IAG offers concessions while European Commission delays decision on Aer Lingus sale by 14 days

It had been reported to Reuters last week that the European Commission was unlikely to give a favorable decision on IAG’s offer to buy Aer Lingus, the flag carrier airline of Ireland, unless concessions were offered. In acquiring the airline IAG are looking to purchase the 25% stake held by the Irish Government which the bid has valued at €335million (US$369million), and the 29.8% currently held by Ryanair. The government are currently backing the offer made by IAG and overall the bid values the airline at €1.4billion ($US1.55billion). While IAG await the decision of the European competition authority, their bid is also subject to acceptance by Ryan Air.
It is not unusual for the purchasers of an airline to offer concessions to allay fears of competitors and to obtain regulatory approval. This will usually take the form of an offer to give up airport slots, allow rivals access to connecting traffic, or let competitors sell tickets on their flights on certain routes. The concessions offered by IAG have yet to be fully disclosed, though is anticipated it may involve a number of slots at Heathrow, the main base for IAG’s British Airways. Perhaps triggered by these events, the European Commission has announced an extension of the decision-making process and will now deliver the findings on the 15th July this year instead of the 1st.
In the interim it has also been announced that Aer Lingus was in breach of any agreement when the airline switched operations from Belfast International Airport (BIA) to Belfast City Airport. BIA was suing Aer Lingus for damages totaling €20million (US$22million) for breach of contract concerning a 10-year agreement with BIA which commenced in 2007. The court’s ruling was that because the agreement was based upon the contents of a letter and not a legal contract, the letter established little more than a 10-year pricing agreement. However the situation has not completely drawn to a close as the judge has yet to rule on whether Aer Lingus was entitled to terminate the arrangement in the way it did and a subsequent hearing in September will likely focus on the amount of notice given. The judge presiding was openly critical of some evidence given by Aer Lingus, describing it as “elusive”. He indicated that it had added to time and expense to the proceedings, and consequently he was “minded” to demand Aer Lingus pay half of BIA’s costs.