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Cabinet agrees to sell its 25pc stake in Aer Lingus to IAG


Transport Minister Paschal Donohoe in a press conference on the new Aer Lingus deal tonight. Photo: Fergal Phillips.

Transport Minister Paschal Donohoe in a press conference on the new Aer Lingus deal tonight. Photo: Fergal Phillips.

Fergal Phillips

Aer Lingus is the subject of a takeover bid

Aer Lingus is the subject of a takeover bid

Aer Lingus CEO Stephen Kavanagh. Photo: Mark Condren

Aer Lingus CEO Stephen Kavanagh. Photo: Mark Condren


Transport Minister Paschal Donohoe in a press conference on the new Aer Lingus deal tonight. Photo: Fergal Phillips.

TRANSPORT Minister Paschal Donohoe has revealed the new offer from airline giant IAG to buy the State's share in Aer Lingus.

Mr Donohoe said the Government agreed to sell the State's 25.1pc stake this morning and will now seek Dail approval.

IAG official made its bid to the stock exchange in the past hour.

The minister said IAG confirmed existing employment rights of all Aer Lingus employees will be "fully safeguard".

He said the airline company expects to "sustain and create employment" and this will result in an increase of approximately 150 employees next year and the creation of 635 by 2020.

It also hopes to create indirect jobs in airport and airline support activities and in broader Irish economy, particularly in tourism industry.

The company has agreed to "legally binding connectivity commitments" as part of the proposal.

Aer Lingus's Heathrow  slots will continue to be held by Aer Lingus. The Government will have a veto over the sale of the Heathrow slots under the new deal.

The deal will see Aer Lingus continue to operate its routes between Heathrow and Dublin, Cork and Shannon for at least seven years. A five year guarantee was given on Heathrow routes to Belfast.

The Government has also received a legally binding commitment on the Aer Lingus brand and keeping the company's head office in Ireland

Mr Donohoe said that the Government agreed to the deal based on a cash deal worth €2.50 a share.

He said he and the Government are satisfied that at that price, the deal is acceptable and represents value to the State as a shareholder.

"On this basis, the Government has agreed to the disposal of its shares in line with the General Principle of a cash payment of at least €2.50 per Aer Lingus share," Mr Donohoe said.

Mr Donohoe said that in addition to the legally binding connectivity commitments, IAG has also outlined plans that "would promote Ireland's wider connectivity" and makes better use of Irish airports.

IAG plans to use Dublin as a natural gateway for transatlantic routes and shorthaul services to London from Dublin, Cork and Shannon stand to benefit, Mr Donohoe said.

Commitments have also been made to grow traffic on the Knock to London Gatwick.

In total, IAG reckons it can increase passenger numbers by 2.4 million with vague commitments about expanding its reach into North America.

The proceeds of the sale from Aer Lingus will go into a connectivity fund.

IAG plans to use Dublin as a natural gateway hub for transatlantic routes and routes from Dublin Shannon and Cork will be grown, says Paschal Donohoe.

In a joint statement tonight, Labour TDs previously opposed to the sale did a U-turn after a suite of new concessions from IAG allayed their concerns.

Members of the so-called 'Aer Lingus Seven' said they will now vote in its favour following the significantly revised offer.

In a statement issued tonight, Aer Lingus welcomed the decision by Government to support International Consolidated Airlines Group’s (IAG) proposed offer for the company.

Chairman Colm Barrington said: “This is a compelling transaction for Aer Lingus, its shareholders, its employees, its customers and for Ireland.  Shareholders will realise an attractive return through the premium that the IAG offer provides over the level of our share price immediately prior to the announcement of IAG’s offer."

"The company will reap the commercial and strategic benefits of being part of the much larger and globally diverse IAG Group and as a member of the oneworld alliance of 17 airlines that together carry over 500 million passengers.  This access to greater global scale will accelerate growth across our network, enhance Ireland’s position as a natural gateway connecting Europe and North America, give Irish tourism access to major traffic flows and customer loyalty programmes and provide better access for business interests and to cargo flows."

