Battle is joined. The decision of the Aer Lingus board to recommend that its shareholders accept the bid from IAG, subject to certain conditions, means that the fight for control of Aer Lingus is now on in earnest.
IAG has been constrained in what it could say since news of its third offer broke at the weekend as discussions continued with the Aer Lingus board. Board approval was the first key step in its strategy. It was clear at the weekend that the board were going to accept the revised offer, but there has been a lot of coming and going in the meantime on the exact terms of the recommendation.
In the end the Aer Lingus board said in a statement this morning, rather curiously, that it would be willing to recommend the offer “subject to being satisfied with the manner in which IAG proposes to address the interests of relevant parties”. This is the kind of meaningless nonsense which lawyers and investment bankers like, but which is poor communication to the rest of us.
IAG's statement to the Stock Exchange this morning was clearer and showed the start of its pitch of its vision for the airline. Aer Lingus would remain a separate brand with its own management, it said and transatlantic traffic would be developed in tandem with the services IAG offers over the North Atlantic with its partner American Airlines.
However the problem for IAG is that the gap between the news breaking at the weekend and the board recommendation this morning has allowed voices opposing the deal to dominate the airwaves. Trade unions, fearful for member jobs, regional interests and opposition politicians have all been out warning of the risks to connectivity and jobs. As reported this morning, Labour Party sources are nervous and wonder could they be seen to vote through the deal in the Dáil. It will be an interesting discussion at Cabinet this morning.
To combat this initial focus of opposition to the deal, IAG is likely to decide to "Free Willie" and let its Irish chief executive Willie Walsh loose to lay out exactly what he intends. It remains to be seen whether this will be done behind closed doors, with the Government, or via a public campaign, or both. One constraint for IAG, however, is the strict Stock Exchange rules governing communication during a takeover and the need not to be seen to favour any one shareholder over another. We may have to wait to see full takeover documents in a few weeks before the full IAG plan is unveiled. But Walsh, completely conversant with how Ireland works, will know that he has a fight on his hands, while his board members will be reading today's Financial Times headline which focuses on the growing opposition to the deal.
The complication for the Government is that the status quo is not really an option. It has signalled that it will sell its 25 per cent stake at some stage and Ryanair is likely to be forced to sell down its 29.8 per cent stake by UK competition regulators, though it has currently appealed this decision. Aer Lingus has done well financially in recent years, though there are also questions about its long term future as a smaller independent airline.
So control of Aer Lingus is going to change in some significant way, whatever happens. The job for the Government is to decide what the best way forward is, taking into account the implications for connectivity and for jobs, both within Aer Lingus and across the wider economy. Before it decides, Willie Walsh will have to put his case and flesh out his intentions for air routes in and out of Ireland, the company itself and how the Government can be reasonably content about the long-term future for the airline. Expect to see him out shortly selling the message.
