Three of Ireland’s biggest businessmen and the country’s government had the future of Aer Lingus in their hands last night as British Airways’ owner IAG launched a bid for the £1bn airline.
International Consolidated Airlines Group, run by Willie Walsh, the former boss of Aer Lingus, announced yesterday it had made a takeover offer for the Irish airline which was turned down. Aer Lingus later said it had rejected IAG earlier in the week after its board decided the bid was too low.
An IAG takeover would need the blessing of Mr Walsh’s friend and rival Michael O’Leary, who runs Ryanair. Mr O’Leary has tried to add Aer Lingus to Ryanair in the past but was thwarted by the Irish authorities. Ryanair has a 30 per cent stake and is Aer Lingus’s biggest shareholder.
Meanwhile, the media tycoon Denis O’Brien retains a stake, which he built up to block a Ryanair bid.
He has said in the past that he did not want Ryanair to buy Aer Lingus because he could not abide the idea that potential foreign investors flying in to his country would have the budget airline as their first taste of Ireland.
While Mr O’Brien has sold down much of his holding, with a 2.4 per cent stake he remains a powerful voice and may decide IAG is a better owner for Aer Lingus than Ryanair.
The Irish taxpayer retains 25 per cent of the carrier.
Analysts have said Mr Walsh has been somewhat slow carrying out the takeover deals for which IAG was set up in 2011. The British Airways-Iberia tie-up that created it was intended to be the first of many consolidations – snapping up smaller airlines across the world. However, so far it has only bought bmi and Spain’s Vueling. Mr Walsh originally earmarked 12 airlines he wanted.
Analysts said an Aer Lingus takeover would bring IAG crucial new take-off and landing slots at the overcrowded Heathrow airport, which it could use for new routes to emerging markets to which it currently does not fly.
Aer Lingus would also bring in extra passengers to feed into BA’s transatlantic stronghold. However, analysts said it was possible IAG’s resulting dominance of Heathrow slots could make the deal fall foul of competition regulators.
Ryanair has been thwarted by EU regulators in its efforts to buy the airline, while British authorities have ordered it to cut its stake. That decision is currently under appeal.
Other shareholders of Aer Lingus include Etihad of Abu Dhabi, with 4 per cent.
Some analysts said the offer looked like an attempt by Mr Walsh to take advantage of Aer Lingus at a time of weakness following its chief executive Christoph Mueller’s announcement five months ago that he was stepping down to run the ill-starred Malaysia Airlines next year.
Aer Lingus shares leapt 9 per cent, IAG gained 4.5 per cent and Ryanair rose 3 per cent.
Neil Shah, director of research at Edison Investment Research, said: “This not a simple airline takeover approach but a battle for the keys to more of the lucrative long-haul slots at Heathrow, which is close to capacity.
“With Ryanair intent on remaining king maker whether or not it can hold on to its block-holder 25 per cent stake in Aer Lingus, this will once again be a Willie Walsh versus Michael O’Leary battle.”