British Airways’ parent International Airlines Group (IAG) has moved closer to a takeover of Aer Lingus after submitting a revised bid for the Irish carrier.
The board of Aer Lingus is expected to confirm that it will recommend acceptance of the IAG bid to shareholders, with the airlines ready to confirm they have begun formal talks.
The latest IAG bid values Aer Lingus at close to £1 billion following a bid of €2.50 per share or €1.34 billion for the carrier.
Aer Lingus rejected a bid of €2.40 per share earlier this month following IAG’s initial bid of €2.30 in mid-December.
IAG will still require the backing of the Irish government, which owns a 25% stake in Aer Lingus, and of Ryanair which owns a near 30% stake.
The Dublin government announced last week that it would take “great care and exercise great caution” in deciding whether to accept an IAG takeover.
Ryanair chief executive Michael O’Leary said last week: “We’ve had no offer from IAG. We could sell – but then we could make another offer to buy ourselves.”
However, O’Leary has been thwarted by the European Commission on competition grounds in previous bids to acquire Aer Lingus and IAG boss Willie Walsh is likely to have sounded him out on support for a takeover.
The Dublin government is likely to demand commitments to maintain services between Ireland and the UK.
The BBC quoted a senior source in the Irish government who said: “The issue of landing slots at Heathrow airport is crucial.
“You have to have flights from Dublin and Cork into a major hub and the Irish government would drive a hard bargain.”
Irish opposition transport spokesman Timmy Dooley urged the government not to sell its stake.
Dooley said: “Dumping this stock to raise some short-term cash to fund election promises would be a major mistake.”
The IAG group already owns BA, Iberia and Vueling and acquired the former BMI from Lufthansa in 2013.
Aer Lingus is the third-largest carrier at Heathrow where it has 23 pairs of take-off and landing slots and its acquisition would increase BA’s dominance at the airport.
Walsh ran Aer Lingus between 2001 and 2005 and previously worked as an Aer Lingus pilot.
IAG aims to freeing up capacity at Heathrow and is likely to assure Aer Lingus that a deal would not affect connectivity between Dublin and London.
Aer Lingus chief executive Christoph Mueller is poised to leave to take over at Malaysia Airlines.
The Irish carrier reported operating profits of €113 million (£88 million) in the three months to September. Shares in Aer Lingus closed at €2.35 on Friday.