An Post staff could be in line for a 5 per cent pay increase in exchange for agreeing to major restructuring at the loss-making company.

Talks at the Labour Relations Commission are understood to have reached an advanced stage, with An Post management proposing a 5.35 per cent pay increase to unions. The increase, however, would be spread over three years.

The largest union at An Post, the Communication Worker's Union, remains unhappy with the proposal. Its executive is expected to meet shortly to discuss the offer.

An Post management declined to comment yesterday and said talks were still ongoing.

An Post has refused to pay staff increases under the terms of Sustaining Progress, pleading inability to pay in the current climate. The company remains committed to radically restructuring and a recruitment freeze remains in place.

An Post reported an operating loss of €42.9 million for 2003. This was the highest operating loss experienced since An Post was established as a State-owned commercial company in 1984.

The annual report and accounts showed that turnover in 2003 increased by €25 million to €701 million, but costs rose by €51 million to €752 million, resulting in a third successive year of losses. Payroll costs in 2003 totalled €501 million, an increase of 4.5 per cent over the previous year.

Since then, the company has sought about 1,450 redundancies in an attempt to cut payroll costs. It has also announced the closure of SDS, its parcel and courier business. It has sought to do this by re-integrating the parcel business into the main An Post group and cutting staff numbers by 270.

Another loss is anticipated this year but breakeven is forecast in 2005 through the reduction of costs across all operations, the deployment of technology and achieving savings already paid for and further savings currently being negotiated.

Chief executive Mr Donal Curtin has said that An Post remains on a "financial knife-edge".