Aer Lingus agrees to adjourn bid to reduce reserves
CONTINUING TALKS over how to address a €930 million deficit in the Aer Lingus staff pension schemes have led to a further adjournment of the company’s High Court bid to release €500 million from the company’s capital reserves to pay dividends to shareholders.
Mr Justice Roderick Murphy had last July refused to sanction the €500 million reduction unless Aer Lingus provided for potential legal claims resulting from the pensions deficit. The shortfalls in the general and pilots’ pension schemes appeared to constitute a contingent future claim against Aer Lingus, he said. The proposed reduction in the capital reserves from almost €860 million to about €360 million was “substantially below” the level of the funds’ shortfall, he noted.
While the Aer Lingus group was entitled to seek a reduction in capital, the matter must be addressed in the context of section 73 of the Companies Act dealing with entitlements of creditors, he said.
The trustees of the pension schemes owed duties to the Aer Lingus pensioners and were contingent creditors of Aer Lingus in the circumstances of a shortfall in funding of the schemes, he ruled.
The judge noted the trustees had expressed concern, if the company got approval for the share capital reduction before a final agreement was reached on pensions issues, that was likely to significantly affect talks aimed at resolving the pensions issue. He adjourned the matter to allow consideration of implications.
When it came back before the judge yesterday, Paul Sreenan SC, for Aer Lingus, said the sides had agreed to adjourn the matter to October. A solicitor with A L Goodbody, representing the trustees, confirmed that was the case and the judge adjourned the proceedings to October 30th.
In its petition, Aer Lingus Group plc, as the holding company of the Aer Lingus companies, had claimed it had no “legal” obligation to address the pension deficits. Ryanair, a 30 per cent shareholder, had threatened legal action if the Aer Lingus board moved to reduce the deficit without the approval of shareholders, the court was told.
The Minister for Finance had received legal advice the pensioners could make a reasonable legal case the company has an obligation to reduce the pension fund deficit while the company took the view such a case would not succeed, the court was also told.
The Retired Aviation Staff Association, representing 4,700 mostly retired Aer Lingus staff, opposed the application due to the €748 million deficit in their pension scheme while the pilots union, Ialpa, objected because of a €182 million deficit in the pilots’ fund.