Aer Lingus-owner IAG says not in talks with Finnair

Aer Lingus-owner IAG said it was not in talks with Finnair, denying a report in a Finnish newspaper that had fuelled speculation it might take a stake in the majority state-owned Finnish airline.

“We haven’t been in any discussions with Finnair,” a spokeswoman for IAG told Reuters on Thursday.

The online edition of Finland’s business daily Kauppalehti had cited an IAG source as saying talks between IAG and Finnair had advanced, adding news could follow soon on those discussions and ownership arrangements.

Shares in Finnair rose as much as 6 per cent on the report, before paring gains to trade up around 3 per cent.

"Finnair notes that there has been speculation in the media today regarding a potential bid for Finnair by British Airways or IAG. Finnair is not active, and is not aware of its shareholders being active, in any such negotiations," the Finnish company said in a statement.

Finnair is 56 per cent-owned by Finland, and the country’s previous government had held some discussions on whether to lower its stake to open way for alliances and deals, but the new centre-right coalition is yet to make its stance known.

Convertible bonds

IAG has led a charge to consolidate Europe's airline industry, adding Aer Lingus in August to a portfolio already comprising Spain's Iberia and Vueling.

The company said yesterday that it would sell €1 billion of convertible bonds to help cover the Aer Lingus purchase. The bonds will be sold in two parts, maturing in 2020 and 2022, the airline said in a statement. Investors will have the option to swap the debt for equity when the stock rises by between 52.5 per cent to 62.5 percent, according to the initial terms.

The proceeds from the bonds will be used for “general corporate purposes,” including the repayment of a bridge facility used to finance the Aer Lingus deal, IAG said. IAG shares dropped after the release.

Reuters/Bloomberg