The Irish Government has agreed to sell its stake in budget airlines Aer Lingus to International Airlines Group (IAG) after the latter accepted certain conditions imposed by the country.
The approval paves way for IAG to bid for the airlines with an offer of €1.36bn ($1.48bn).
The government's nod came after the airlines group agreed to retain Aer Lingus' slots at London Heathrow airport for at least five years.
Under the terms, Aer Lingus will continue to operate its flights between London Heathrow and Dublin, Cork and Shannon for at least seven years post-acquisition, and from its other Irish airports for five years.
IAG has also agreed to retain the Aer Lingus brand name, and its head office in Ireland.
The airlines group, which owns British Airways and Iberia, has established AERL Holding for bidding for Aer Lingus.
The Irish airline rejected IAG's original offer made in December last year. A revised offer of €2.55 per share in cash was made in January.
Aer Lingus chairman Colm Barrington said: "The company will reap the commercial and strategic benefits of being part of the much larger and globally diverse IAG Group and as a member of the oneworld alliance of 17 airlines that together carry over 500 million passengers."
Ryan Air, which holds a 30% stake in Aer Lingus, is yet to accept the offer. The airline has itself attempted to take over Aer Lingus thrice since 2006, but its attempts were thwarted by the government to avoid monopoly of the Irish skies.
The IAG board expects to gain operational synergies with the deal through an enhanced network, particularly to North America. The airline intends to use Dublin as a hub for transatlantic routes.
IAG CEO Willie Walsh said: "Acquiring Aer Lingus would add a fourth competitive, cost effective airline to IAG, enabling us to develop our network using Dublin as a hub between the UK, continental Europe and North America, generating additional financial value for our shareholders."
Image: Aer Lingus will continue to operate its flights to London Heathrow. Photo: courtesy of Aer Lingus Group Plc.