Aer Lingus Mulls BA Owner's New Approach

Aer Lingus (Other OTC: AELGF - news) has confirmed it is considering a sweetened takeover offer worth £1bn (€1.36bn) from the owner of British Airways (BA).

Sky News revealed on Saturday how International Consolidated Airlines Group (IAG) had submitted a revised all-cash proposal to the board of Aer Lingus last week - its third approach since December.

The statement from the Dublin-based carrier said that the offer from IAG was conditional on the support of major shareholders Ryanair and the Irish Government and it said it investors were "strongly" advised to take no action.

The attempt by IAG chief executive Willie Walsh to acquire Aer Lingus is designed to cement its grip on take-off and landing rights at London's Heathrow Airport, while enabling him to improve the Irish carrier's profitability by combining some operations with those of IAG.

Already the largest carrier at Heathrow, a merger of the two companies would create a group with close to half of the available slots there.

The Irish Government holds a 25% stake in Aer Lingus and will want reassurances from IAG over its plans for the key Dublin to Heathrow route.

No-frill carrier Ryanair, which owns 29.8% of Aer Lingus following a series of failed takeover attempts, may be tempted to sell at the new price as it has been told by UK competition authorities to sell down its stake because it potentially distorts the market for flights between Ireland (Other OTC: IRLD - news) and Britain.

IAG was created in 2009 from the merger of BA and Iberia, which has been radically restructured by Mr Walsh against initially intense opposition from Spanish labour groups.

Since then, it has also acquired Vueling, another Spanish carrier, struck an alliance with American Airlines (Xetra: A1G.DE - news) and considered several other big takeovers.

IAG's share price was more than 1.5% higher in early trading on the FTSE 100 on Monday.