RYANAIR IS threatening to take legal action against Aer Lingus to prevent it from shoring up a large funding shortfall in the pension scheme that it operates for staff jointly with the Dublin Airport Authority and SR Technics.
In an open letter to shareholders published by Ryanair yesterday, its chief executive Michael O’Leary said he was fearful that shareholder funds would be “frittered away” by Aer Lingus “at shareholders’ expense”.
“Ryanair intends to initiate legal proceedings to prevent the company agreeing to, or making, any such additional contributions without prior shareholder approval.”
Ryanair said the move was necessary as Aer Lingus had rejected its calls for an extraordinary general meeting to be held to consider the matter.
The Irish Aviation Superannuation Scheme is believed to be about €722 million in deficit. The scheme is jointly operated by Aer Lingus, the DAA and SR Technics, which has quit Ireland.
Aer Lingus has consistently stated since its stock market flotation in 2006 that it does not have any legal obligation to plug any deficit in the pension scheme.
It currently makes a fixed contribution of 6.375 per cent on behalf of staff members to the scheme.
However, Aer Lingus has conceded previously that a failure to engage on pensions with staff could result in industrial unrest.
On January 30th, the airline said it believed it to be in the “best interests” of Aer Lingus to “constructively engage” with staff representatives and trustees of the pension scheme to address the issues around the pension fund.
This followed reports that the trustees of the pension fund were considering freezing the scheme and purchasing sovereign annuities from the National Treasury Management Agency.
It also emerged that the various employers were looking at setting up separate schemes for future service for the staff.
Mr O’Leary called on Aer Lingus shareholders to communicate their views on the matter to either Ryanair or the board of Aer Lingus. He cited how Aer Lingus had paid €27 million to the employee share trust to buy out its shares and had paid €30 million to the Revenue Commissioners to settle a tax bill relating to controversial “leave and return” redundancies a couple of years ago.
Aer Lingus declined yesterday to comment on Ryanair’s letter.
Meanwhile, Ryanair is to launch its MasterCard prepaid card in Ireland. This will allow consumers to book flights with Ryanair without having to pay the airline’s punitive €6 administration fee on each flight. It will be the only way for passengers to avoid the Ryanair charge and will apply to bookings made from March 1st.