Irish government to sell Aer Lingus stake to IAG

The Irish government is to sell its 25-percent stake in flag carrier Aer Lingus to International Airlines Group after receiving assurances on the airline's future, the transport minister said Tuesday.

"Following detailed consideration of... all of the issues surrounding a potential disposal of the State's shareholding in Aer Lingus, the Government has decided that it will support IAG's proposal," minister Paschal Donohoe said in a statement.

The sale has been a hot topic for Dublin, with severe opposition within the junior government coalition party, Labour, and from unions who warned about future implications for jobs and connectivity.

To quell opposition IAG made commitments on the future of the airline, promising to maintain the brand and a head office based in Dublin and ensure the airline's lucrative landing slots at London's Heathrow airport would not be sold.

The deal offers Aer Lingus shareholders 2.55 euros a share ($2.77), valuing the airline at 1.36 billion euros ($1.7 billion).

IAG, formed by the merger of Britain's flag carrier British Airways and Spain's Iberia, will now have to issue a formal offer while the matter is expected to be discussed in parliament, possibly as soon as Wednesday.

A vote will be necessary before Dublin can complete the sale.

IAG will also require the support of Irish airline Ryanair, which is the largest shareholder, with a 29.8 percent holding.

Ryanair spokesman Robin Kiely told AFP its board "will consider any offer on its merits, if and when an offer is made".

IAG said in a statement the acquisition had a "compelling and financial rationale" for the group.

"Aer Lingus, Ireland and IAG would all benefit from this deal," IAG chief executive Willie Walsh said in a statement.

"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."

- Union opposes deal -

The announcement follows an independent report presented to the Irish cabinet on Tuesday morning, understood to be strongly in favour of the sale.

The British Irish Chamber of Commerce, which represents hundreds of business in both countries, voiced support for the sale, saying that it would support trade links between the two countries.

"This sale will unlock the potential for Dublin to become a European hub," said the group's director general John McGrane.

But unions reiterated their fears about job losses and deteriorating working conditions after restructuring, saying they would oppose the sale if their concerns were not addressed.

Ireland's largest public sector trade union IMPACT said the takeover would be "bad for jobs, for Aer Lingus workers and for Ireland's connectivity and economic development".

"The interests of IAG shareholders will always trump the interests of the Irish economy and the Irish travelling public," the statement said.

The leader of the opposition Sinn Fein party, Gerry Adams, said earlier on Tuesday that IAG's concessions would be "merely a stay of execution" on the airline's valuable Heathrow slots.

"Losing these vital routes in six months, five years or later is still very bad for Aer Lingus, bad for the economy and bad for Ireland," Adams said.

The European Commission will also have to assess the takeover on competition grounds.