Iarnród Éireann ‘nearly insolvent’ due to losses

Iarnród Éireann has forecast that further financial losses this year will leave the company just €2 million ahead of insolvency.

The State-owned rail operator has predicted that it will lose about €6 million this year, bringing its accumulated deficit to €159.2 million.

Iarnród Éireann told the Labour Court in a confidential submission drawn up at the end of May that its financial position was now "critical".

It said its financial circumstances were “much more severe” than those in Bus Éireann, where staff went on strike for three weeks earlier this year as part of a dispute over management plans to address its cash crisis.

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The rail operator told the Labour Court that if it were agree to pay increases being sought by staff, it would “effectively be trading recklessly”.

Iarnród Éireann forecast that it would record losses of just under €3 million for 2016 with a projected deficit of €6 million for this year.

It said this would leave shareholder funds in the company at a level of €41.1 million at the end of 2016.

Insolvency

“The shareholder funds within the organisation cannot go below €33.1 million, or we will be facing insolvency. The projected losses in 2017 will reduce that to €35.1 million and within approximately €2 million of insolvency. Indeed if we were to pay increases in such a perilous financial position we would effectively be trading recklessly.”

The company acknowledged that it had received increased exchequer funding in 2015, 2016 and 2017 but argued that this was “nowhere near enough” to address a funding shortfall which a recent rail review estimated was about €100 million a year.

Iarnród Éireann said the Government had consistently argued that any additional State funding provided to the company could not be used to finance pay rises, but must rather be invested in infrastructure and rolling stock.

Concerns

The submission to the Labour Court also raised concerns about the pension schemes operated by the CIÉ group for staff in its three constituent companies, Iarnród Éireann, Bus Éireann and Dublin Bus.

It said improvements in financial markets last year meant funding proposals for the two pension schemes in the group were back on track.

However, it said the 3.75 per cent annual pay rise – which was reckonable for pension purposes – secured by staff in Dublin Bus after a strike last autumn had exacerbated the situation.

“The additional cost of these proposals have ensured that the funding proposal is again off track, giving serious future problems for the funding of our (pension) schemes. Any further pressure on our pension schemes will have a very serious impact on both schemes and repercussions for all employees within the CIÉ group.”

Unions at Iarnród Éireann had initially been seeking pay rises of up to 21 per cent over a number of years or, at a minimum, increases along the lines of the 3.75 per cent a year secured by staff at Dublin Bus.