The row over the status of the Air Lingus pension fund may force the Government to put plans to sell the airline on hold for the second time.
It had been thought that the Government would look at a sale of the company or the bringing in of a strategic investor this year. But with an unquantifiable pensions liability potentially hanging over the airline, there is little prospect of any move in the short term.
SIPTU and IMPACT, the main unions at Aer Lingus, claim the company has changed the status of the scheme without consent. As a consequence, worker directors at the airline refused to sign its accounts at a board meeting on Thursday.
The company insists there has been no change in pension arrangements at the airline, which has recently emerged from a swingeing restructuring that saw the departure of 2,000 staff and the reworking of its business model.
IMPACT has asked the Pensions Board, which regulates pensions in the Republic, for a determination on the status of the Aer Lingus arrangements.
At issue is whether the scheme is defined benefit - in which case the employees are assured of certain benefits in retirement - or defined contribution, under which the benefits are determined by the performance on contributions made by the employers and the members.
The scheme is registered with the Pensions Board as a defined-benefit scheme but was described in the company accounts last year and this year as a "targeted-benefit" scheme.
Much will hinge on the legal definition of a targeted-benefit scheme. The leading legal text book on the subject, Irish Pensions Law and Practice, by Kevin Finucane and Brian Buggy, describes targeted-benefit schemes as "a defined-benefit scheme in which the employer indicates but does not promise that it will fund the scheme... in order to provide target but unguaranteed benefits".
Unions insist that benefit entitlements under the scheme are "absolutely defined and without caveat".
While contribution levels have been sufficient to meet promised benefits since the scheme's creation in 1954, unions fear Aer Lingus's new stance might undermine future benefits.
"Either this is an unadulterated defined-benefit scheme or it is not, in which case we would be better off knowing before any sale of the company," said IMPACT deputy general secretary Mr Shay Cody. "That is why we have sought the Pensions Board determination. From the company's point of view, you could not get involved in a sale or a third-party investor while all this was in the air."
The determination could take months and pensions experts last night said that the issue was likely to end up in the courts.
"This certainly could present a potential conflict for the company," said one pensions industry source. "There are arguments on both sides and it will really be a question of lawyers picking over words and over who said what to whom."
The outcome will affect thousands of workers. Aer Lingus staff are members of the Irish Airlines (General Employees) Superannuation Scheme and the Irish Airlines (Pilots) Superannuation Scheme.
Staff at Aer Rianta, FLS, Airmotive and Timas are also members of these schemes, which are administered by Aer Lingus.
Chief executive Mr Willie Walsh said recently that Aer Lingus would comfortably pass the most recent projected profit of €45 million for 2002.
Last November, the Minister for Transport, Mr Brennan, met airline officials and is understood to have indicated that he would await full-year results before deciding how to proceed. He said at that time the Government was looking very closely at the airline's options.
