Aer Lingus willing to set aside €100m for pensions

Aer Lingus management has indicated a willingness to set aside more than €100 million of the proceeds from the airline's proposed flotation in a special fund to offset any deficit in its staff pension scheme.

The plan is designed to win staff support for the privatisation of the State-owned company, which is being prepared for a stock market listing near the end of September.

In an effort to create a secure foundation for stable industrial relations after an initial public offering and to reassure potential investors, the plan includes a wide range of commitments on pay, conditions and a claim for compensation in respect of changes in work practice conceded under the airline's 2004 business plan.

Siptu's opposition to privatisation has emerged as a big barrier to the privatisation process, which is already vulnerable to the threats posed by the spike in fuel prices and stock market jitters over the rise in interest rates.

The union's stance in the coming weeks on the latest proposals from the airline's management will be crucial because the Government has indicated that its ultimate approval for the flotation process will be dependent on staff support.

It was unclear last night whether Siptu would be prepared to change its position on the strength of the proposal, which emerged this week.

The airline promised in May to provide some €70 million for a special pension fund, but it moved in recent days to increase that commitment by more than €30 million.

The fund would be drawn down in the event of a deficit in the existing pension scheme. Staff at the Dublin Airport Authority and the aircraft maintenance firm SR Technics also subscribe to the scheme, but they would not be entitled to support from the fund proposed by Aer Lingus.

In return for the commitment to set up the fund, staff will be asked to increase their pension contributions by 2-2.5 per cent. The company would increase its pension contributions by a similar amount.

The airline had agreed last month that no action should be taken to reduce the pay and conditions of staff who are employed immediately before the date of the flotation.

This point is reiterated in the latest proposal, which also includes a commitment to establish a profit-sharing scheme for all workers.

The purpose of such a scheme would be to allow staff to buy additional shares and retain their 14.9 per cent shareholding in the airline when new shares are issued as part of the flotation. In its absence, staff could see their stake diluted.