Irish govt spurns IAG's €1.4-bn Aer Lingus bid
25 February 2015
The Irish government yesterday turned down the €1.4-billion takeover offer from the owner of British Airways International Airlines Group (IAG) for the Irish flag carrier Aer Lingus as it is not satisfied with IAG's the assurances on the deal.
Although the budget airline's board and some lobby groups are in favour of IAG's offer, the government, which holds a 25-per cent stake in the airline, is concerned about the protection of jobs and future growth prospects for the airline.
In a statement, the Irish transport minister Paschal Donohoe, said, ''The information and commitments that have been provided to date do not at present provide a basis on which the government could give an irrevocable commitment to accept an offer to dispose of its shares, should one be made by IAG.''
IAG's Irish-born chief executive and the former head of Aer Lingus Willie Walsh was hopeful of clinching a deal. On Friday, he sweetened the offer pledging to create net 635 job positions by 2020, bring in an additional 2.5 million passengers to Ireland and serve five new North American destinations.
However, these were not enough to woo the transport minister, who is looking for more details.
According to government sources, Donohoe is playing ''hardball'' in a bid to ensure that the state derives the best possible deal through the sale of its stake in the airline.
Donohoe demanded that IAG's assurance to use Aer Lingus slots at Heathrow only to serve Irish routes for at least five years has to be longer and also wanted the group's commitments regarding Cork, Shannon and Knock services.
IAG said it will consider the transport minister's statement in due course.
The Aer Lingus unions are split over IAG's takeover. (See: Aer Lingus takeover uncertain as unions split)
According to a labour party group which opposes the deal, ''This is an unacceptable bid, it's a case of selling what we have left of the family sliver for a below par bid."
Aer Lingus' incoming chief executive Stephen Kavanagh said that the deal would boost the number of passengers on the routes between Ireland and Heathrow. He further warned that a failure to accept the offer would be ''an opportunity foregone.''
For the year ended December 2014, the airline network carried over 11 million passengers during the year, for the first time in the airline's history.
Aer Lingus reported a 9-per cent increase in revenue at €1.56 billion and 18-per cent surge in operating profit to €72 million. However, the improved performance was offset by certain one-off items such as filling of superannuation deficits and staff stabilisation payments to the tune of €190 million, which lead to pre-tax loss of €111 million.
Free cash flow was up 92 per cent to €147 million, while net cash increased 30 per cent to €545 million.