Saturday 24 March 2018

Aer Lingus gives ground on issue of dividends by the airline


Peter Flanagan

AER Lingus will try to make it easier to pay a dividend next month when it asks shareholders to allow cash reserves to be freed up.

The move will be seen as a concession to Ryanair CEO Michael O'Leary, who is demanding a special dividend.

The company has called an extraordinary general meeting for November 4. At the EGM, the airline will ask shareholders to allow it to reduce its non-distributable reserves by up to €500m to give it "greater flexibility" to consider paying dividends in the future.

A spokesman yesterday said there were no plans to pay a dividend in the immediate future, however.

"If carried, this proposal will make it easier for us to pay a dividend, and there is a degree of cleaning up the balance sheet involved as well," he said.

The move was not related to pressure brought by Ryanair, which controls just over 30pc of the airline and has been lobbying for a dividend to be paid, he added.

Aer Lingus has not made any dividend payment since going public five years ago.

The current structure of the company prevents dividends as it has accumulated losses of some €210.43m that dwarf the €57.35m cash the company has in hand.


If the proposals to allow the company to pay a dividend in excess of €57.35m are carried, in a circular to shareholders Aer Lingus said it "will provide the company with the flexibility to pay a dividend or affect another form of distribution to shareholders, much sooner than would otherwise be the case".

"While the board believes that it is in the best interests of all shareholders to consider a dividend when there is a more durable recovery and consequent earnings visibility, the board has nonetheless reviewed the group's balance sheet with a view to improving flexibility for the future," the circular added.

On the face of it, paying out a dividend in the near future appears unlikely given the €400m pension deficit the company is facing.

But the airline insists it is not legally required to fund the black hole in a defined benefit pension scheme that has around 16,000 retired, active and deferred members, primarily from Aer Lingus and the Dublin Airport Authority.

Aer Lingus closed flat at 65c in trading on the Dublin stock market yesterday as the overall market gained 1.5pc.

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