Aer Lingus will be examining how to best use almost €400m of cash on its balance sheet following the expected resolution of a long-running pension issue, according to chief financial officer Bernard Bot.
Mr Bot was speaking as the airline said it will hold an extraordinary shareholder meeting on December 10 to vote on a €191m cash injection that Aer Lingus has agreed to contribute to help address a €750m deficit at the Irish Airlines Superannuation Scheme (IASS). The IASS serves around 15,000 past and present employees of Aer Lingus, the Dublin Airport Authority and Shannon Airport.
Aer Lingus had €571.6m of net cash on its balance sheet at the end of September, after reporting a strong third-quarter financial performance, boosted by summer long-haul business.
Assuming €191m is stripped from that net cash position, the airline will still be left with about €380m.
Mr Bot said that it's prudent to retain a cash buffer, but acknowledged that the airline is considering what to do with the cash once the pension issue has been resolved. "We are very closely looking at that following the pension resolution," he said.
Aer Lingus, which floated on the stock market in 2006, only to be immediately circled in a Ryanair takeover attempt, paid its first dividend in 2012 - three cent per share.
"We keep looking at that with an eye of providing a return for our shareholders," said Mr Bot, adding that it's "a little early at this stage" to say what the company might do with the cash.
He also cautioned that airlines had to consider volatilities and market factors "that do require a liquidity buffer".
There have been suggestions that some Aer Lingus institutional shareholders may be uneasy about the company volunteering so much of its cash to address pensions, but the airline insisted it's a solution that "substantially reduces" future prospects of industrial action.
The plan will see the existing IASS scheme frozen and a new defined contribution scheme established for current staff. Retired IASS members will see their pensions cut. Ryanair owns almost 30pc of Aer Lingus and has not yet indicated how it will vote. The Government owns 25.1pc. Aer Lingus executive counsel Donal Moriarty said the process of formally speaking to institutional shareholders is only beginning.
The airline has been threatened with legal action over its IASS plans by retired members and so-called deferred members, who have not yet retired.