Aer Lingus predicts strikes, lawsuits over refusal to fund deficit
IRELAND - Aer Lingus, Ireland's flag carrier, has warned it could be subject to strikes and legal challenges over a refusal to contribute deficit reduction payments to its underfunded pension scheme, as it released 2011 accounts showing the shortfall had risen to €700m.
The warning came only a few weeks after fellow airline Ryanair, a major stakeholder in the formerly state-owned company, said it would consider a lawsuit if the company sought to address underfunding in the multi-employer Irish Airlines Superannuation Scheme.
In preliminary company accounts for 2011, Aer Lingus said it had "no obligation to contribute anything other than the fixed rate of contribution to IASS" and that in the absence of any additional funding, it was the responsibility of the trustee board to improve the scheme's funding position.
However, it warned that any such measures were "likely" to result in a reduction in member benefits.
"There is therefore a risk that the Group could become involved in industrial disputes with its employees, which could be significantly detrimental to the operations of the airline and its financial performance," the report stated.
Expressing concern that strike action would not be the only measure employed by workers, the airline also warned it could be subject to lawsuits challenging its stance that it shared no funding responsibility for the scheme - in which it estimated two-thirds of members were Aer Lingus employees, while the remainder worked for Dublin Airport Authority (DAA) and SR Technics.
"If, contrary to the firm legal advice that the Group has received (that such a challenge is unlikely to succeed), a Court were to find against the Group in any such litigation, significant or very significant loss could arise," it warned.
The airline said it was discussing a number of ways to address the deficit, which has risen by €300m over the past year, including its closure to future accrual. As a result, it would launch a new scheme in conjunction with DAA, an approach it deemed in the "best interests" of all parties.
Aer Lingus said it faced a similar problem with its pilots' pension scheme, which faced a deficit of €170m according to figures from the end of October.
The Irish government has previously ruled out any state aid for the fund, saying the exchequer was not able to bail out any fund with a "significant" deficit.