The Irish government has agreed to sell its 25 per cent stake in Aer Lingus to British Airways’ parent company IAG.

Aer Lingus has accepted a €1.4bn (£1bn) takeover bid from IAG, but needs the approval of both the Irish government, which it now has, and Ryanair.

Ryanair has a 29.8 per cent stake in Aer Lingus but has been ordered to cut this to just 5 per cent (see news, February 13). Ryanair has yet to make a decision.

A spokesman said: “The board of Ryanair has yet to receive any offer, and will consider any offer on its merits, if and when an offer is made.”

The deal also requires the approval of the Irish parliament and the European Commission.

Last night’s announcement ends months of negotiations that saw Aer Lingus twice reject IAG’s proposal (see news, December 2014).

IAG is legally bound to maintain Aer Lingus’ routes between London Heathrow and Dublin, Cork and Shannon for at least seven years.

Aer Lingus will continue to operate its international services under the Aer Lingus brand.

Chairman Colm Barrington said: “The company will reap the commercial and strategic benefits of being part of the much larger and globally diverse IAG Group and as a member of the oneworld alliance of 17 airlines that together carry over 500 million passengers.

“This access to greater global scale will accelerate growth across our network, enhance Ireland’s position as a natural gateway connecting Europe and North America, give Irish tourism access to major traffic flows and customer loyalty programmes and provide better access for business interests and to cargo flows.

“This in turn will lead to an increase in jobs at Aer Lingus, in support activities and the tourism sector and, importantly, will strengthen connectivity to and from Ireland.”

IAG chief executive Willie Walsh said: “Aer Lingus would maintain control of its brand and operation… Ireland’s vital air links to Europe and North America would be enhanced, creating new jobs, with cast-iron guarantees on ownership of Aer Lingus’ Heathrow slots.”