Leaks could derail talks over pension deficit – Aer Lingus
IRELAND - Leaks detailing Aer Lingus proposals to address a €750m pension deficit are putting the successful outcome of discussions at risk, the Irish flag carrier has warned, as it estimated active members would be left with 4% of benefits if the scheme was wound up.
In a statement to the Irish Stock Exchange, the airline said recent media commentary surrounding its discussions with unions on the pension deficit in the multi-employer Irish Airlines Superannuation Scheme (IASS) had seen confidential details of the discussion emerge and could be “prejudicial to reaching a conclusion”.
The comments are likely a reference to articles in Irish newspapers that saw the Irish Congress of Trade Unions’ submission to the Labour Relations Commission leaked.
Unions are asking Aer Lingus and Dublin Airport Authority to pay a combined €330m into the pension fund to guarantee accrued benefits.
The airline said the current funding position - a €748m deficit under the funding standard - was “unsustainable” and needed to be addressed by the IASS trustee.
However, it also stressed that it would not contribute any funding above member contributions in an effort to reduce the shortfall.
One of the airline’s largest shareholders, rival Ryanair, has previously threatened a lawsuit if any deficit contributions were to occur.
Aer Lingus said that if the scheme had been wound up at the end of May, active members would have been left with approximately 4% of the expected benefits.
It added: “Aer Lingus believes that such an outcome would be extremely damaging for the group, its employees and shareholders.”
Under Irish law, pensions in payment receive absolute priority on scheme wind-up.
The government had proposed a change to the wind-up as part of legislation that introduced a revised funding standard earlier this year, but language was not included in the final draft of the Social Welfare and Pensions Bill.
Aer Lingus outlined its proposals to create a better outcome for its members, suggesting the closure of the IASS, with the trustee urged to invest in matching assets - a potential reference to sovereign annuities.
But the airline stressed that it would not make additional contributions beyond employer benefit payments.
It added that, on the closure of the IASS, a new defined contribution scheme would be launched for its members.
“Aer Lingus is prepared to put in place arrangements to improve the likely future pensions of affected IASS members, provided the balance between costs and benefits is in the interests of all parties including shareholders,” it said.
“If put in place, any such arrangements are likely to include a once-off initial contribution to the DC funds of those affected IASS members. Such contributions would favour those closer to retirement.
“In combination, these three elements have the potential to provide fair and sustainable pension benefits for affected IASS members significantly beyond the level of coverage, which the IASS current funding status can sustain.”
The airline stressed that the discussions with the Labour Relations Committee were “complex and involved many parties”, and that there was therefore no certainty of a successful outcome.