* Ryanair says pension deficit main impediment to sale
* Says any buyer will likely break up Aer Lingus
* Ryanair maintains 2012 after-tax profit forecast of 400 mln eur (Adds quotes, background)
DUBLIN, Sept 29 (Reuters) - British Airways would be the most likely buyer of the Irish government's 25 percent stake in Aer Lingus , the Irish airline's largest shareholder Ryanair said on Thursday.
BA, which formed the International Airlines Group when it merged with Spain's Iberia last year, has not expressed interest in buying the Aer Lingus stake, which the Irish government is considering selling.
"It is far more likely that there will be a trade buyer. I think the obvious trade buyer would be BA or IAG," Ryanair CEO Michael O'Leary told journalists at the company's annual general meeting.
Aer Lingus on Wednesday warned the government against selling its stake to a larger rival, saying this could undermine its business model by damaging current partnerships and driving up costs.
O'Leary, whose company owns 29 percent of Aer Lingus, said the stake could sell at up to 1 euro per share, a strong premium over the current price of 68 cents per share. Aer Lingus' share price was up 4.4 percent at 1400 GMT, while the broader Irish market was up 0.6 percent.
Ryanair says it will consider selling its 29 percent stake if it can secure a good price.
The main stumbling block to a sale is a deficit at an Aer Lingus' employee pension fund, which at over 400 million euros is larger than the company's market capitalisation of around 340 million euros, he said.
"I think Aer Lingus' share price could go to 1 euro per share if they took the simple measure of closing out the uncertainty on the pension scheme," he said.
Aer Lingus management has said it has legal advice that it is not liable to make up the deficit, but O'Leary said investors remained nervous as the company's board of directors had not made a clear statement on the issue.
O'Leary said he believe Aer Lingus' legal position was "very strong."
He said that any buyer would likely break up the airline.
"If the government sells the stake in Aer Lingus to anybody else it is inevitable that Aer Lingus will be broken up" to separate its valuable Heathrow Airport slots and profit-making transatlantic business, he said.
O'Leary told shareholders he was upbeat about Ryanair's prospects despite global economic turmoil and said passenger numbers were set to grow to 80 million by 2013 from 72 million last year.
"Forward bookings are strong, yields are good. If there is any change to guidance this year, it is more likely to be on the upside than the downside," he said.
He said the airline's forecast for 2012 profit after tax was unchanged at 400 million euros.
One of the biggest drags on profit is the high oil price, he said.
The airline has hedged its fuel bill by 90 pct for 2012 fuel at $820 per tonne and 57 percent hedged at $999 per tonne of fuel in 2013. ($1 = 0.735 Euros) (Reporting by Conor Humphries; Editing by Will Waterman)