"This in turn will lead to an increase in jobs at Aer Lingus, in support activities and the tourism sector and, importantly, will strengthen connectivity to and from Ireland,” Mr Barrington added.


Aer Lingus chief executive Stephen Kavanagh has written to Transport Minister Paschal Donohoe regarding sale to IAG

Aer Lingus chief executive Stephen Kavanagh has written to Transport Minister Paschal Donohoe regarding sale to IAG

Aer Lingus chief executive Stephen Kavanagh has written to Transport Minister Paschal Donohoe regarding sale to IAG

Dublin Airport Authority, which operates Dublin and Cork airports, welcomed the Government’s decision this evening.

“We believe that this transaction, should it be completed, offers significant potential benefits for both Dublin Airport and Cork Airport,” said DAA Chief Executive Kevin Toland.

“Dublin Airport is already becoming a significant hub for transatlantic travel and this market segment would be further strengthened with IAG as the owner of Aer Lingus. This should enable additional long-haul connections and frequencies into Dublin’s existing transatlantic hub,” Mr Toland said.

“The proposed acquisition should also bring greater opportunities for short-haul growth from both Dublin and Cork airports,” according to Mr Toland.

“Aer Lingus is a key customer, which is growing, and this transaction will offer the opportunity for Aer Lingus to grow even more quickly. It would allow Aer Lingus to tap into a much larger international sales and marketing channel for its services via British Airways (BA), Iberia and the oneworld alliance. We are already working with BA, Iberia Express and Vueling at Dublin Airport and we look forward to growing our business with IAG’s family of airlines at both Dublin and Cork airports in the months and years ahead.”

“Dublin and Cork airports currently support and facilitate more than 108,000 jobs in the Irish economy and we believe this transaction will lead to increased employment, as IAG expands its Irish operations in the future,” Mr Toland said.

Shannon Airport also welcomed the Government's decision to sell its 25pc share in Aer Lingus to IAG.

The Chairman of Shannon Group plc, Rose Hynes said: “This decision paves the way for IAG to take over Aer Lingus. It's good news; it’s a positive opportunity for Ireland, will safeguard  the Shannon Heathrow connectivity for seven years and it opens the door to further growth at Shannon,” she said.

“This year we celebrate 70 years of transatlantic flights through Shannon and this decision is the latest proof of Ireland’s strategic location as a transatlantic gateway for Europe.

“An IAG takeover of Aer Lingus opens a new era, not just for Aer Lingus but also for Shannon Airport and the region. Aer Lingus already operates successful US, UK and European routes from Shannon, and indeed only last week the airline announced a 20% increase in seat capacity on the popular Shannon-Heathrow route, adding to a new Aer Lingus Regional flight to Birmingham commencing on the 18th of June.  We are delighted that IAG has committed not only to  sustain and strengthen Shannon's existing Aer Lingus services after the takeover but also to pursue further growth opportunities from Shannon to North America," Ms Hynes said.

Earlier this evening, a senior Government source said the proceeds from the sale of the 25.1pc shareholding will be used for investment purposes and not to pay off national debt.

Some Coalition TDs were briefed tonight that the sale would finally be agreed by Cabinet ministers after a series of concessions and assurances were given.

But Labour Party deputies who previously expressed concern about a sale will need to be convinced that their concerns are met.

Aer Lingus chief executive Stephen Kavanagh wrote to Transport Minister Paschal Donohoe this afternoon to address concerns raised by unions over employment conditions at the airline if it’s bought by IAG.

Mr Kavanagh also stressed a takeover by IAG brings a “significant opportunity” for growth “that is both in the interests of employees and the company”.

In the letter, seen by the Irish Independent, Mr Kavanagh said that Aer Lingus had a “strong preference” to utilise direct labour “wherever this can be done efficiently and effectively”.

The airline chief said that Aer Lingus had “consistently demonstrated” an ability to do so.

Mr Kavanagh was responding to a query from the Minister this morning after Mr Donohoe met representatives from trade unions Impact and SIPTU in advance of the Cabinet discussing IAG’s planned takeover of Aer Lingus.

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