Aer Lingus to seek shareholder backing for €110m pension deal
Airline loses €28 million in first half but expects €49 million full-year profit
Aer Lingus chief executive Christoph Mueller said that the aireline’s board hoped to be in a position to put to its shareholders, in October, a Labour Court proposal designed to resolve a long-drawn out dispute over a shortfall in a staff pension scheme.
The airline said yesterday it lost €28.2 million before tax in the first six months of the year, 14 per cent more than the €24.7 million shortfall it reported for the same period in 2012.
However, the company still expects 2013’s operating profits to be “broadly in line” with the €49.1 million it earned last year.
The group said revenues in the first six months grew 5 per cent on the same period last year, to €657.9 million from €626.3 million. Passenger numbers increased by 1.3 per cent to 4,750 and fares grew 5 per cent to €538.4 million from €513 million.
In the second quarter of the year, operating profits fell 8 per cent on the same period in 2012 – to €29 million from €31.7 million.
Speaking after Aer Lingus published its results, Mr Mueller said the board hoped to put a Labour Court proposal designed to resolve a long-drawn out dispute over a shortfall in a staff pension scheme to shareholders in October.
Staff at Aer Lingus and the Dublin Airport Authority are members of the Irish Aviation Superannuation Scheme, whose €780 million shortfall has several times brought both companies’ workers to the brink of industrial action.
In May, following six months of talks, the Labour Court recommended that Aer Lingus provide €110 million to a new fund, pay a number of salary increases due this year and then freeze pay. Estimates of the entire deal’s cost run to €200 million.
Aer Lingus has enough cash to meet the lump-sum payment – it had €1 billion on its balance sheet at the end of June. The board has backed the deal, but the company has decided to put it to a shareholders’ vote, although it is not obliged to do so. Michael O’Leary, chief executive of its its biggest stakeholder, Ryanair, has already pledged that his company will oppose the deal.
Mr Mueller said he was optimistic that objections raised by the Pensions Board to the plan could be dealt with. Its chief executive, Brendan Kennedy, wrote recently to the scheme’s trustees rejecting some of the plan’s aspects on the grounds they do not meet requirements laid down in legislation.
The Aer Lingus chief executive said the board had not rejected the plan outright. “It was really an informal pre-notification from the Pensions Board to the trustees, it was mostly about guiding them in the right direction,” he said. Mr Mueller added he was optimistic of putting the deal to shareholders and resolving the issue fully by the end of the year.
He is also hopeful the UK Competition Commission will order rival Ryanair to sell its entire 29.8 per cent stake in Aer Lingus when it makes a final ruling this month on its investigation into the impact of the stake on competition between the two routes between Britain and Ireland.
He suggested a recent statements from Ryanair indicated it believed the commission would order it to sell the stake and that it was trying to pre-empt this.
Aer Lingus recently announced plans to expand is transatlantic services, including San Fransisco. The move is partly designed to attract British travellers, from areas such as Scotland and northern England, to connect to US routes via Dublin. Mr Mueller predicted that up to half its long-haul traffic would be made up of such fliers by next year.