Ryanair Accepts Takeover of Aer Lingus by IAG

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Ryanair accepts the offer of International Consolidated Airlines Group (IAG) on Friday to purchase its 29.8% stocks in Aer Lingus, the Irish flag carrier. According to analysts, the sale of Aer Lingus (which is under British Airways) to IAG will boost the position of Ireland as the center for trans-Atlantic travel.

Ryanair, the largest discount carrier in Europe and located in Dublin, has offered to buy out Aer Lingus three times, but was unsuccessful. The airline carrier wanted to expand into an all-inclusive service in the air travel industry and to get a substantial landing and takeoff slots in Europe’s major airports like Heathrow.

Michael O’Leary, chief executive of Ryanair, said they accepted the offer because AIG’s offer for Aer Lingus is sensible in the present market. It is also for the best interests of their shareholders.

Ryanair’s decision came following the acceptance of the Irish government, when it has obtained a number of concessions. (Twenty-five percent of Aer Lingus is owned by the Irish government.) One of the concessions was the inclusion to maintain a “golden share,” banning Dublin on any future sale of the 23 Heathrow landing slots owned by Aer Lingus.

Mr. O’Leary of Ryanair said they would support the veto right of the government.

IAG offered the takeover of Aer Lingus in February after being rejected twice in 2014. It offered Aer Lingus 2.55€ per share, that valued Aer Lingus at roughly €1.36 billion, or about $1.5 billion.

IAG is one of the largest airline companies in the world. It owns the Spanish all-inclusive airline service Iberia and the economical carrier Vueling Airlines. In 2014, it has carried over 77.3 million passengers. Approximately one-fourth of the air travel market between the European Union and North America is dominated by IAG and its associates in the Oneworld airline alliance.

The buyout is profitable for IAG, as it will get additional lucrative slots at Heathrow. It will also boost the trans-Atlantic operations of the airline company.

Analysts say that although Ryanair has accepted the offer, IAG still has to face other obstacles to finalize the takeover. It has to wait for the European Union and US competition regulators’ statement about the takeover. Last month, IAG offered concessions and is now awaiting the European Commission’s decision on Wednesday.

Fifty-one percent of Heathrow’s takeoff and landing slots are owned by British Airways. The competition authorities could order IAG two things:  1) to reduce its presence at Heathrow; and 2) to reduce its frequencies on specific routes between Ireland, Spain and Britain, including some of AIG’s trans-Atlantic services.

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