Monday 25 September 2017

Pension row stalls Aer Lingus bid to cut its capital reserves

The airline has been attempting to reduce its capital reserves by €500m since the summer.
The airline has been attempting to reduce its capital reserves by €500m since the summer.

John Mulligan and Mary Carolan

Efforts by Aer Lingus to reduce its capital reserves so it can pay future dividends have been put on ice again at the High Court.

The airline has been attempting to reduce its capital reserves by €500m since the summer. Such a change has to first secure shareholder approval and then be cleared by the High Court.

But High Court Judge Roderick Murphy refused to sanction the move in July unless Aer Lingus made a provision for possible legal claims in relation to a €700m-plus deficit at a pension scheme designed to serve thousands of former and current employees at the airline and the Dublin Airport Authority.

Deficit

With the pension deficit issue still unresolved and Aer Lingus staff preparing for industrial action in three weeks' time, it was agreed in court that the capital reserves matter be put back until December 11.

Mr Justice Murphy said the shortfalls in the general and pilots' pension schemes appeared to constitute a contingent future claim against Aer Lingus.

The proposed reduction in the airline's capital reserves from almost €860m to about €360m was "substantially below" the level of the pension funds shortfall, he said.

While Aer Lingus was entitled to seek a reduction in capital, the matter must be addressed in the context of Section 73 of the Companies Act dealing with entitlements of creditors, Mr Justice Murphy said.

The trustees of the pension schemes owed duties to the Aer Lingus pensioners and were contingent creditors of Aer Lingus in the circumstances of a shortfall in funding of the schemes, he ruled.

In those circumstances, the company's application was adjourned to facilitate talks over the dispute.

Talks at the Labour Relations Commission over the deficits in the schemes were suspended last week.

In court, Paul Sreenan, for Aer Lingus, said it had been agreed with trustees the matter could go back to December 11.

Brendan Frawley, a solicitor and Aer Lingus pensioner, said the judge's decision on the application for the €500m reduction had been interpreted a number of ways and he wanted to hand into court a statement outlining his own interpretation of it.

In his view, the judge's decision was "as clear as day" and he was concerned why the matter was "dragging on".

Mr Justice Murphy said he was aware discussions were taking place. Mr Sreenan said he considered Mr Frawley had no legal standing in this matter as the beneficiaries of the pension scheme, including Mr Frawley, were represented by the trustees.

Mr Sreenan said he agreed there were different interpretations of the court's decision and the judge may yet have to rule what was the correct one but that the matter should be adjourned at this stage.

James Doherty, for the trustees, said they were deemed creditors for the purpose of the application for reduction of capital and that was all he was saying now.

Mr Justice Murphy said the trustees were those charged with the matter but Mr Frawley could attend court on December 11 and the other parties were entitled to see his submissions.

Irish Independent

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