Aer Lingus has said its board of directors has backed a proposal to make a once-off contribution of €140m to employee pensions as part of a deal to avoid possible strikes at the airline.

The Labour Court recommendation includes a once-off contribution of €110m for existing employees in a new defined contribution pension scheme for existing workers.

It will also make a once-off contribution of €30m in respect of deferred members of the IASS scheme.

The deal aims to address a hole in a pension scheme which employees at Aer Lingus share with other aviation industry workers and which had a deficit of over €700m at the end of 2011.

The proposal will be put to shareholders following talks with unions and pension fund trustees and will be implemented if staff and union members also agree, Aer Lingus said in a statement today.

Aer Lingus shares were significantly higher by the close of business in Dublin, gaining 4.3% to finish at almost €1.62.

Low-cost airline Ryanair, which owns almost 30% of Aer Lingus and this year failed in a third takeover attempt, has said it opposes a pension pay-out, but does not have enough votes to block it alone.

Britain's Competition Commission is to rule by July on whether to force Ryanair to sell its stake in Aer Lingus due to competition concerns.

The airline's chairman Colm Barrington said the recommendation is a compromise that contains elements that are ''challenging'' for all parties.

''Notwithstanding these challenges, it is our assessment that the recommendation is a step forward that balances the various risks and concerns and for this reason, it should form the basis upon which the parties proceed,'' Mr Barrington said.

''The board looks forward to a timely conclusion of the required next steps so that a circular outlining the full details of the proposed solution can be put to Aer Lingus shareholders,'' he added.

Ryanair will vote against the move

Ryanair has responded to the move, calling it a ''spineless rollover''.

Ryanair said Aer Lingus had repeatedly assured shareholders that the pension scheme was a defined contribution scheme for which Aer Lingus had no further liability.

The airline has accused Aer Lingus staff of having blackmailed the Government and board of Aer Lingus in order to enrich themselves.

It said the move increases Aer Lingus' cost base, with no benefit to the airline's shareholders.

Ryanair has said it will vote against the measure but has acknowledged that its minority stake in Aer Lingus gives it little influence over the decision.

"Ryanair does not believe that this latest exceptional payout will be the last. The Aer Lingus unions have repeatedly shown that whenever they threaten, the board and management will roll over," Michael O'Leary, CEO of Ryanair, said in a statement.

"This will continue while Aer Lingus remains controlled by a board of directors which was appointed by and is controlled by the Irish Government and ICTU boss David Beggs. As a public company, Aer Lingus should be run for the benefit of its shareholders and not to repeatedly enrich its 3,000 staff," he concluded.