Aer Lingus shares up as Irish government backs stake sale

Its agreement comes after IAG gave certain pledges to preserve jobs and transport links within the Republic.

Although the Irish government and the board of Aer Lingus now support the €1.36bn (£961m) bid, Ryanair, which owns 29.8%, has yet to commit.

IAG said it was "hopeful" Ryanair would agree to the offer.

The government, a coalition, still needs to formally vote for the deal.

Although Aer Lingus' shares rose on Wednesday morning, at €2.44 they are below the €2.55 a share offer value.

'Attractive offer'

Last year, Aer Lingus rejected two takeover offers from IAG, saying they undervalued the business.

Ryanair itself has attempted to take over Aer Lingus three times, starting in 2006, just after Aer Lingus was floated on the stock market by the Irish government. 

Ryanair's initial bid illustrates the wild swings in Aer Lingus's value since then. Its first offer was €2.80 a share. The second, two years later, was half that and its most recent offer in 2012 was €1.30 a share.

It was prevented from a full takeover on the grounds it would give it dominance over travel to and from the Republic.

Willie Walsh, the chief executive of IAG, said he hoped Ryanair would be satisfied with the offer: "We're hopeful that Ryanair will see this as an attractive offer for their stake in Aer Lingus and we will wait to see what Ryanair and the Ryanair board says in response to this."

Ryanair has 28 days to respond to the offer.

Reassurance

IAG's offer was opposed initially by Irish MPs, who were concerned that services between Irish airports and London's Heathrow might be cut. In February, politicians asked IAG to meet certain guarantees.

Under Tuesday's deal, IAG has now agreed to a legally binding commitment to maintain current services between Heathrow and Dublin, Cork and Shannon for at least seven years.

It has also promised to add two new transatlantic routes next year and 2.4 million more passengers by 2020.

Transport Minister Paschal Donohoe said Aer Lingus did not foresee any compulsory redundancies, adding that the airline could see more than 600 new jobs by 2020.

In a statement, Aer Lingus chairman Colm Barrington said: "This is a compelling transaction for Aer Lingus, its shareholders, its employees, its customers and for Ireland.

"The company will reap the commercial and strategic benefits of being part of the much larger and globally diverse IAG Group."

But Aer Lingus' main trade union, Impact, repeated its view that the deal was bad for workers. A second major union, Siptu, said it wanted further commitments on compulsory redundancies and outsourcing.

'Cast-iron guarantee'

Under the deal, Aer Lingus will continue to operate its international passenger services under the Aer Lingus brand.

The company will also keep Aer Lingus as its registered name and its head office will remain in the Republic of Ireland.

Willie Walsh, who before becoming boss at IAG was chief executive of Aer Lingus, said that "Aer Lingus would maintain control of its brand and operation while gaining strength as part of a profitable and sustainable airline group in an industry that's consolidating".

"Ireland's vital air links to Europe and North America would be enhanced, creating new jobs, with cast-iron guarantees on ownership of Aer Lingus' Heathrow slots."