Aer Lingus climbs on debut

Aer Lingus shares climbed 8 per cent on their stock market debut yesterday as the flotation of the Irish flag carrier was priced at the bottom end of the range.

The offer got away safely after the Irish government and its advisers, AIB and UBS, decided to price the shares at €2.20 (£1.48) compared with a range of €2.10 to €2.70. The shares closed at €2.37 on the London and Dublin exchanges, valuing Aer Lingus at €1.22bn (£820m).

The success of the IPO follows the decision of other companies to pull their flotations, most notably the business travel group Hogg Robinson which abandoned its £380m listing this week, blaming market conditions. Bankers say investors are shunning smaller IPOs in harder-to-value sectors. "Liquidity goes at a premium. The bigger the better. It's easier to execute highly visible transactions," one said.

The flotation will raise a little more than €500m for the airline and €200m for the Irish government, which will be left with a 28 per cent stake worth a further €300m. Aer Lingus will use the proceeds to cut the deficit in its pension scheme and help fund a €2bn expansion of its aircraft fleet. It is looking to expand its route network in Europe, North America, Asia and possibly South Africa.

The issue was nearly four times subscribed. Institutions will be left with 40 per cent of the company and retail investors 12 per cent. A further 12 per cent will be in the hands of staff, either through an employee share ownership trust or employees subscribing to the offer. Approximately 58 per cent of the airline will be in Irish hands. Unconditional trading in the shares starts on Monday.

Dermot Mannion, Aer Lingus's chief executive, said it had not been deterred from listing by high fuel prices, airline security fears or geopolitical uncertainty. He said the "hybrid" business model of operating both as a low-cost short-haul carrier and a full-service long-haul airline would stand Aer Lingus in good stead. "We have been successful because we have re-engineered the business and that has given us an advantage over the rest."