The chief executive of Aer Lingus, Mr Willie Walsh, went to Government Buildings last night to discuss the final details of a proposed employee share ownership plan (ESOP) with the Government after talks had concluded with union representatives. A final text on the ESOP is expected later today.
The main difficulty between the sides has been on reaching agreement on a formula to finance the proposed 14.9 per cent stake that has been agreed in principle for the workforce in return for £100 million (€127 million) worth of productivity measures and job cuts.
One major problem was that the Department of Finance and Aer Lingus had hoped the money saved as a result of the pay freeze proposed by the company, and partially endorsed by the Labour Relations Commission, would be used to purchase part of the ESOP.
The LRC proposal, however, allows the unions to seek a review of the pay freeze after 15 months and the unions would not ballot members on the proposals if they were significantly altered.
Despite the large take-up in allocations for voluntary severance, there is still widespread resistance to the package among pilots, cabin crew and some sections of ground support staff.
Any major dilution of the LRC package would probably be rejected, even with endorsement by the main unions, SIPTU and IMPACT.
It is understood that the Government and company have now agreed that the pay review must go ahead and it is likely to be undertaken by the Labour Court at the end of the 15-month freeze.
The other main problem area was agreeing terms for the £5 million loan, which will allow the ESOP to buy back the 4.7 per cent of shares held individually by Aer Lingus employees.
At present, these are practically worthless and have to be sold back to the company within three years if an employee leaves.
Unfortunately the bulk of them are held by older workers with long service, precisely the group targeted by the company in its voluntary severance and early retirement plans.
A scheme had to be found to buy back the shares at a rate that makes the overall package attractive if redundancy targets are to be met.
The Government had intended offering a £5 million interest-free loan to the company to finance the buy-back but this might have breached EU guidelines on state aid. Instead the company will buy back the shares for the ESOP from individual employees who leave within the allotted three-year time span.
While the haemorrhage of funds needed to finance the voluntary packages has been halved from £2 million a week to £1 million, the chief executive, Mr Walsh, told the Oireachtas Joint Committee on Public Enterprise and Transport last week that speedy implementation of the survival plan was the most important ingredient for success.
The LRC issued its proposals on target on November 28th, but the target date of December 7th to conclude union ballots is long past. Ironically, it was a query for clarification on the pay proposals from the company to the National Implementation Body that led to the first major delay in the timetable.
