Trustees of Aer Lingus-DAA pension scheme seek more funding for deferred members

The trustees of the joint pension scheme operated by Aer Lingus and the Dublin Airport Authority are believed to have told the companies that the €200 million they are offering to help plug the deficit in the scheme is not enough.

It is understood that the trustees are seeking additional payments for deferred members of the pension fund, which has a deficit of €780 million. These are staff who have left the companies but are yet to draw down their pensions.

Loggerheads
This is being resisted by the companies and puts the trustees of the Irish Airlines Superannuation Scheme at loggerheads with the employers, the trade unions representing staff, and the Government, as a shareholder in both Aer Lingus and the DAA, in relation to resolving this matter, which has been under negotiation for about two years.

The trustees have also indicated that they could make an application to the High Court in relation to the deficit in the scheme. This would likely reference Aer Lingus’s plan to potentially reduce its cash reserves by €500 million following High Court approval for such a move in March.

The High Court approved the capital reduction proposal put forth by Aer Lingus with the condition that the airline gives at least 28 days notice to the trustees of any distribution that would cause the aggregate cash reserves of the company to be less than the pension deficit.

This followed lengthy representations to the court by the pension trustees, who were concerned that Aer Lingus’s cash reserves might dwindle in advance of any resolution to the pension issue.

There is now concern that the trustees could derail the package that has been agreed by the employers and the various trade unions following a Labour Court recommendation on May 24th.

The agreement involved Aer Lingus paying €110 million in relation to active members of the scheme and €30 million for deferreds while the DAA would pay €52.75 million for active members and an undisclosed sum in relation to the deferreds.

This figure is thought to be between €7 million and €9 million. The DAA's contribution would also cover the Shannon Airport Authority, which was given its independence by the Government last year.

Higher contributions
While the trustees have indicated that they want higher contributions from Aer Lingus and the DAA for the deferred members of the pension scheme, it is not thought they have put a precise figure on how much would be expected from the companies.

Aer Lingus and the DAA have both indicated that the payments offered are once-off and represent a full and final settlement of their obligations to the schemes.

As part of the agreement reached by the companies and unions, the IASS scheme would be frozen with current employees of Aer Lingus and the DAA moved to separate defined contribution schemes for the purposes of future accrual.

No increase
The Irish Times has learned that earlier this month Aer Lingus informed Brian Duncan, chairman of the trustees, that it would not increase the amount allocated for deferred members in respect to their past service with the company. The DAA is believed to be taking a similar line.

Having informed the stock market of its intention to pay €140 million to resolve its pension issues, Aer Lingus is unlikely to increase its cash offer.

It is already under pressure from Ryanair, which owns 29.8 per cent of the airline, not to make the proposed payment. Ryanair has threatened legal action if the scheme goes ahead.

While Aer Lingus has insisted in recent years that it has no legal obligation to plug the deficit in the pension scheme, it recognises that it would face industrial action from current workers if it did not contribute to a solution. It could also face legal actions from trustees and current and former workers.

The once-off funding from Aer Lingus would address the €502 million of the IASS deficit attributable to the airline.

Aer Lingus and the DAA were unavailable for comment last night.