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It’s people like Irish pensioner Mark Swords that IAG SA Chief Executive Officer Willie Walsh might have to win over to gain control of Aer Lingus Group Plc.
On Monday in Dublin, Irishman Walsh offered assurances on maintaining Aer Lingus routes between Ireland and the U.K. as he sought to overcome mounting political resistance to the proposed takeover. IAG has said it won’t proceed without the endorsement of the government, with the two coalition parties trailing in the polls a little over a year before elections.
“It’s the national airline,” said Swords, 75, while out shopping in Monday in the north of the Irish capital. “You must be joking. People will lose their jobs.”
For the government, which has a 25 percent stake in the company, the IAG bid is less about money and more about political survival with voters fretting that a takeover will mean a loss of routes and employment at a company that still carries the shamrock on its tail fins. Three attempts by Irish rival Ryanair Holdings Plc to take over Aer Lingus foundered, in part on government opposition.
“The sale price is not the key, connectivity, competition and jobs are,” said Kieran O’Donnell, a lawmaker from the mid- west city of Limerick, about 30 miles from Shannon Airport, which relies on Aer Lingus flights for links with Boston and London Heathrow. “The stakes are high for Ireland Inc.”
Under the terms proposed on Monday, IAG wouldn’t sell Aer Lingus’s 23 slot pairs at London Heathrow and the carrier would remain based in Ireland. IAG also committed to operating the slots on Irish routes for five years. The government said it would carefully weigh the proposals, which labor unions called “unconvincing.”
Last week, the Aer Lingus board said it was prepared to recommend an indicative offer of 2.55 euros per share from IAG, having rebuffed two other approaches from the company led by Walsh, a 53-year-old Dubliner who was a former Aer Lingus pilot before rising up the ranks to become its CEO.
Almost immediately, an informal alliance of politicians, businesses and labor unions mobilized against the deal, calling on Prime Minister Enda Kenny not to sell the state’s holding to IAG. Walsh became CEO of IAG four years ago after running British Airways, which formed IAG after merging with Iberia.
Aer Lingus’s share price dropped to 2.13 euros on Monday in Dublin from 2.48 euros two weeks ago. It rose to 2.23 euros after Walsh’s proposals, still short of the offer price.
“IAG have shown that they were able to improve on their previous proposals, which in itself is of interest,” said John Lyons, a Labour Party lawmaker for Dublin North-West. The proposal “leaves me asking why does IAG want Aer Lingus so badly,” Lyons said.
In North Dublin, close to the airport, the district where many Aer Lingus workers live, concerns mostly center on jobs. As many as 1,200 positions may be at risk should IAG take over Aer Lingus, labor unions say.
“In North Dublin, it’s difficult to find somebody who doesn’t know someone directly or knows someone with a family member who’s with Aer Lingus in some shape or form,” said Lyons. “To a lot of people, Aer Lingus is still in their eyes part of the state silver.”
The Irish government started Aer Lingus in 1936 to provide links to the U.K., and it now connects Ireland with cities like New York and Boston as well as London.
Earlier attempts to scale back those links have run into opposition in Ireland. In 2007, a year after the state sold off 75 percent of the company, Aer Lingus moved slots linking Shannon airport to Heathrow to Belfast. That triggered a storm of protests and marches in the area, and two years later, Aer Lingus restored the routes.
Prime Minister Kenny said on Sunday in Dublin that he would need a “cast-iron permanent guarantee in respect of connectivity for Cork, Shannon and Dublin” to London before giving wider consideration to any IAG offer.
Recognizing those concerns, Walsh yesterday laid out his plan for Aer Lingus, and some analysts said the transaction may go through. David Holohan at Merrion Capital in Dublin puts the chances of the takeover succeeding at as much as 70 percent.
The assurances “go a long way to assuaging the government’s concerns,” said Holohan. “They will keep the Heathrow routes, even beyond the five years. It increases the likelihood of the deal going ahead.”
Yet, for Kenny, the issue is complicated by the timing of a general election, due to be held next year.
Combined support for the coalition is about 33 percent, according to a Red C poll for the Sunday Business Post, published on Sunday 26. That’s down from 55 percent in the 2011 election. Sinn Fein, a party opposed to Irish budget cuts that supported Greek Prime Minister Alexis Tsipras’s bid for power, has been ahead or neck and neck in polls since late last year.
“There’d be no political dividend in any shape or form for any party who thought it would be a good idea to sell of Aer Lingus,” said Lyons, the Labour Party lawmaker.
This article was written by Donal Griffin and Dara Doyle from Bloomberg and was legally licensed through the NewsCred publisher network.