IAG share price: CEO reluctant to increase five-year offer for Heathrow landing rights

on Mar 20, 2015
Updated: Oct 21, 2019

International Consolidated Airlines Group Plc (LON:IAG) has been urged by Ireland’s Transport Minister, Paschal Donohoe to improve the five-year offer on connectivity between Heathrow and airports in Ireland. The Irish Government owns 25.1 percent of Aer Lingus (LON:AERA), making it the second biggest shareholder, and securing its support is believed to be one of the few remaining impediments to IAG finalising the takeover of the Irish carrier.

Aer Lingus currently has 23 take-off and landing spaces at Heathrow airport and the Irish Government wants these to remain in use for flights to and from Ireland. The board of Aer Lingus has already backed the takeover offer, but IAG will not formalise this without the backing of the Government.
IAG’s share price has seen a 1.38 percent rise in today’s trading to 589p, as of 14:15 GMT. Meanwhile, Aer Lingus shares have only managed to inch 0.53 percent higher to €2.36.
Initially, IAG promised the Irish Government that the 23 spaces at Heathrow would stay open for inbound and outbound flights to and from Ireland for a guaranteed period of five years. However, Donohoe rejected the offer last month, calling for an extension on this. Shannon airport chairwoman, Rose Hynes has backed up the government’s position by stating that she would “happily negotiate a 10-year deal now with IAG,” in relation to connectivity and airport related charges.
According to analysts, one of the main reasons why IAG CEO Willie Walsh is so reluctant to give any advance on five years is that he is unsure about tying the company down to such a long term without having a deal on landing charges into the future. Walsh’s sensitivity towards this issue was made all too clear during his appearance before the Oireachtas transport committee last month when he made reference to the Shannon-Heathrow controversy of eight years ago and the more favourable terms made available to Ryanair back then.
Meanwhile, earlier this week, Etihad Airways confirmed that it would be willing to sell its four percent stake in Aer Lingus to IAG should the takeover deal be successful.
As of 16:02 GMT, Friday, 20 March, International Consolidated Airlines Grp share price is 590.25p.

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