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Aer Lingus Group PLC (AERL)

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Monday 08 October, 2012

Aer Lingus Group PLC

Aer Lingus statement regarding pension discussions

RNS Number : 2166O
Aer Lingus Group PLC
08 October 2012
 



 

Aer Lingus Group plc

ISE: EIL1           LSE: AERL 

 

Aer Lingus statement regarding pension discussions

 

Dublin & London, 8 October 2012:  Aer Lingus Group plc ("Aer Lingus", "the Group") notes recent media commentary regarding the on-going discussions taking place at the Labour Relations Commission ("LRC") in relation to pensions matters. Aer Lingus regards the provision to the media of confidential elements of these discussions as being prejudicial to reaching a conclusion that is in the interests of all parties. Aer Lingus continues to be engaged in the LRC process in order to find an appropriate solution to the funding issues in the Irish Airlines (General Employees) Superannuation Scheme ("IASS"). The discussions in the LRC have not yet concluded, nor has a finalised recommendation been issued by the LRC. If any such recommendation is issued, further detailed discussions with the Trustees of the IASS will be required.

 

The LRC process has been ongoing since 2011. The parties involved include Dublin Airport Authority ("DAA") and trade unions representing both Aer Lingus and DAA members of the IASS. Aer Lingus has met and continues to meet all of its obligations to the IASS. As previously and consistently stated, Aer Lingus has no obligation to increase its employer contributions to the IASS above the current fixed rate. Aer Lingus is participating in the LRC process in good faith as it believes it is in the interests of all parties that the funding issues in the IASS be addressed.

 

The Group strongly believes that the current funding position of the IASS is unsustainable and must now be addressed by the IASS Trustees. Aer Lingus understands that the IASS funding shortfall as at 31 May 2012 was approximately €748 million on the current statutory Minimum Funding Standard basis. Irish pension legislation mandates priority over IASS assets for pensions in payment. As such, had the IASS been wound up on 31 May 2012, current employees and their beneficiaries not yet in receipt of a pension would have received approximately 4% of their expected IASS pension benefits. Aer Lingus believes that such an outcome would be extremely damaging for the Group, its employees and shareholders.

 

In this context Aer Lingus is attempting to assist in the achievement of a fair outcome that improves the pension prospects of affected IASS members in a way that will balance the interests of all parties, including shareholders.  Aer Lingus has submitted proposals as part of the LRC process which seek to improve the pension that can be paid by the IASS and place future pension provision on a sustainable basis.

 

The key elements of the Aer Lingus proposal are:

 

·    Firstly, the IASS would be closed to new members and benefit accrual for current members would cease.  The IASS investment policy would be changed by the Trustees to reduce risk by investing in bonds whose cash flows broadly match the IASS obligations.  This approach would result in higher pensions than on a wind-up of the IASS, but is at the sole discretion of the IASS Trustees.  Aer Lingus would make no financial contribution to the IASS (beyond its regular contributions, which in any event would be discontinued when the IASS closes to future contributions).

 

·    Secondly, Aer Lingus would establish new Defined Contribution ("DC") arrangements on competitive terms in respect of future service of its own employees. Subject to the uptake of Aer Lingus employees, the overall increase in employment costs attributable to the new DC scheme is not expected to be significant.

 

·    Thirdly, 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.  In particular, Aer Lingus is seeking employment cost stability over the coming years.  If put in place, any such arrangements are likely to include a once-off initial contribution to the DC funds of those affected IASS members.  Such contributions would favour those closer to retirement. The extent of the arrangements, including any contribution by Aer Lingus, will be linked to the strength of the commitment to stabilise employment costs.

 

In combination, these three elements have the potential to provide fair and sustainable pension benefits for affected IASS members significantly beyond the level of coverage which the IASS current funding status can sustain.  

 

The discussions at the LRC are complex and involve many parties. There can be no certainty that agreement will be reached between all parties involved. Further updates will be provided if and when appropriate.

 

 

 

 

ENDS

 

For further information please contact:

Investors & Analysts




Declan Murphy

Aer Lingus

Tel:

+353 1 886 2228

Jonathan Neilan

FTI Consulting

Tel:

+353 1 663 3686





Media




Declan Kearney

Aer Lingus

Tel:

+353 1 886 3662





 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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