Business

Ryanair will be 'kingmaker' in €1.4 billion Aer Lingus deal

Celebrating the Belfast-New York flight's 10th anniversary are economy minister Jonathan Bell; Bob Schumacher (United Airlines); Graham Keddie, MD Belfast International Airport; US Consul General Greg Burton; DRD minister Danny Kennedy; and deputy First Minister Martin McGuinness
Celebrating the Belfast-New York flight's 10th anniversary are economy minister Jonathan Bell; Bob Schumacher (United Airlines); Graham Keddie, MD Belfast International Airport; US Consul General Greg Burton; DRD minister Danny Kennedy; and deputy Fir Celebrating the Belfast-New York flight's 10th anniversary are economy minister Jonathan Bell; Bob Schumacher (United Airlines); Graham Keddie, MD Belfast International Airport; US Consul General Greg Burton; DRD minister Danny Kennedy; and deputy First Minister Martin McGuinness

The takeover of Aer Lingus by British Airways owner International Airlines Group will be a "growth story" for the Dublin airline, its former boss Willie Walsh insisted yesterday.

But the €1.4 billion (£1.03bn) deal has been left hinging on the next move by Ryanair - now "kingmaker" in the deal due to its near-30 per cent stake in the Irish flag-carrier.

However, the low-cost airline, headed by flamboyant boss Michael O'Leary, was keeping its cards close to its chest, saying it had yet to receive an offer despite the announcement on Tuesday that terms had been agreed by the Aer Lingus board.

Ryanair could choose to "play hard ball" and force IAG to return with a higher bid for all shareholders, according to one broker.

The deal moved a step closer after the Irish government, which owns a 25.1 per cent stake in Aer Lingus, gave the green light to the bid.

But the offer is conditional on acceptances by at least 90 per cent of shareholders. Ryanair owns 29.8 per cent of Aer Lingus and has consistently said it would consider any offer, should it receive one, on its merits.

IAG said it had reached agreement with the independent directors of the Aer Lingus board on a cash offer to be recommended to shareholders.

It would see them receive €2.55 (£1.81) in cash per share, representing a premium of 40 per cent to its closing price prior to the offer period opened last December.

Ryanair said: "Our position has not changed. The board of Ryanair has yet to receive any offer, and will consider any offer on its merits, if and when an offer is made."

IAG declined to comment on whether there had been any discussions with Ryanair but it was hopeful that the low-cost carrier would accept the offer.

The background to the transaction is complicated by a long-running battle fought by Ryanair against UK competition authorities, which have ordered it to cut its stake in Aer Lingus.

Analysts at Jefferies described the low-cost carrier as the "kingmaker", saying it "may yet prove troublesome".

On Tuesday Ryanair reported a 66 per cent rise in annual earnings to €867 million (£614 million).

The Irish government has backed the IAG takeover after receiving "additional information and certain commitments", Transport Minister Paschal Donohoe said. Legislators in the Dail will now have to vote on the proposals.

IAG said it has agreed to a number of "legally binding" promises on the future of Aer Lingus, including the development of Dublin as a hub for transatlantic routes.

It has also said Aer Lingus will keep existing slots at Heathrow, continue routes between Heathrow and Dublin, Cork and Shannon for the next seven years, as well as retaining its corporate brand.

Aer Lingus is also expected to continue to operate its daily flights from Belfast City Airport to London for at least five years following the takeover.

Willie Walsh, the Irish-born chief executive of IAG, claimed Aer Lingus, Ireland and IAG would all benefit from the deal.

"Aer Lingus would maintain control of its brand and operation while gaining strength as part of a profitable and sustainable airline group in an industry that's consolidating," he said.

However, unions and opposition parties fear job losses, reduced connectivity in and out of Ireland and less competition if the airline is sold.

Repeated advances from IAG had been previously rejected on the back of such concerns.

Meanwhile a ceremony was held at Belfast International Airport yesterday to mark United Airlines' decade of non-stop flights between Belfast and its New York hub, Newark Liberty International Airport.

The airline has carried nearly 900,000 customers on the route since its launch in 2005.