A pension deficit of €107 million has been disclosed in the balance sheet of the Irish Aviation Authority for 2004.

The net pension liability at the State-owned company, which regulates Irish airspace, increased in 2004 by about 87 per cent, from €57 million to €107 million.

The authority's chief executive, Eamonn Brennan, said this pension deficit presented a major challenge and while there was no "quick fix", the company was taking steps to address the situation.

He was speaking after the company announced its annual results for 2004. These showed turnover rising 12.6 per cent to €124 million. Pre-tax profits were up 61 per cent, from €5.9 million to €9.6 million.

Mr Brennan said the pension deficit needed to be addressed and there were various solutions available, including higher contributions. The company currently employs 650 staff.

In his review of the year, Mr Brennan says: "The authority has commenced a review of the strategic management of the pension fund assets and liabilities. An actuarial valuation of the fund's assets and liabilities is also under way and the authority will be considering the outcome."

He adds: "The authority will be taking additional steps to address the underfunding situation and will consult with the scheme's actuary, scheme members and trustees in this regard."

Overall, the company made solid progress in 2004 and was in a position to declare a dividend for Minister for Finance Brian Cowen of €2.2 million.

The authority collects a significant portion of its revenue from aircraft passing through Irish airspace.

This business is referred to as "en route navigation" services. About 66 per cent of its turnover in 2004 came from this source.

The other main area of income generation is from terminal navigation services. This refers to aircraft approaching, landing and taking off at the three Irish airports.

Total costs increased by 10 per cent to €113 million in 2004, up from €103 million in 2003. The company's annual report of the cost increase was related to depreciation.

"A significant element of the increase in costs, amounting to €7.9 million, was in respect of additional depreciation associated with the new air traffic management systems commissioned in late 2003 and during 2004."

Staff costs, as a percentage of total costs, remained static.