CHRISTMAS CAME early for current and former employees of Aer Lingus yesterday after the airline’s decision to pay its employee share ownership trust (Esot) €25.3 million to clear its debt, which was held by Anglo Irish Bank.
These borrowings relate to stock bought at the time of the company’s market debut in 2006 when the Esot subscribed for 15.5 million shares. That transaction took its holding in the airline to 12.5 per cent.
This deal has also allowed the Esot to distribute 66.6 million shares to its 4,700 members. This equates to an average of 14,170 shares each, which, based on yesterday’s closing price of €1.13, are valued at just over €16,000. About 55 per cent of the Esot members still work for Aer Lingus.
This transaction means that Aer Lingus is no longer obliged to pay a profit share to staff. The profit share obligation was established at the time of the IPO in 2006. It required Aer Lingus to pay up to 7.5 per cent of its pretax profit before exceptional items to the Esot until the earlier of April 2023 and the full repayment of the Esot’s debt and associated interest.
Aer Lingus said the transaction would yield a “financial benefit” to the airline as the once-off payment is less than the future profit-share payments and other associated costs that it would have been obliged to pay the Esot.
But the airline did not quantify the scale of the financial benefit. Aer Lingus has not made a profit-share payment to staff since 2007 when Esot members shared €9.8 million.
The deal should also help to improve the liquidity of the shares on the stock market. Aer Lingus will now have a free float of close to 45 per cent.
This deal must come as a relief to the Esot trustees in the current financial climate. The trust was effectively burdened with the costs of servicing its borrowings without having received any income from the profit share for three years.
Aer Lingus chief executive Christoph Mueller said the transaction represented a “significant benefit” for Aer Lingus. “The transaction makes financial sense for the group and significantly increases direct employee share ownership,” he added.
Shay Cody, chairman of the Esot board, said: “The Esot is pleased that it has delivered value for its beneficiaries.”
Aer Lingus has paid for the deal out of its gross cash reserves, which stood at €952 million at the end of September.
The Esot was established in 2003 as part of a restructuring deal.