Aer Lingus pays €25m to employee share trust
Members get average of €16,000 each after airline agrees to clear debt and end future liability
Published 22/12/2010 | 05:00
Nearly 5,000 current and former Aer Lingus employees are each set to receive shares in the airline valued at €16,000 on average in coming weeks after the carrier inked a deal with the employee share ownership trust (ESOT) to clear its debts and absolve the airline from paying any future profits to its members.
The news came as IMPACT cabin crew members at Aer Lingus stepped up industrial action in the run-up to Christmas.
Aer Lingus said yesterday that it has agreed to pay €25.3m to the ESOT to eliminate debts the employee group accumulated buying 15.5 million shares following the flotation of the airline in September 2006.
ESOT bought the additional shares in October that year for €2.20 each after Ryanair launched a hostile bid for Aer Lingus just days after it went public. ESOT and the government rejected the bid.
ESOT already held over 47 million shares in the airline upon its flotation, while the total 66.6 million shares it controlled equated to about 12.4pc of the airline. Ryanair owns almost 30pc of Aer Lingus and the government 25pc.
Aer Lingus shares were trading at €1.13 in Dublin yesterday, valuing the total ESOT stake at just over €75m. Had the first Ryanair bid succeeded, the ESOT shares would have been worth €186m based on the €2.80 offer from the rival.
The 4,700 ESOT beneficiaries, of whom about 2,600 are current employees, will be free to sell their shares immediately. The dispersal to individual ESOT members radically increases the free float of the airline's stock, or the number of shares that are readily available to be bought and sold.
Employees who had joined the company prior to 2003 had been eligible to receive shares in the airline, while staff who joined after that date will not receive anything. About one-third of current Aer Lingus staff fall into the latter category.
ESOT was entitled to receive up to 7.5pc of Aer Lingus profits, before tax and exceptional items, on an annual basis depending on the return on average shareholder funds, but the payments had to be used to fund the repayment of ESOT borrowings or to exercise additional options ESOT had. That profit sharing agreement was to run to April 2023.
Aer Lingus management approached ESOT to make an offer to clear its debts and release the company from the profit sharing agreement. An Aer Lingus spokesman declined to say how much the airline's projected savings were by paying off ESOT debt.
Aer Lingus chief executive Christoph Mueller said the deal was of "significant benefit" to the airline and its employees and that it made "financial sense" for the airline. Chairman of the ESOT board, IMPACT general secretary Shay Cody, said the trustees had "delivered value" for the beneficiaries.