The interest expressed by IAG, the parent company of British Airways, in purchasing Aer Lingus met immediate political resistance when it first became public a few weeks ago. Local political interests in North Dublin, Cork and Shannon objected, amid a debate on threats to airline connectivity, focused in particular on the Heathrow Airport slots. For whatever reason, probably partly to do with Stock Exchange takeover rules, IAG was slow to respond and signals have gone out that the Government is unlikely to sell its 25.1 per cent stake, at least for the moment.
The Government needs to avoid making too hasty a decision. IAG has indicated that it is prepared to be flexible on a number of the key issues, such as the guarantee on the use of the Heathrow slots. It says it has a growth strategy for the future of Aer Lingus, although we have still to see the details. The IAG offer – not yet a formal bid – deserves proper consideration, rather than being stymied before a full assessment even takes place. It is clear that IAG is prepared to go quite a distance to try to persuade the Government to sell its stake. The Government’s assessment of this needs to be based on a proper examination of the influence given by its current 25 per cent stake, versus what is on offer from IAG.
The future investment needs of Aer Lingus and the wider issue of connectivity also need to be considered, in addition to the specific issue of the Heathrow slots. And this needs to be done on the basis that the State has already sold most of its shares in Aer Lingus and has said it intends to sell the rest when the time is right.
The Government could just decide to say no to the IAG offer, but it would need then to explain its position. Does this mean it will not sell at all, or that it might at some time in the future? Whatever the Government decides, it needs to be clear, because Ryanair, the other major shareholder in Aer Lingus, could well be forced by a competition ruling to sell its shares sooner or later. The last thing the airline needs is for uncertainty to be hanging over the future of more than 50 per cent of its stock for an extended period. The IAG offer has not, to date, flushed out any other interest in taking over the airline, so if its bid is rejected Aer Lingus may have to move forward as an independent airline.
It is also possible that IAG could make an unconditional bid, accepting that it will end up with 75 per cent of the company, at most, with the State as a minority shareholder. However so far it has said it wants acceptance from the two major shareholders before going ahead.
Before we reach this point, the Government should give proper consideration to the IAG proposal to make an offer for all the IAG shares. The wider national interest needs to be the deciding factor.