Hopes grow for end to Aer Lingus pension row
Airline prepares to get investor backing for once-off €191m contribution to fund
Hopes are growing that a solution to the row over pensions at Aer Lingus and the Dublin Airport Authority (DAA) has moved a step closer, with the airline gearing up to get investor backing for a once-off €191 million contribution to a fund that will replace the existing insolvent scheme.
Aer Lingus, DAA, trades union and other stakeholders have been in deadlock for several years over how to plug a €780 million hole in the Irish Aviation Superannuation Scheme (IASS), whose members include workers in both the airline and airport.
The latest proposal for resolving the dispute involves a contribution of €191 million from Aer Lingus and €73 million from DAA to a new fund that will replace the IASS.
Aer Lingus told brokers this week it hopes the issue can finally be resolved by the end of this year and is planning to hold an egm to get shareholder approval for the €191 million contribution in early to mid December.
It has also agreed terms with its unions which they will put to a ballot of their members in a process that is expected to last until the end of next month.
Around the same time, the trustees will seek approval for the entire settlement from the Pensions Board, the State’s regulator. Earlier this year the trustees drew up a plan involving a clawback from retired workers and a 20 per cent benefit cut for current staff.
Aer Lingus hopes to issue formal notice of its egm in November, indicating the meeting will take place the following month. The original settlement called for a €140 million contribution from the airline.
This failed to get the unions’ support.The increased figure now on the table was proposed by an expert panel appointed by the Government in March after industrial action was narrowly avoided.
Aer Lingus “reluctantly” accepted the new terms in June. This week it told brokers’ analysts the new settlement would substantially reduce the risk of industrial action at the airline. The pensions row has several times brought its staff and those working for DAA to the brink of strike.
The airline also said the deal would stabilise staff costs as the deal involves no increments or annual pay inflation this year or in 2015 and 2016. From 2017 on, salary increases will be calculated off a lower base than previously.
The analysts reacted positively to the news. Goodbody estimated that the pay freeze forming part of the deal will save up to €80 million and pointed out that the company’s balance sheet could absorb the €191 million once-off payment.
Goldman Sachs said the resolution would unlock the company’s balance sheet potential and cited it as one of the reasons why it believes the airline remains attractive to investors. However, a number of groups involved in the pension row have threatened to take legal action if their concerns are not addressed. Existing pensioners, who face a clawback from their payments under the trustees’ resolution, are reportedly considering going to court.
At the same time, deferred beneficiaries – workers who left either company before reaching pensionable age – are threatening litigation on the grounds they are not being put on an equal footing with current staff. A total of 14,343 people are affected by the row, including 4,270 workers, 5,186 deferred beneficiaries and 4,887 pensioners.