Aer Lingus Deal With BA Owner Moves Closer

The Aer Lingus board says it is willing to recommend the financial terms of an approach by the owner of British Airways.

The Dublin-based carrier's statement was seen as support for the proposed £1bn (€1.36bn) takeover by International Consolidated Airlines Group (IAG), but it said the bid's success was in the hands of major shareholders, which include Ireland (Other OTC: IRLD - news) 's government.

The airline said: "IAG has indicated that it would only proceed with its third proposal with an indication from the Board of Aer Lingus (Other OTC: AELGF - news) that it would be willing to recommend the financial terms of the Revised Proposal.

"Having considered this request, the Board has indicated to IAG that the financial terms are at a level at which it would be willing to recommend, subject to being satisfied with the manner in which IAG proposes to address the interests of relevant parties.

"The Board notes IAG's intentions regarding the future of the company, in particular that Aer Lingus would operate as a separate business with its own brand, management and operations, continuing to provide connectivity to Ireland, while benefiting from the scale of being part of the larger IAG group."

IAG confirmed it wanted Aer Lingus to join the Oneworld airline alliance, of which its brands BA and Iberia are members, and become part of of a joint business that IAG operates over the North Atlantic with American Airlines (Xetra: A1G.DE - news) .

IAG said it "believes that the proposal would secure and strengthen Aer Lingus' brand and long-term future within a successful and profitable European airline group, offering significant benefits to both Aer Lingus and its customers.

"IAG recognises the importance of direct air services and air route connectivity for investment and tourism in Ireland and intends to engage with the Irish government in order to secure its support for the transaction."

Aer Lingus was privatised nine years ago, leaving the Irish government with a current 25% stake.

Ireland will want assurances from IAG over its plans for the key Dublin to Heathrow route.

No-frills carrier Ryanair, which owns 29.8% of Aer Lingus following a series of failed takeover attempts, may be tempted to sell as it has been told by UK authorities to draw down its stake on competition grounds.