Aer Lingus could have been a stronger global airline as a subsidiary of Ryanair if the low-cost carrier's takeover of former State firm had gone ahead, Ryanair stockbroker Davy argues in a new report.

While such an argument is immaterial given the EU ruling against such a deal, analyst Stephen Furlong placed a price target of €3.40 on Aer Lingus shares over Friday's closing price of €2.66. Mr Furlong said Aer Lingus was likely at its annual meeting this week to confirm that its business plan was on track. The likelihood of the airline confirming that the market remains competitive underlined the importance of its cost-cutting programme, he said.

The continuation of falling unit costs will be crucial. "If costs continue to fall, Aer Lingus has a decent chance to deliver on its business plan, but limited liquidity and the Ryanair stake/competitive strength represent an overhang of sorts."

Davy said Aer Lingus has multiple but volatile revenue streams in short-haul, long-haul, cargo and ancillary markets. "Relative to its long-haul competitors, Aer Lingus is in a good position regarding costs."

Davy said the "open skies" deal represents a genuine growth opportunity.

"Turning this into the appropriate returns and profitability depends on successfully competing with US competitors, the construction of a new terminal at Dublin airport and the acquisition of capital at an appropriate price. We are encouraged by recent market commentary regarding the level of discounts on the Airbus A350 programme and the airline's securing of early delivery positions . . . Our price target reflects the anomaly that Aer Lingus, one of the highest-return airlines, is also one of the cheapest."