Judge rejects Aer Lingus resolution
A High Court judge has refused to sanction a €500 million reduction in Aer Lingus group's capital reserves to pay dividends to shareholders unless the company makes provision for potential legal claims resulting from the €930 million deficit in the pension schemes.
The shortfalls in the general and pilots' pension schemes would seem to constitute a contingent future claim against Aer Lingus, Mr Justice Roderick Murphy said.
In those circumstances, court approval of the resolution to reduce the capital reserves was subject to a condition that Aer Lingus provide for potential claimants arising from the penson funds deficit, he found.
The proposed reduction in the capital reserves from almost €860 million to about €360 million was "substantially below" the level of the shotfall in the pension funds, he noted.
While the Aer Lingus group was entitled to seek a reduction in capital, the court had to address the matter on the basis of Section 73 of the Companies Act relating to the entitlements of creditors, he said.
The trustees of the pension schemes owed duties to the Aer Lingus pensioners and are contingent creditors of Aer Lingus in the circumstances of a shortfall in funding of the schemes, he ruled.
The judge also noted the trustees had engaged with Aer Lingus with a view to resolving the pension fund issues and had expressed concern, if the company got approval for the share capital reduction before a final agreement was reached on pensions issues, such approval was likely to impact significantly on the talks.
He was delivering his reserved judgment on the application for approval for the share capital reduction. The judge has adjourned the matter to September 3rd to allow the various parties, including the pension scheme trustees, consider his judgment. James Doherty, for the trustees, said "a lot depends" on what happens between now and September 3rd.
In its application, Aer Lingus Group plc, as holding company of the Aer Lingus companies, had claimed it has no "legal" obligation to address the pension funds deficits and also said 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 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 some 4,7000 serving and retired Aer Lingus staff, had opposed the application because of a a €748 million deficit in their pension scheme. The pilots union, Ialpa, also opposed the application due to the €182 million deficit in the pilots pension scheme.