Discussions between IAG and an expert group appointed to advise the Government on its bid are believed to have largely concluded, with substantial agreement on the main points of a deal.

Political contacts are now under way which will determine if a proposal to approve a deal will be brought to Cabinet. If this happens the Cabinet could give the go ahead either next Wednesday or the following week, though sources say discussions between the coalitions parties are still continuing.

Unions

As well as ongoing contacts with the Government, IAG is understood to have had further discussions with the Aer Lingus unions, to see if they can be persuaded on the merits of the deal. Another key factor will be whether Ryanair, which holds a 29.8 per cent stake, will agree to sell its shares, an issue on which the Government is likely to want clarity before it makes its own decision.

IAG chief executive Willie Walsh has said that the airline will only launch a full bid if Ryanair and the Government, which holds 25.1 per cent of the equity, commit to sell their shares. Contacts between IAG and the expert group appointed by Minister for Transport Pascal Donohue have continued for four months. It is believed that broad agreement has been reached on key issues including a guarantee on the Heathrow slots, the opening of new routes from Ireland, employment commitments and plans for flights from Cork and Shannon, as well as Dublin.

New routes

The Government had indicated it would seek a 10-year guarantee on the use of the slots in Heathrow for flights to Ireland, while IAG’s initial position was to offer five years. Sources believe that a guarantee of about seven years is now on offer, as well as a package which will promise increased jobs and new routes to the US in particular, as well as investment in Dublin as a hub for IAG traffic.

However, agreement on what to do as a result of the report has to be reached between the two Government parties before the matter comes to Cabinet. One key issue will be whether the unions are willing to back the deal or at least not oppose it, which is seen as a factor in the Government decisions, particularly for the Labour Party.