IAG ups bid for budget airline Vueling by one third

Passengers stand in front of a Vueling auto check-in at Barcelona's airport January 30, 2012. REUTERS/Gustau Nacarino

MADRID (Reuters) - International Airlines Group ICAG.L on Wednesday raised its takeover offer for Spanish budget airline Vueling VULG.MC by almost one third after the Barcelona-based carrier rejected a previous bid.

IAG, which owns British Airways and Spanish flag carrier Iberia and already holds a 45.85 percent stake in Vueling, upped the offer to 9.25 euros (£7.87) per share from 7 euros previously.

It also said it would extend the acceptance period for the offer to 48 days from 39 days and drop to 4 percent from 90 percent the shareholders acceptance level for the bid.

Shares in Vueling surged after the announcement by 8.8 percent at 9.23 euros at around 4.05 p.m. British time, following a temporary trading suspension.

Acquiring Vueling would help IAG boost its short-haul business and halt losses in Spain in the face of tough competition from cheaper operators and a deep economic crisis.

The company said on Wednesday that Iberia Chief Executive Rafael Sanchez-Lozano had stepped down after months of strikes at the airline.

Loss-making Iberia plans to lay off over 3,000 workers and cut salaries to stay afloat.

Vueling’s board said earlier this month that the 7 euros per share offer did not reflect the value of the company. Shares in Vueling traded at 8.42 euros prior to the trading suspension, having risen 17 percent year-to-date.

Reporting by Clare Kane; Editing by Julien Toyer and David Cowell