UPDATE 2-Aer Lingus plays safe with maiden dividend

Fri May 4, 2012 11:16am EDT

* To pay 3 cents per share in July

* Rivals Ryanair, easyJet have promised special dividends

* Aer Lingus shares down 1 pct, outperform market

By Lorraine Turner and Conor Humphries

DUBLIN, May 4 (Reuters) - Irish airline Aer Lingus offered its first dividend in more than five years as a public company on Friday following a return to profit, disappointing some shareholders who had hoped for a bigger payout.

Aer Lingus, which has not made any form of distribution to shareholders since its stock market listing in 2006, said on Friday it intends to declare an ordinary dividend of 3 cents per share, to be paid in July.

This will make a total payout of approximately 15.9 million euros ($21 million) this year.

However the airline, in which Abu Dahabi's Etihad Airways bought a small stake this week, backed away from boosting the payout with a special dividend like those promised by rivals Ryanair and easyJet.

The chief financial officer of Ryanair, which is the largest shareholder in Aer Lingus, welcomed the dividend, but described the payout as "paltry," saying 50 million euros would be more appropriate considering its 1 billion euro gross cash pile.

"If it was Christmas I'd be calling you Scrooge," said Ryanair's Howard Millar, speaking at Aer Lingus' annual general meeting on Friday.

British low-cost airline easyJet said in November it would make its first dividend a bumper payout, paying a special dividend of 34.9 pence on top of an ordinary dividend of 10.5 pence, making a total payout of 195 million pounds.

Ryanair, which in 2010 paid its first dividend after listing 13 years earlier, and has said it will likely approve a substantial dividend this year.

Aer Lingus said it expects to pay a final dividend of 3 cents per share in each of the next two years, subject to the group's financial position being maintained.

"The board believes that this dividend represents a reasonable proportion of profitability and will not be detrimental to Aer Lingus' financial strength," the company said.

Analysts said shareholders may be disappointed, but uncertainty surrounding the airline could be the reason for its conservative payout.

"Ryanair and easyJet set a precedent that there might be some sort of special dividends here. There will probably be a little bit of disappointment that there isn't," Davy's analyst Stephen Furlong told said.

"I'm assuming they adopted a more prudent approach," he said, noting the volatile operating environment for airlines as well as uncertainty surrounding the group's pension deficit and ownership.

Etihad Airways bought a 3 percent stake in the Irish airline on Tuesday, positioning itself as a potential buyer of the indebted Irish government's 25 percent stake in Aer Lingus which it plans to sell as part of its international bailout.

However analysts said Etihad would likely want to resolve uncertainty over whether Aer Lingus may eventually have to contribute to a pension deficit that rose to 700 million euros at the end of 2011.

Shares in Aer Lingus were down 1.1 percent at 1511 GMT, outperforming the wider market which was down 2.6 percent.