Review group set to advise Cabinet about IAG deal

Government Ministers are likely to consider a recommendation on the €1.36 billion bid for Aer Lingus at the first Cabinet meeting after Easter.

Senior civil servants have been discussing the terms under which the Government would sell the State’s 25.1 per cent stake in the carrier for several weeks with representatives of International Consolidated Airlines’ Group (IAG), which is offering €2.55 a share for Aer Lingus.

Sources say the Government review group, which has been negotiating with IAG, is likely to make a recommendation on the bid in time for the April 14th Cabinet meeting, the first after Easter.

While they say the date is not definite, industry sources suggest it is the most likely as the talks are nearing their final stages. The Government wants assurances jobs will be protected and Aer Lingus services to London’s Heathrow Airport will be maintained before it will consider IAG’s proposed offer.

If the Cabinet were to decide to sell the State's stake, it would have to put the matter to a Dáil vote. Separately, Ryanair would also have to agree to sell its 29.8 per cent holding in Aer Lingus. That company has said its board will consider any offer it receives.

Ryanair challenge

The UK’s

Competition and Markets Authority

would have to approve a sale of Ryanair’s shares in Aer Lingus. The low-cost airline has challenged the regulator’s ruling that it cut its stake to 5 per cent or less.

If a deal were to cross those hurdles, the European Commission’s competition directorate would have to approve a takeover. It could take up to two months to scrutinise such a deal.

Virgin Atlantic has already told the commission that it believes there is a risk that competition will be reduced and travellers will face increased fares between Britain and Ireland if the deal succeeds.

Virgin interest

The Richard Branson-controlled Virgin is a rival of

British Airways

, the biggest airline in IAG.

Its director of network and alliances, Joe Thompson, told the Oireachtas Committee on Transport and Communications yesterday that a takeover of Aer Lingus would result in an "inevitable diminishing in competition in air travel for Ireland".

Virgin does not fly from the Republic, but it will operate a limited service from Belfast to Orlando over the summer. The airline says every year about 100,000 Irish people connect to its long-haul flights from other carriers.

It has a partnership with Aer Lingus, from which some 50,000 passengers transfer to Virgin flights every year.

“The competition we and others provide through long-haul connections at Heathrow, Gatwick and Manchester is important to Irish consumers,” he said.

If IAG takes over Aer Lingus, Virgin wants the EU to order that some of the combined entity’s airport slots be offered to other airlines so that they can establish rival services between Ireland and Britain to ensure competition remains at the same level.

Speaking after the committee hearing, Mr Thompson said that, as a backstop to that, it also wants the EU to demand that Aer Lingus and IAG maintain services and capacity at their current levels.