| 11.6°C Dublin

Ryanair clears the way for BA to take over Aer Lingus

A merger between Aer Lingus and British Airways -- now headed by former Aer Lingus boss Willie Walsh -- was today being considered a real possibility by industry analysts as the Government considers selling off its stake in Aer Lingus.

The Cabinet was today due to consider proposals to sell its 25pc stake in the airline along with other State assets.

But the willingness by Aer Lingus' other major shareholder, Ryanair, to sell its share is fuelling talk of an Aer Lingus/British Airways merger.

Ryanair, which twice mounted bids to take over the national airline, said it was open to selling its share of just under 30pc.

The value of Ryanair's stake has fallen by more than €300m to about €100m since the shares were bought.

In a statement, Ryanair said: "Should another financially strong airline/investor acquire the Government's 25pc stake, Ryanair would not rule out entering into discussions with that party for the subsequent disposal of Ryanair's near-30pc stake subject to an acceptable agreement on price and maximising shareholder value."

The most likely buyer of Ryanair's share would be the airline group which already owns BA and Spanish airline, Iberia.

International Airlines Group has said it wants to lead consolidation in European aviation.

One big hurdle to such a purchase, however, would be the huge pension deficit in the Aer Lingus and Dublin Airports Authority (DAA fund), which stands at €344m.

Under the terms of the EU-IMF bailout, the Government must assess what State assets it can sell off.

Aer Lingus and the ESB are among the businesses set to be considered in a bid to raise a total of €5bn.