Aer Lingus shareholders are unlikely to allow the airline to contribute more than €140 million to the cost of resolving the row over its pension deficit, according to chief executive Christoph Mueller.
The company has told the markets that a proposal involving a €140 million contribution from its coffers could form the basis for a settlement designed to deal with an estimated €780 million shortfall in the Irish Airlines Superannuation Scheme (IASS), a pension plan jointly operated by Aer Lingus and the Dublin Airport Authority. However, it seems likely that its unions could ask for a larger sum.
Mr Mueller said yesterday that €140 million is the "maximum contribution from Aer Lingus". The airline's board has agreed to allow shareholders, including the State and rival Ryanair, a vote on putting any of its cash towards resolving the row.
Its chief executive said that shareholders are likely to approve a €140 million contribution, but if the number were to be larger than this, they would be unlikely to support it, particularly without further savings in costs.
He pointed out that the company has no obligation to put any money towards resolving the pensions shortfall and has always said that there must be a business case for doing so.
Recent letter
Mr Mueller's remarks underscored a recent letter from the company to the pension trustees that ruled out making any further contribution above the €140 million that is already on the table.
As things stand, the scheme is to be frozen and and staff moved to a new, defined contribution plans funded with the help of cash contributions from Aer Lingus and the DAA.
At the same time, staff would face benefit cuts in the original IASS of between 11 per cent and 25 per cent and would have to work for extra years before retiring.
In July, Mr Mueller said that he hoped to put a final proposal to shareholders by October and that the matter would be finally resolved by the end of this year. However, concerns raised by the trustees and the regulator, the Pensions Board, have resulted in further delays.
In a statement issued with its third quarter results yesterday, Mr Mueller said that he had to “again express my disappointment that the ongoing process to resolve pension issues continues to have a negative impact on our ability to deliver efficiencies and cost saving measures, particularly in respect of our recent voluntary severance programme”.
Publishing its latest results yesterday, the company stuck by its prediction that operating profits for the full year will be about €60 million.
This was in contrast to its competitor and shareholder, Ryanair, which said that its profits would be up to €100 million below what it forecast in its first warning in September.
