britain British Airways Strike UK union members hold up cutouts of Walsh's face in a 2010 British Airways protest Source: AP Photo/Kirsty Wigglesworth

However he warned IAG wasn’t expecting to make any concessions to Ryanair and the €2.55-per-share offer for Aer Lingus was the highest it was prepared to go.

Meanwhile, Ryanair has been giving little away about its position. As part of its annual results announcement yesterday, when the company showed a 66% rise in profits for the year, CEO Michael O’Leary said the airline still believed the UK competition ruling was “untenable” and it should be allowed to hold onto its piece of Aer Lingus.

In the meantime, our approach to any IAG offer for Aer Lingus is unchanged – should Ryanair receive an offer from IAG the board of Ryanair will consider it in due course on the merits,” he said.

Belgium Ryanair Travel Ryanair CEO Michael O'Leary Source: AP Photo/Virginia Mayo

READ: After four long months, the government is set to FINALLY sell its stake in Aer Lingus >

READ: Copenhagen mayor bans 45,000 staff from using Ryanair >

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About the author:

Peter Bodkin  / Editor, Fora

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