Aer Lingus rejects / now accepts IAG takeover offerBack to Forum
Anonymous18 Dec 2014
Not surprised the €1.1bn bid was rejected given the previous relationship with Walsh. Also not surprised by Walsh’s arrogance given Aer Lingus, with the third highest number of slots at LHR with 24 pairs, would surely be referred to the competition authorities.18 Dec 2014
Aer Lingus staff must be relieved, they are only just over the Walsh disaster and I doubt would want it recreating.
Surely too the Irish government would have something to say, IAG would simply asset strip EI of the LHR slots and hand the dregs to Ryanair.
BigDog is also right, the competition commission would become involved and hopefully block such an awful move.
There is another rumour out there which goes that LH are interested having realised what they lost when they let BA have BD and they are regretting it. That would probably be of no interest to the competition authorities but I can already hear Walsh and for that matter Branson throwing things out of their prams if there is truth in it.18 Dec 2014
To play devils advocate, what do we think would happen in France or Germany for example if this happened at Frankfurt or CDG. I believe that even if Aer Lingus relinquished their slots at LHR, KLM, Lufthansa and AF would still have more of a percentage of slots at their main airports than BA would have at LHR.18 Dec 2014
I don’t really think that one can actually fairly compare this situation to FRA or CDG.
If Air Berlin were based in Frankfurt and LH tried a takeover, then there would be issues with who’s too dominant here. CDG & FRA don’t have more than one major player unlike Heathrow with BA, Virgin & Air Lingus (and earlier with BD).18 Dec 2014
The difference Chiantikid is that at FRA, CDG there is current availability of slots so a competitor could build a reasonable schedule of offerings to compete with the dominant tenant, if the demand/economics held.
LHR being capacity constrained doesn’t allow that. Although a competitor may be able to snap up the occasional slot pair, it is not enough to build a schedule which permits say 2 flights per day per week to a specific destination eg NY.
LHR has a fairly captive customer pool whereas the European hubs (+BRU, AMS) compete against themselves aided by good HS rail links.
Unlike the other European carriers, BA can luxuriate in its home base, fortress LHR safe in the knowledge no-one can build a viable alternative.
BA doesn’t need to raise its game to keep up with ME3 as they cannot secure the slots needed to provide enough regular services many business people require.
I was against Boris Island because of the huge cost and impracticality of access, however if it had been chosen, the massive increase in slot availability would have transformed the competition picture to the benefit of the UK passenger imo.18 Dec 2014
It will be interesting to see if EK get the sixth slot they are after and if they immediately introduce the A380 on it. Downgrading to the 777 would make that service the poor relation.
TK seem to have acquired a fifth slot on some days of the week too though I have no idea where from.
EI in the Star Alliance would be an interesting thought whether they were more closely tied to LH or not. Presumably their point to point London traffic could move to LGW and LHR slots could be freed up for other purposes either by themselves or other carriers moving transfer traffic away from LHR. Of course their common use of T2 is just coincidence but that also would serve them well.18 Dec 2014
I’ll chuck my tuppence worth in……
EI would be mad to let LH sniff about and invest; I’ll never forgive them for their incompetence in running an LHR based airline into the ground. A management team that couldn’t successfully make BD work, clearly make Willie Walsh’s running of BA look like the Nirvana of airline management!
On the other hand, becoming part of Star Alliance does have it’s advantages, especially if it takes over Virgins domestic routes. Strategically thinking ahead, would it be possible for them to operate a DUB/LHR combined hub approach? Flying to the US, you transit in DUB, flying east or south or to Canada and LHR becomes the transit point ?19 Dec 2014
“No Etihad approach for Aer Lingus as market awaits higher IAG offer,” reports independent.ie20 Dec 2014
IAG have made a 3rd bid.
