Aer Lingus staff may lose up to 25% of expected pension benefitsThursday 10 October 2013 17.47
Aer Lingus staff may lose up to a quarter of their expected pension benefits due to a deficit in their pension fund, according to the trustees of the fund.
In a statement to the Stock Exchange, Aer Lingus said that at a meeting with management and unions earlier this week, the trustee had estimated the loss in benefits at between 11% and 25%.
However, the airline today ruled out any increase in the one-off €140 million sum which it has already agreed to contribute to underpin the restructuring of the pension scheme.
The Irish Aviation Superannuation Scheme, which covers staff in both Aer Lingus and the Dublin Airport Authority, has a deficit of around €750 million.
Last summer, a restructuring proposal negotiated by the two companies and their unions at the Labour Court was rejected by the Pensions Board.
That proposal would have seen the existing pension scheme frozen, with assets used to purchase long term sovereign bonds.
It was forecast that the yield on those bonds would deliver sufficient returns to fund pension entitlements accrued to date.
Aer Lingus would also contribute a once off lump sum of €110 million to a new defined benefit pension scheme, and a further €30 million to help meet the entitlements of former staff who have not yet retired.
In today's statement, Aer Lingus said that the scheme trustees had met management and unions on 7 October and outlined a number of measures aimed at addressing the deficit in the fund which now stands at over €750 million.
The trustee's proposals included working for extra years, and cuts in benefits of between 11 and 25%.
Unions have calculated that the reduction in benefits could be even greater, and want Aer Lingus to inject a larger amount of cash to protect members' pensions.
However, Aer Lingus today ruled out any additional contribution beyond the €110 million, saying it remained adequate to achieve the target levels of pension benefit negotiated at the Labour Court.
It also said that it was unlikely there would be a deal before the end of this year.
Unions have already threatened to take industrial action over the pension cuts.
The pension deficit has been viewed as a serious obstacle to the government's plan to sell its 25% stake in Aer Lingus, as well as to the company's attempts to build alliances aimed at growing the airline.