Unions at Aer Lingus have been told in a confidential report that using funds from the sale of the airline to address the pension deficit may "represent the best outcome for members".
The report also contains the blunt warning: "Doing nothing does not solve the pension issue".
The report prepared by consultants Farrell Grant Sparks and Paul Sweeney and Associates urges union negotiators to take a "positive approach" to the idea of using the sale to correct a looming pension deficit.
Unions in public have strongly opposed any sale plan, but the report suggests that negotiating about the pension in the context of a sale should be approached at least in a positive fashion.
The official position of Siptu and Impact is against any sale and this is not likely to change. However, some members have said while the unions must continue to fight any privatisation, the two unions should seek the best possible deal on pensions regardless.
This week the Minister for Transport Martin Cullen said a final decision on selling Aer Lingus would be made within weeks. He denied the Government was softening its stance by meeting union delegations over the sale plan.
He has instructed the company to "engage" with unions over all relevant issues, although there was no sign this had happened last night, said a Siptu spokesman.
"Taking a positive approach to a proposed transaction may create the opportunity for a once-off improvement in the pension deficit," it states. The views of the consultants were passed to union negotiators in the last week.
"Improving the pension position, whilst at the same time ensuring that there is no decrease in the existing pension rights, may represent an optimum outcome for members," states the report.
"Government and management need to bring forward proposals which are capable of achieving the foregoing," it says.
Union sources yesterday said the report contained a number of "ifs and maybes" and management had not tabled any formal proposals. The sources also pointed out that Siptu and Impact wanted the Government to take the idea of a State holding company seriously.
The company has for several years maintained that the pension scheme is a defined contribution scheme and there is no reason for an FRS 17 obligation. Staff representatives maintain the scheme is a defined benefit scheme. The report comments on this: "There is a disconnection in trying to identify who has the liability to meet these liabilities".
The report says the pension scheme, which also serves Dublin Airport Authority (DAA) and SR Technics staff, has a potentially large deficit, although the Aer Lingus component amounts to about €170 million.
It says doing nothing on pensions could eventually lead to the scheme having insufficient funds and pensioners may take action to recover benefits. It says it is hard to say how courts might decide on this issue.
The report discusses the idea of setting up a supplementary scheme and leaving the existing scheme unaltered. The new supplementary scheme would be funded by a lump sum gained during the sale process. It says a small additional employer and employee contribution might also be added to this new fund. It says a number of things need to be considered to make this happen:
- Government approval would be needed for the lump sum
- Approval would be needed for the new contributions from staff and company
- There would be no guarantee that a supplementary scheme would be sufficient to meet inflation each year. It points out that the supplementary scheme would underwrite indexation.
