State airline seeks investor to save it from bankruptcy
Aer Lingus has appointed NCB Corporate Finance to find an investor to save the company from bankruptcy. The £40 million (€51 million) redundancy programme unveiled yesterday will not be sufficient to return the company to profitability and new funds will still be needed to make good a £50 million shortfall in working capital next year, according to Aer Lingus sources.
The money is being raised by the sale of two Boeing 737 aircraft. But the unions have reacted angrily to a company decision to issue the redundancy package direct to staff yesterday without prior notice or consultation. The first any of the unions knew about the latest development was when they were contacted by RT╔ for comment. The company has imposed a November 30th deadline on the offer.
The general secretary of the Irish Congress of Trade Unions, Mr Dave Begg, said last night the unions had been "put in an impossible position" by the company over the redundancy package. "The problem is bad enough without the company acting in this Machiavellian way." However, union leaders were careful not to say if they would recommend rejection or acceptance. They may feel the terms are too poor to attract many applicants.
The terms are certainly poorer than those in the Cahill Plan. They allow only four weeks' pay per year of service instead of six weeks. There is also a cap of two years' salary on the amounts available.
The terms are slightly better for pilots, who can avail of early retirement at 48. However, the fact that a pay increase worth £21,000 a year for pilots has been deferred indefinitely means they will be reluctant to avail of the retirement offer without some commitment that they can recoup the value of the pay increase at some future date.
Even if the unions recommend acceptance of the terms it seems unlikely the package will attract anything like the company's job cuts target of 2,026. Mr Begg made his criticism of how the company handled the redundancy issue after leading an ICTU delegation to Government Buildings last night to discuss the crisis facing the national airline with the Taoiseach, Mr Ahern, and the Minister for Public Enterprise, Ms O'Rourke.
He said the Taoiseach was still pursuing options with the European Commission, but the problem of finding a market investor remained central. The move by Aer Lingus to find an investor through NCB Corporate Finance could therefore prove crucial.
The decision to press ahead with the redundancy programme is part of a process to make the airline a more attractive investment, according to a company source. Unofficial soundings among other airlines and private investors have led to nothing.
NCB has only been appointed and it has not yet approached anyone. Potential investors may have been deterred by the prospect of their cash being used to pay generous redundancies rather than being invested in the ongoing business.
The package unveiled yesterday will be funded by the sale of two Boeing 737 aircraft for around £40 million. This would reduce the amount of cash required and the amount of the company that may have to be sold.
Last week the Government approved the sale by Aer Lingus of a minority stake to raise cash. Up to 35 per cent of the airline might be sold, allowing the State to retain a majority stake and the staff increase their stake from 5 per cent to 15 per cent.
The increased shareholding for employees is unlikely to be enough to reconcile unions to the sort of productivity changes being demanded. They will also be reluctant to allow members to accept indefinite pay freezes and a return to a low wage culture simply to attract a short-term outside investor. Even if the uptake of special leave increases and early retirement packages are offered to other groups, as requested by the chairman of the craftworkers group, Mr Eamon Devoy, at last night's meeting with the Taoiseach, very tough negotiations lie ahead.