Reuters, Dublin - British Airways would be the most likely buyer of the Irish government's 25 per cent 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 perc ent of Aer Lingus, said the stake could sell at up to EUR1 per share, a strong premium over the current price of 68 cents per share. Aer Lingus' share price was up 4.4 per cent at 1400 GMT, while the broader Irish market .ISEQ was up 0.6 per cent. Ryanair says it will consider selling its 29 per cent 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 EUR400 million is larger than the company's market capitalization of around EUR340m, he said. "I think Aer Lingus' share price could go to EUR1 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 72m 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 EUR400m. One of the biggest drags on profit is the high oil price, he said. The airline has hedged its fuel bill by 90 per cent for 2012 fuel at $820 per tonne and 57 per cent hedged at $999 per tonne of fuel in 2013.