Proposals have been drawn up to plug the €722m deficit in the Aer Lingus pension fund by giving its assets to the National Treasury Management Agency in return for a long term bond portfolio.
The pension deficit is viewed as a major obstacle to the Government's plans to sell of its 25% stake in the airline as part of the Troika programme for the sale of state assets.
Dealing with the massive deficit is further complicated by the fact that the Irish Aviation Superannuation Scheme is a multi-employer scheme - covering the private sector Aer Lingus, the state-owned Dublin Airport and the defunct SR Technics.
Proposals floated at the Labour Relations Commission would start by freezing the scheme - no further contributions would be made and no benefits would build up.
The fund's assets, worth €1.4 billion, would transfer to the National Treasury Management Agency. In return, a bond portfolio would be issued, including some bonds maturing over decades.
However, there are a number of problems. What share of the liabilities will each employer have to cover, given that their financial situations vary and SRT is defunct?
Who will pay for the shortfall if the NTMA bonds do not yield enough to meet pension obligations?
In addition, brand new separate DAA and Aer Lingus pension schemes must be negotiated for future pensions.
Sources say it is likely that future pensions for Aer Lingus and DAA workers will be lower. It remains to be seen whether the NTMA mechanism will be used to deal with pension deficits in other state companies.
Government sources stressed that it was vital there was no additional burden for the taxpayer.
