TALKS BETWEEN Aer Lingus and its pilots broke down on Tuesday morning after the airline’s management tabled a proposal that the pilots “shoulder the entire” €100 million-plus deficit in their defined-benefit pension scheme, according to a document seen by The Irish Times.

This was in addition to a number of concessions on the pension scheme that had already been agreed in principle by pilots’ union Ialpa.

It is understood that the pension deficit proposal was introduced by the airline in a document, headed “final company position”, at 6am on Monday morning.

Ialpa produced a response to the document within a couple of hours but negotiations ended.

The deficit in the pilots’ pension scheme was €147 million in March 2009. This is believed to have reduced in the meantime as stock markets have recovered in value.

An Aer Lingus spokesman declined to comment on the pension negotiations.

It is understood Ialpa offered more than €35 million in cost savings to Aer Lingus.

These included a pay cut of 10 per cent, which would have saved the airline €8.1 million a year.

This offer was made on the basis of the debt of the Tailwind trust, which has spent €30 million buying shares in Aer Lingus to fend off Ryanair’s bids, being wiped out.

Voluntary redundancies would have added €15.2 million. The pilots offered productivity increases that they said were worth €9 million a year.

Aer Lingus valued these savings at €5 million annually.

In addition, the pilots agreed to an increase in the retirement age from 55 to 60.

The pilots estimated that would yield a saving of €5.85 million. The airline is believed to have disputed this figure, arguing that it would give the company a zero saving.

In relation to the pension scheme, the pilots agreed to increase their contributions to 11 per cent from 7 per cent currently.

It is understood that Michael Greally, Aer Lingus’s human resources director, wrote to Ialpa yesterday seeking more talks.

On Tuesday evening, Aer Lingus chief executive Christoph Mueller issued a statement saying the talks with its unions had been unsuccessful and the company would move to ground aircraft, close loss-making routes and lay off more than 1,000 staff to give it a viable future.

Aer Lingus had sought 676 voluntary redundancies to help achieve annual cost savings of €97 million a year by 2011.

Mr Mueller said the board would decide the details of the rationalisation at its board meeting tomorrow.

Aer Lingus held lengthy talks yesterday at the Labour Relations Commission with Impact, the union that represents cabin crew, to try to reach agreement.