Buying Aer Lingus would 'make sense' for IAG, says Liberum

Broker Liberum Capital has reiterated its ‘buy’ stance for IAG shares, saying it expects the airline group to add Aer Lingus to its portfolio.

IAG announced that it had approached the Irish carrier about a possible takeover offer, which was refused as Aer Lingus claimed the proposal "fundamentally undervalued" the airline and its attractive prospects.

Liberum said Aer Lingus would further strengthen IAG's transatlantic market position and improve its ability to service transatlantic traffic to and from the UK regions, as slot constraints at Heathrow and the limited domestic network of British Airways limited the opportunities to target those markets.

“Adding Aer Lingus to the IAG portfolio of airlines makes sense, in our view,” the broker said in a note on Friday

“It would strengthen the group's position in the North Atlantic market, potentially allowing it to switch some transfer traffic to Dublin and free some Heathrow slots.

“We also believe acquiring Aer Lingus would give IAG a relatively low cost long haul operating platform."

Liberum has a 600p target price on IAG shares, which rose 0.26% to 464.70p at 11:34 on Friday.