Business Irish

Tuesday 6 December 2016

Aer Lingus warns of disputes over €344m pension hole

AVIATION

Published 01/09/2011 | 05:00

€25.9m

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Aer Lingus's operating profit in the second quarter of 2011

Aer Lingus has warned it could face "significantly detrimental" industrial disputes if a €344m funding hole at an employee pension scheme results in its members being forced to take cuts in their future entitlements or to put more of their earnings into the scheme.

The airline issued the caution as its chief executive Christoph Mueller said he expected full-year profits at the carrier to be better than previously expected due to stronger-than-anticipated customer demand as the airline enters the second half of the year.

Aer Lingus yesterday reported that its operating profit in the second quarter of the year jumped 38pc to €25.9m as, unlike last year, it didn't have to deal with the impact of airspace closure due to volcanic ash. For the first six months of 2011, pre-tax losses narrowed nearly 32pc to €14.2m, although its operating loss widened 46.3pc to €27.8m for the period with the threat of industrial action by IMPACT.

The Irish Airlines Superannuation Scheme is a joint defined benefit scheme with the Dublin Airport Authority (DAA), former SR Technics workers and Aer Lingus employees, and has about 16,000 retired, active and deferred members.

The Irish Independent has learnt that the Irish Congress of Trade Unions wrote this week to DAA chief executive Declan Collier and Mr Mueller insisting that the companies had an obligation to develop proposals to address the deficit and that unions would act to defend the pension entitlements of their members.

Unions had previously warned that Aer Lingus faced possible industrial action if the companies insisted on making no additional contributions to the troubled pension scheme.

But Niall Shanahan, a spokesman with IMPACT, played down the prospects of industrial action yesterday, saying that while he believed Aer Lingus had a duty to find a solution to the pension fund deficit, the two sides had a track record of reaching acceptable agreements.

"A negotiated solution is always preferable," he said. "It's too early to call time on that."

One way for the trustee of the scheme to address the deficit is to reduce future benefits for active members, or make them contribute more to the pension fund while they continue working. Both the DAA and Aer Lingus maintain they have no legal obligation to inject fresh funds into the pension scheme in order to plug the deficit.

The scheme's trustees told management at Aer Lingus and the DAA in July that the position of the fund was "both critical and urgent". A resolution of the deficit issue must be secured by the end of this year.

Aer Lingus chief financial officer Andrew Macfarlane said yesterday that if the company's position -- of not having to make any additional contributions -- was tested in court and it lost the case, the airline could face serious financial consequences.

Mr Mueller said yesterday the airline was also exploring the possibility of introducing a voluntary extended leave scheme in winter 2012-2013.

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