Aer Lingus has signalled to the markets it believes it will not have to make an additional contribution to deal with the problems in the pension scheme it shares with the Dublin Airport Authority (DAA).
Last May, the company told the markets a proposal put forward by the Labour Court could form the basis of an agreement for dealing with the estimated €780 million deficit in the Irish Airlines (General Employees) Superannuation Scheme (IASS).
However, subsequently the Pensions Board raised concerns about the Labour Court proposal. At a series of briefings with management and unions at both Aer Lingus and the DAA this week, the trustees of the scheme said a number of benefit cuts were required to satisfy the concerns put forward by the Pensions Board.
The trustees proposed that members take a cut in benefits of 25 per cent, or they proposed a combination of measures that involved beneficiaries taking a lump sum on retirement and a 12 per cent reduction on their pension payout.
They also proposed increasing the retirement age to 68, in line with the changes to State pension entitlements. The trustees have sought feedback on their proposals from employers and unions.
Message to market
In a new statement to the markets yesterday, Aer Lingus set out a summary of the proposals put forward by the trustees.
Aer Lingus said: “The company’s assessment, based on careful consideration of the IASS trustee proposal and advice received, is that the recommended company contribution can accommodate a degree of reduction in co-ordinated IASS benefits and still achieve the target levels of pension benefit proposed by the Labour Court in its recommendations dated January 2nd, 2013, and May 24th, 2013. In particular, the company’s proposed once-off funding of €110 million to a new defined-contribution scheme remains adequate to support the achievement of the targets in the Labour Court recommendations.”
It said the company “also proposed to make a once-off contribution of €30 million to a new defined-contribution scheme in respect of former employees who are deferred members of the IASS.”
The airline said that following the submission of a proposal to, and acceptance by, the Pensions Board, the implementation of the Labour Court recommendations on the pensions issued would remain dependent on a series of further complex steps. It said these included agreement with the trade unions; agreement by IASS trustee with the sponsoring employers; approval by Aer Lingus shareholders; approval by union members in ballots; and the successful conclusion of a range of implementation steps by the IASS trustee.
“As previously stated, assuming the above agreements with the IASS trustee, Irish Congress of Trade Unions and the trade unions can be concluded, Aer Lingus will issue a circular to all shareholders which sets out full details of the proposed solution and to convene an extraordinary general meeting to seek approval from shareholders.” Aer Lingus said it remained committed to implementing the proposal set out in by the Labour Court. However, it said it was unlikely an extraordinary general meeting could be convened before the start of 2014.
