Aer Lingus: No Dividends
A hot potential European IPO is the Irish airline Aer Lingus. They have scared some investors away by announcing that they will not initially pay dividends:
Aer Lingus management has no plans for the company to pay a dividend to shareholders, if and when the airline is floated on the Irish Stock Exchange this year.
The company and its advisers instead want to sell Aer Lingus to investors as a growth story, in keeping with the company’s five-year business plan to spend €2 billion on doubling the size of its long-haul fleet and increasing capacity on its short-haul routes by 55 per cent.
There is nothing wrong with a newly public company deciding to hold its cash for investment and start-up costs. In fact, dividends are much more prevelant in older, established firms that have cash to spare and less new investment to fund.