Aer Lingus warns against legal action over pensions
Published 29/09/2011 | 05:00
Aer Lingus has warned that any legal action designed to force it to cough up money to help cover a massive €400m deficit at its pension scheme would be tied up in the courts for years.
At an investor conference in London yesterday, senior management, including chief executive Christoph Mueller, insisted that the airline had no obligation to help clear the black hole at a defined benefit pension scheme that has around 16,000 retired, active and deferred members, primarily from Aer Lingus and the Dublin Airport Authority (DAA).
While the trustees of the joint pension scheme and the Irish Congress of Trade Unions have written to both Aer Lingus and the DAA indicating that the deficit issue needed to be urgently addressed, Mr Mueller said no money would be forthcoming from the airline and that even if Aer Lingus did agree to inject any fresh funds into the scheme it would first have to ask shareholders' permission.
"The pension issue is not our issue," said Mr Mueller, who also hinted that he would prefer to see the State's 25.1pc stake in the airline sold to institutional investors rather than another airline when it eventually comes up for sale. He argued that a trade buyer could "infect" Aer Lingus and force its costs up.
Aer Lingus chief financial officer Andrew Macfarlane told investors that the company would staunchly oppose any attempts to force it to stump up cash for the pension fund and that its legal advice supported its position.
"If any other party had a well-founded view to the contrary, we would already have been subject to some sort of legal challenge," he said. "My concern for all parties is if this ends up in litigation it's going to take a number of years to resolve."
Human resources director Michael Grealy told investors and analysts that the airline was prepared to deal with industrial action if it arose because of the pension issue.
"We do feel confident that we will be able to work with the employee groups, but we are not afraid to confront issues," he said. Mr Grealy added that many staff had been with the airline for 20 years or more.
"If we've got to help them leave the organisation, we're prepared to do that."
A tetchy confrontation also erupted at yesterday's conference between Christoph Mueller and Ryanair's chief financial officer Howard Millar, who attended the session representing the low-cost carrier's position as the single biggest shareholder in Aer Lingus.
Ryanair has been calling on Aer Lingus to publish the findings of a report undertaken after the airline was forced to come to a €30m settlement with the Revenue Commissioners this year over a controversial 2008 leave and return scheme.
Mr Millar accused the Aer Lingus board of suppressing the report to protect management.
Mr Mueller said the report won't be made publicly available and also dismissed Mr Millar's renewed call for a €110m dividend to be paid by Aer Lingus to shareholders.
Aer Lingus is also eyeing up new services to Scandinavia and will introduce wireless internet services on its long-haul aircraft from next year.
Mr Macfarlane said the airline's long-haul services were now performing well, but that Aer Lingus had considered terminating its US services in 2009 due to the losses being incurred.
Aer Lingus said yesterday that during July and August its yields rose 4.6pc compared with the same period last year, while passenger volumes were 1.4pc higher.