British Airways owner IAG SA and Irish government representatives are moving closer to an agreement on guarantees that would pave the way for a sale of Aer Lingus Group Plc, according to people with knowledge of the matter.
IAG and government officials have made progress on the length of commitments on operating Aer Lingus routes from Ireland to London Heathrow airport following a potential IAG takeover, according to the people, who asked not to be identified because the process is ongoing.
Discussions between Ireland and IAG continued after the government, which controls a 25 percent stake in Aer Lingus, rejected the airline’s indicative bid. IAG needs to provide a guarantee on maintaining routes to London for longer than the five years it initially proposed, Irish Transport Minister Paschal Donohoe has said.
“IAG has provided further details on the issues of concern to the government,” according to a statement from Donohoe today, responding to media reports. “I do not want this process to be drawn out unnecessarily and I expect that it can be brought to a conclusion in the coming weeks.”
The talks have been useful and are progressing, he added. Representatives of IAG and Aer Lingus declined to comment.
Aer Lingus closed up 3.8 percent at 2.38 euros in Dublin. IAG is bidding 2.50 euros a share plus a 5 cents cash dividend, valuing the carrier at 1.36 billion euros ($1.46 billion).
Appearing before a parliamentary hearing in February, IAG Chief Executive Officer Willie Walsh sought to convince Irish lawmakers, voters and workers that his bid for the airline won’t result in the loss of jobs and flights to London. The executive, an Irishman who once ran Aer Lingus, has stipulated that both the state and 29 percent investor Ryanair Holdings Plc must back a deal for it to go ahead.
While the Aer Lingus board rejected early overtures, it now backs the deal, with newly-appointed CEO Stephen Kavanagh describing it as a “fast-track” to growth. The Irish carrier was already mulling the need for a partnership when it received the approach from IAG, he said.
Speaking in Dublin last month, Walsh said that while he’s in “no hurry” to conclude a deal for Aer Lingus, uncertainty around the potential sale “may well be a distraction for the management of the business and that is something that they will want to see addressed.”