CEO rules out Aer Lingus pension fund top-up

AER LINGUS chief executive Christoph Mueller yesterday described the €700 million deficit in the pension scheme it operates jointly with the Dublin Airport Authority and SR Technics as “frightening” but insisted the airline would not be providing funds to shore it up.

This is in spite of its recent engagement at the Labour Relations Commission with the various interested parties on the matter and its acknowledgment that a failure to address the issue could provoke staff members to implement some form of industrial action.

The deficit widened by €300 million last year alone, primarily due to increases in the estimated cost of purchasing annuities for pensioners in a wind-up, and a decline in asset values.

As of December 31st, the Irish Airlines Superannuation Scheme had 14,680 members, of which about two-thirds are current or former Aer Lingus staff.

Aer Lingus reiterated its stance that it has “no obligation” to contribute anything to the fund, other than the fixed-rate contribution it makes on behalf of employees.

At the time of its flotation in 2006, the airline made a once-off payment into the pension scheme of about €100 million and stated that its firm legal advice was that it did not have any obligation to make additional payments into the scheme in the event of a default.

Options being considered to address the pension deficit include freezing the scheme so that no more payments are made. Aer Lingus and DAA – SR Technics has quit the Irish market – would then have to set up new pension arrangements for future service.

The changes might also involve the trustees of the scheme buying sovereign annuities to improve the expected return on investments to reduce the deficit in the scheme.

Aer Lingus also revealed that its pilots’ scheme, which has 895 members, had a deficit of €170 million at the end of October 2011. Changes to this scheme were agreed with pilots in 2010 and Aer Lingus said it was not in “formal discussions” with pilots about the deficit.

Ryanair, which owns 29.8 per cent of Aer Lingus, again threatened to take legal action if its rival were to bow to pressure to shore up the deficit. Mr Mueller said it has no plans to do so, unless requested by shareholders, which seems unlikely.

He said the airline was participating in the Labour Relations Commission talks through a “moral obligation” to its employees “more than anything else”.