Solving airline pension deficit ‘key’

MERRION Stockbrokers has upped its 12-month share price target for Aer Lingus; noting that solving its €500 million pension deficit problem could be the key to creating stock value.

Aer Lingus’ share price opened this year around the €1.07 mark, but is now down at between 64c and 65c. In a detailed report on the airline’s short-term prospects, Merrion said that a relatively swift resolution of the airline’s pension deficit issue could propel the company’s share price by as much as 72%, to €1.10 in the next 12 months.

“Solving the IASS [Irish Aviation Superannuation Scheme] pension deficit is the key issue for Aer Lingus and could trigger a re-rating if successful. From speaking to management, trade unions and actuaries, we consider that Aer Lingus has a strong legal position but some form of burden-sharing may be necessary to avoid costly industrial action,” says Merrion analyst, Gerard Moore.