Cantillon: Debate over Aer Lingus pension proposal to run for some time

The market yesterday welcomed the Labour Court's efforts to deal with the pension deficit that has been hanging over Aer Lingus.

Dating back to its days as a wholly State-owned company, Aer Lingus is a member of the Irish Airlines Superannuation Scheme (IASS), a joint fund also involving Dublin Airport Authority and the now departed SR Technics.

The scheme has a deficit of close to €780 million and a long-running dispute over how to resolve this has brought the various parties close to industrial action on occasion.

On Friday, the Labour Court recommended that, for its part, Aer Lingus make a lump sum payment of €110 million into a new scheme for the benefit of active IASS members still working for the company. The ruling applied to all those staff except pilots.

It’s a lot of money, but not as much as some feared. Aer Lingus’s share price shot up yesterday on the back of the news, actually jumping by as much as 7 per cent before closing around 3.9 per cent ahead of its opening quote.

The reason is that investors believed that it would be asked to put up around twice that figure, and were relieved to see that the recommendation was far short of their worst fears.

However, there is some ways to go yet before this matter is sorted out. The first stage comes this week when the board meets to discuss the Labour Court proposals and decide if they should be put to shareholders.

But the unions, who were obviously party to the Labour Court proceedings will have to consider it, and presumably put it to their members. Then the pension trustees also have to consider the proposals.

Either, or both, of these stakeholders could raise issues that could delay or derail the proposed settlement.

Then, there are the shareholders themselves, to whom the company is committed to giving an opportunity to vote on any pension funding proposal. Those shareholders include the State and, of course, Ryanair.