Airline plans EGM on pension payment
If the payment is given the green light by shareholders and the funding plans are cleared by the Pension Authority, it could mean an end to the four-year dispute over how to address a €750m hole in the existing Irish Aviation Superannuation Scheme (IASS), which has members in Aer Lingus and the Dublin Airport Authority.
IASS would be frozen and its members transferred to a defined contribution scheme.
In a statement to the markets yesterday, the airline warned shareholders that the issues arising from the current deficit represent a “real and significant risk to the success of the company”. It said the proposed solution would deliver a number of benefits for shareholders, including:
A substantially reduced “industrial relations risk” for the airline;
Clarity as to the likely total financial and legal impact of resolving funding issues in IASS;
A“sustainable” solution for IASS that otherwise may be forced to be wound-up;
The future pension provision for general employees of the airline would be on a sustainable footing;
Certain future staff costs would be “stabilised” over a “multi-year” period.
Aer Lingus chairman Colm Barrington said the board considered the proposal, formulated by an expert group made up of representatives of employers’ body Ibec, the Government, and the Ictu, was “the only solution capable of being implemented”.
“The IASS is no longer a viable scheme for the provision of pension benefits for our employees,” he said.
“A key objective of our IASS proposal is to establish a modern, single employer pension arrangement which will be fit for purpose in the context of the highly competitive European airline sector. The board of Aer Lingus recommends shareholders vote in favour of this resolution at an EGM scheduled for December 10.”
The proposal has won the backing of the majority of workers at Aer Lingus, though in the Dublin Airport Authority, management is having a harder time convincing all staff of its merits.
In relation to the €190.7m payment, the board said the money would be placed in an “escrow” structure to be disclosed as a restricted cash balance in the airline’s consolidated statement of financial position.
It reassured shareholders that “Aer Lingus Group plc has a strong balance sheet and, as at June 30m had a gross cash balance of €1,034.4m and total net assets of €813.2m”.
If shareholders do back the plan, confirmation will be sought from the trustee of IASS that the funding plan is effective. Once that is secured, it will be up to the Pension Authority to either accept or reject the plan and to make a “Section 50” application.
