IAG (The Parent Of British Airways, Iberia & Vueling) Raises Its Bid To Purchase Irish Flag Carrier Aer Lingus

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It was widely reported over the weekend that the IAG (International Consolidated Airline Group), which is the parent of British Airways, Iberia and Vueling, had made a new bid worth 1.34B to purchase the Irish flag carrier Aer Lingus.

IAG Aer Lingus

This time the board of Aer Lingus is set to recommend the deal that needs to be approved by both the Irish government that owns quarter of the airline and Ryanair that holds a 29.9% share of it. Etihad Airways of Abu Dhabi also has an ownership interest in Aer Lingus.

You can read more about the recent developments on WSJ here and on Financial Times here.

Here’s an excerpt from WSJ:

IAG chief executive Willie Walsh, who previously headed the Irish Airline, is trying to strengthen the airline operators hold on the lucrative trans-Atlantic market. Buying Aer Lingus would give the group scarce takeoff and landing slots at London Heathrow airport, Europe’s busiest hub. British Airways has about 48% market share at Heathrow.

IAG’s acquisition plans could still face antitrust hurdles. European regulators blocked Ryanair’s takeover attempt on antitrust grounds. Consolidation in the trans-Atlantic market, where Aer Lingus has positioned itself as a low-cost alternative to rivals such as British Airways, could also face antitrust concerns.

And here’s from Financial Times:

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.

Conclusion

British Airways certainly would want to get hold of some of the Aer Lingus Heathrow slots and the airlines could also better consolidate the flights between London Heathrow and Dublin. With these new slots British Airways could then use them to launch new long-haul routes.

The comments that I have seen on articles online and on the TV also suggest that this could be one way for IAG to further strengthen its hold of transatlantic travel, when the third runway at the Heathrow seems to be a never ending project.

There is another benefit for flying to the States via Ireland. US has pre-clearance immigration and customs posts at both Dublin and Shannon airports allowing passengers to clear both in Ireland and thus arrive in the US as domestic passengers.

Aer Lingus used to be part of the Oneworld alliance and becoming part of the IAG would likely lead it to rejoin it. Aer Lingus could keep it’s own frequent flier program and make it Avios based, as both British Airways and Iberia ones are, allowing moving them between IAG programs.

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