The Aer Lingus board reportedly spent six hours considering the latest offer from International Consolidated Airlines Group (IAG), which is said to be willing to pay a total of €1.335 billion for the Irish flag carrier.
Most observers were expecting a statement on Monday confirming the €2.50 a-share offer, and possibly, recommending that Aer Lingus stakeholders, including Ryanair and the State – who between them own 54.9 per cent – accept it.
IAG has been circling Aer Lingus for a while. It made its first overture on December 14th, when it proposed paying €2.30 a-share for the company. The board rejected that and a follow-up indicative offer, made on December 29th, of €2.40 a-share.
The group confirmed the second approach in early January on a day when speculation about its intentions sent the Aer Lingus share price rocketing to €2.50 on the Dublin market. They were at €2.35 before news of the third offer broke.
Three approaches in six weeks indicate that IAG, which already controls British Airways and Spanish carriers Iberia and Vueling, is keen to get its hands on Aer Lingus.
Heathrow slots
It is drawn to a number of things, all of which are likely to feature in any plans it may have for the airline. One is Aer Lingus’s 24 slots at Heathrow, which are said to be worth €400 million in their own right and which would give IAG control of 55 per cent of all those available there.
Opponents of the deal, including Fianna Fáil transport spokesman, Timmy Dooley, argue that the slots are vulnerable in the event of a takeover, particularly those connecting Shannon and Cork to the London airport. However, it appears that IAG wants to preserve and develop these links. They already feed valuable passengers to subsidiaries such as BA.
Heathrow is likely to loom large in any talks between the group and the Minister for Transport Paschal Donohoe, and his cabinet colleagues, who will decide the fate of the Government's 25.1 per cent stake, worth €335 million at €2.50 a-share.
IAG boss, Irish man Willie Walsh, is a former Aer Lingus chief executive and chairs the State's National Treasury Management Agency. He is already very familiar with the personalities involved.
Nevertheless, his group cannot make special concessions to one shareholder as it has to make the same offer to everyone. Talks are only likely to take place if the Aer Lingus board recommends its terms and they are put before all stakeholders.
Government policy
Rather than offer special conditions, Walsh will have to convince Donohoe that IAG’s plan fits in with Government aviation policy, specifically maintaining and developing links with key markets for business and tourism.
Another element of its likely strategy could chime with that: tapping Dublin Airport's potential for growth on transatlantic routes. Heathrow offers no more room to expand, but last year, 750,000 passengers transferred to Aer Lingus North American flights out of Dublin from non-Irish airports. Most of them came from England and Scotland.
Some observers believe Dublin's share of Europe-to -North America traffic could more than double.
Both British and Irish sources argue that the strength of the Aer Lingus brand should not be underestimated. “In the US in particular, it has very strong resonance,” one says.
Along with the Government, IAG will also have to convince Ryanair, Aer Lingus’s biggest rival and shareholder, with 29.8 per cent. Chief executive Michael O’Leary has said his board will consider any offer carefully “if and when it arrives”.
There is an issue here that is in danger of being overlooked. Ryanair is awaiting a ruling, possibly this week, from Britain's Court of Appeal on its challenge to the UK's Competition and Markets Authority decision that it cut its Aer Lingus stake to 5 per cent.
While Ryanair will appeal at a European level if the British court rules against it, the verdict could raise the possibility of a forced sale, which could, in theory at least, bring other interested parties out of the woodwork. Chairman Colm Barrington and his board could yet be in for a few more marathon meetings.
