IAG's 18-Dec-2014 announcement that it had offered to buy Aer Lingus four days earlier was a surprise. At no time since the Irish airline's 2006 IPO had anyone other than Ryanair shown interest in acquiring Aer Lingus. Moreover, with only 1% of seats to/from Europe controlled by Aer Lingus, this deal would make little difference to market concentration in the region, where consolidation has lagged North America.

However, Aer Lingus has two key attractions to IAG and its CEO Willie Walsh, an ex-CEO of Aer Lingus: an important holding of slots at London Heathrow, the main hub of IAG's British Airways, and a high growth strategy on the North Atlantic, which is BA's key long haul market.

Probably to the relief of both companies' advisors as the holiday season approached, Aer Lingus rejected the offer on the grounds that it fundamentally undervalues its business. Nevertheless, a convergence of factors makes it likely that IAG will return with another offer. Mr Walsh is an old acquaintance who does not wish to be forgot...