Aer Lingus has said that if the €748m deficit in its pension scheme is not addressed, members who have not yet retired could receive as little as 4% of the pensions they expected.
Aer Lingus outlines proposals to address pensions deficit
SIPTU called off a threatened strike at Aer Lingus and the Dublin Airport Authority over a week ago.
This was to allow talks on the deficit in their joint pension scheme known as the Irish Aviation Superannuation Scheme (IASS) to continue.
Last week, unions claimed that Aer Lingus would have to contribute up to €200m, and the DAA would have to pay out €130m to resolve the deficit.
In an announcement to the stock exchange yesterday evening, Aer Lingus outlined its proposals to address the deficit.
It proposed freezing the current IASS scheme - and reducing risk by investing in bonds whose cash flows "broadly match" the IASS obligations. It claimed this approach would deliver higher pensions than on a wind-up of the IASS, but would be at the sole discretion of the scheme's Trustees.
It said that if the scheme had been wound up on May 31, the current employees and former employees who have not yet retired would only have received 4% of their expected IASS benefits due to the deficit. That outcome, it said, would be extremely damaging for the group, its employees and shareholders.
However, Aer Lingus stressed that it would make no financial contribution to the IASS beyond its regular contributions - which would cease in any event when the IASS was closed to future contributions.
Once the IASS was frozen, Aer Lingus would establish a new Defined Contribution scheme on what it called "competitive terms" to cover future service by employees. It said the overall increase in employment costs attributable to the new scheme is " not expected to be significant".
The statement also noted that Aer Lingus is prepared to put in place arrangements to improve the likely future pensions of affected IASS members - provided the balance between costs and benefits is in the interests of all parties - including shareholders.
Those arrangements would include a once off initial contribution to "kickstart" the defined contribution scheme. While it is not specified in the statement, it is understood that the current proposal would see Aer Lingus contribute €1,000 per year of service per employee, with the structure of payments favouring those closest to retirement.
However, the amount to be put into the new scheme will depend on what it called "the strength of the commitment to stabilise employment costs".
This is a reference to cost-offsetting measures, believed to include a demand for pay restraint over a four year period.
Aer Lingus reiterated that it has met and continues to meet all its obligations to the IASS - and has no obligation to increase its employer contributions to the IASS above the current fixed rate.
The statement warned that there can be no certainty that agreement will be reached between all the parties, given the complex nature of the LRC talks.
The airline also criticised leaks of confidential elements to the media as prejudicial to reaching a conclusion in the interests of all parties.
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