Aer Lingus announced today that it supports a takeover by IAG, the parent company of British Airways – meaning that the foreign acquisition is now dependent on shareholder approval.
The 11-member board of the Irish airline said it could recommend IAG's latest bid of €2.55 per share, up from €2.40, valuing the airline at €1.36 billion. It emphasised that the proposal required backing from the two biggest shareholders: rival Irish carrier Ryanair and the Irish government.
The government is facing mounting political pressure from the two main opposition parties, as well as the airline's trade unions, not to sell, raising the stakes just over a year before national elections.
Aer Lingus's main trade union IMPACT has said a takeover could lead to the loss of up to 1,200 jobs, a quarter of the carrier's workforce.
However, IAG said it intends to operate Aer Lingus as a separate business with its own brand, management and operations.
"IAG recognises the importance of direct air services and air route connectivity for investment and tourism in Ireland and intends to engage with the Irish government in order to secure its support for the transaction," IAG said in a statement.
Shares in Aer Lingus were 1.2 per cent higher at €2.40 at 0810 GMT. IAG rose 2.4 per cent to 562 pence in early trade, the highest level since the group was formed four years ago.
Ryanair, which acquired a 29.8 per cent shareholding as part of three failed hostile takeover bids, declined to comment, the Associated Press reported.
The Irish government, which retained a 25.1 per cent share when it privatized Aer Lingus in 2006, had sought to sell its stake as part of the country's 2010 bailout by the European Union and International Monetary Fund but postponed the plan.
It opposed Ryanair's ambitions and has emphasized its concern that a private owner could weaken travel connections for Ireland, an island nation heavily dependent on air links.
Aer Lingus is the fourth-largest owner of landing slots at Heathrow, Europe's most strategic and crowded hub airport. Those slots alone are valued at €400 million and could be used by new owners for more lucrative long-haul routes.
Transport Minister Paschal Donohoe said he planned to brief fellow Cabinet ministers about the takeover offer at a meeting later Tuesday.
Any sale would also have to be have approved by parliament. The two-party coalition government has a large majority but a vote could nevertheless put pressure on backbench lawmakers.
Timmy Dooley, transport spokesman for the opposition Fianna Fail party, said on Tuesday the conditions proposed by the IAG board were a "ball of smoke". "When it's gone, it's gone. Gov must block it now," he wrote on his Twitter account.
A successful takeover would give IAG more take-off and landing slots at London Heathrow Airport, BA's home base and a major European hub for international flights. Aer Lingus would join the joint business that IAG operates over the North Atlantic with American Airlines, leveraging traffic flows between Ireland and the United States.
Ryanair, which still holds 29.8 per cent after its takeover attempts were blocked and faces a regulatory order to cut its stake to 5 per cent, said last week it would give due consideration to any offer.
IAG was created in 2009 by the merger of British Airways and Spanish airline Iberia. Its Irish chief executive, Willie Walsh, led Aer Lingus from 2001 to 2005.
Aer Lingus' 2006 flotation price was 2.20 euros per share. Cash-rich Ryanair that year offered 2.80 euros but was rebuffed by Aer Lingus, labour union leaders, the government and European regulators, who ruled that a Ryanair-Aer Lingus merger would create a monopoly on routes linking Britain and Ireland.
Additional reporting by agenciesReuse content