IAG landing Aer Lingus not a done deal yet

The IAG bid for Aer Lingus seems to have been going on almost as long as the Greek crisis – and still has a way to go. IAG published its formal offer document to Aer Lingus shareholders yesterday and this, at least, puts a timescale on things. It will all now come to a head in July, with two key issues.

The first is clearance from the competition division of the European Commission. If it decides to clear the bid without pushing it to a so-called phase two investigation – a step it takes when it sees serious competition issues – it will signal this by early July.

It’s possible it may require some concessions from IAG to do this. Virgin Atlantic has criticised the proposed takeover and could be offered some kind of code-sharing arrangement, making it easier for Aer Lingus passengers to London to continue their journeys with Virgin. The commission is also closely examining future competition on the key Dublin to London route.

This may all be sorted before the July 16th deadline by which Aer Lingus shareholders have to accept the IAG bid.

However, if the commission decides to launch a full phase-two investigation, the bid as it stands will lapse and the probe would continue until November, at least. Then it would be a question of whether the commission was seeking further concessions from IAG, and whether it would be relaunch the bid on this basis.

Against a background where EU policy favours consolidation of European carriers, observers feel any issues may be speedily sorted in phase one, allowing the bid to proceed. But it’s not guaranteed.

The other issue is whether Ryanair will sign up. Michael O’Leary now has the formal bid document, and we must presume he will respond in the next few weeks. It would appear a logical move to accept, but O’Leary has kept his cards close to his chest, and the Ryanair board will not want to be seen to be pushed into selling by the British competition commission ruling that it must reduce its stake.

Having accepted the deal, the Government will hope these two hurdles are crossed. They may well be, but this deal is not over the line yet.