With the Euro at an historical low against sterling and dollar, although the €2.50 is still beneath the speculated €2.70, the exchange rate increasingly benefits the predominantly BA funded, IAG position.
edit – DT coverage24 Jan 2015
From today’s Financial Times:
The board of Aer Lingus is expected to recommend a €1.34bn cash bid from IAG, setting the stage for a public debate over the Irish government’s 25 per cent stake in the nation’s flag carrier.
The €2.50 a share cash takeover approach by IAG, owner of British Airways and Spain’s Iberia, marks its third bid in just over a month. Two earlier offers of €2.30 and €2.40 a share were rejected by Aer Lingus. People familiar with the matter said that the two sides could announce the start of formal talks to finalise a deal in the next few days, but warned that the situation remained fluid. IAG and Aer Lingus declined to comment.
The deal has been cast as an opportunity for Aer Lingus to join forces with the larger operator at a time when many flagship airlines have struggled to compete globally. Profits for European airlines in particular have been squeezed by both low-cost carriers and government-subsidised long-haul operators from the Middle East.
The latest offer could face opposition from the Irish government, which owns a 25.1 per cent stake in Aer Lingus. Rival Ryanair, the low-cost airline with a 29.9 per cent stake in Aer Lingus, would also have to be persuaded by the deal. Opposition transport spokesman Timmy Dooley urged the government not to sell its stake, saying that an IAG takeover could have a significant impact on Dublin, Cork and Shannon airports. “Dumping this stock in order to raise some short-term cash to fund election promises would be a major mistake that the travelling public will quickly regret,” he said.
Dublin, in particular, has seen its status as a regional hub climb in recent years and flights between London and Dublin rank as one of the most frequent routes in Europe. Aer Lingus has a lucrative niche on transatlantic routes, offering customs and immigration clearance in Dublin and Shannon for flights to the US. These hubs also benefit from shorter flight times to the US than London.
IAG is interested in freeing up capacity in an already overcrowded Heathrow by transferring some of its regional passengers from the UK through the Dublin and Shannon hubs. It has tried to assure Aer Lingus that a deal would not affect connectivity and would bring the Irish airline into the BA-led Oneworld alliance.
Combined with Ireland’s geographical location on the periphery of Europe, Aer Lingus is much less attractive to other carriers but has been seen as a logical target for BA due to its main hub at Heathrow. The Irish carrier has the third-largest number of take-off and landing slots with 23 pairs at Heathrow, behind BA and Virgin. One analyst valued a pair of slots at €15m. In addition, Aer Lingus had net cash of about €381m in November.
Ryanair declined to comment. Last week Michael O’Leary, Ryanair chief executive, said there had been no approach and the Ryanair board would consider a bid if and when one was made.
In a sign of the political sensitivity surrounding the bid, members of the Irish parliament grilled the transport minister last week on how the government intended to protect routes between Ireland and London’s Heathrow. ENDS
Beyond the commentary about the bid, interesting to note the reference in the FT to “government-subsidised long-haul operators from the Middle East….”24 Jan 2015
“Aer Lingus ‘to accept’ bid from British Airways owner IAG”
Rather surprised by BEEB’s headline unless O’Leary has done a deal behind the scenes which only the BEEB had got a whiff of.
Methinks the BEEB has got ahead of itself with a headline which is not supported even by its own subsequent narrative. The FT (above) and DT being more indicative of the current position.
If the headline holds, methinks there will be many a hurdle still to take especially with respect to LHR slots. It will be a bad day for the free market, Eire and passengers, yet expect the share price to benefit.24 Jan 2015
With the Greek election now over and the result probably causing the Euro to slide further I’m sure this will help IAG grab EI at the lower end of the estimation.
It’s good to see Irish politicians are becoming more aware of the consequences of the sale. I wonder if our monopoly board will green light it ?.26 Jan 2015
Can you think of a single ocasion the Monopolies Commission has ever blackballed a takeover or merger? They make lots of noise but ultimately wave them through.26 Jan 2015