Aer Lingus and Government officials propose using more than €200 million generated during the sale of part of the airline to address its looming pension deficit, writes Emmet Oliver.
A major deficit at the airline is holding up the entire sale process, which is expected to yield between €700 million and €800 million, but the airline and officials in the Department of Transport hope a resolution to the issue is possible by the middle of the month.
The mechanism favoured at this point is to make an ex gratia one-off payment, worth at least €200 million, to the pension fund used by Aer Lingus staff.
A senior Government source said last night: "The sale process provides the best chance in a generation to finally do something about this problem."
A significant portion of the proceeds of privatisation will be made available to the pension scheme, according to senior sources. The Government is not prepared to make a direct Exchequer payment to the fund, so the only other option is to use funds generated by the sale.
The Department of Transport and Aer Lingus have declined to comment except to say that talks on the issue are continuing.
The main issue to be decided now is whether the ex gratia payment will be made during the sale or in the period afterwards. The airline and department officials believe making an ex gratia payment would not fall foul of EU rules on State aid.
Those designing the mechanism believe such a sum, if it is reasonably managed, should prevent the pension scheme falling into deficit in future years.
However, unions remain opposed to any privatisation and, while an offer to fund the pension scheme would be attractive, it might not be sufficiently so. One source said yesterday: "A resolution is needed which has a fighting chance of success." At present, those involved in the sale process hope for a stock market flotation of the company in June. If this timetable is to be fulfilled, a decision from the Government will be needed in the middle of this month.
The key player will be the Taoiseach, Mr Ahern. Last Thursday he reiterated that part of Aer Lingus would be sold to allow the airline to expand. Mr Ahern told the Dáil the Government wanted to secure Aer Lingus, the staff, jobs and help to develop the airline, including new long-haul routes to Thailand, Singapore and Bahrain.
The airline believes that, if index-linked pension increases are to continue, as has been the practice for decades, a major deficit will arise, possibly up to €336 million. A separate scheme for pilots is believed to have similar problems, although the potential deficit is smaller.