DUBLIN (Reuters) - The Irish government agreed on Tuesday to sell its 25 per cent stake in Aer Lingus to IAG, paving the way for the owner of British Airways and Iberia to make a formal bid to buy the Irish carrier.
International Consolidated Airlines Group's (IAG) proposed 1.36 billion euro (S$2 billion) offer for Aer Lingus was recommended by the Irish airline's board in January but is still conditional on receiving the support of its other main shareholder, Ryanair.
"IAG has provided additional information and certain commitments in relation to its proposal. The government has decided that it will support IAG's proposal," transport minister Paschal Donohoe said in a statement after a cabinet meeting.
In February the government presented IAG with a list of new demands it said must be met before it would consider the sale, in areas including possible job cuts, transatlantic services and a longer guarantee on maintaining connections between Irish airports and London's Heathrow airport, BA's hub where Aer Lingus holds valuable runway slots.
Formally presenting its 2.55 euros per share offer, IAG committed to Aer Lingus operating routes from Heathrow to Irish airports for at least seven years. "Acquiring Aer Lingus would add a fourth competitive, cost effective airline to IAG, enabling us to develop our network using Dublin and generating additional financial value for our shareholders," IAG Chief Executive Willie Walsh said in a statement.
Ryanair still has to declare its hand, declining to comment again on Tuesday on whether it would accept an offer by IAG for its 30 per cent stake.
The government, which has been urged by opposition parties and trade unions to reject the IAG offer and also faced objections to the offer from some government MPs, had said that Ryanair's attitude was key to its decision.
Aer Lingus's main trade union, IMPACT, repeated after the announcement that the deal was bad for workers. A second major union, SIPTU, said it wanted commitments that there would be no compulsory redundancies or outsourcing of jobs.
Ireland's ruling coalition would have to put any decision to sell to a vote in parliament and while it has a large majority capable of easily approving the deal, it risks some unhappy backbench MPs voting against the government.
Aer Lingus shares closed 1 per cent higher at 2.39 euros on Tuesday.