Aer Lingus 2011 Annual Report Download - page 24

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PRINCIPAL RISKS AND UNCERTAINTIES Aer Lingus Group Plc
Annual Report 2011
22
Risk Impact Mitigation
Pensions scheme with the aim of addressing the deficit over time.
(
Continued
) The changes included an increase in retirement age from
55 to 60, a reduction in accrual rate for future service from
45ths to 60ths and an increase in member contributions
from 7% to 11% of salary. There was no change in
employer contributions which remain at 21% of salary. The
changes were approved by the Pilots’ Scheme trustees and
became effective as from 1 January 2011. The latest
available information is that the Pilots’ Scheme was
estimated to have an MFS deficit of ¤170m as at 31
October 2011. The Group’s position that it has no
responsibility for the deficit in the scheme could be subject
to legal challenge on various grounds from various potential
claimants. Any such challenge would be strenuously
defended. Lengthy litigation could ensue. If, contrary to the
firm legal advice that the Group has received (that such a
challenge is unlikely to succeed), a Court were to find
against the Group in any such litigation, significant or very
significant loss could arise. No proceedings have been
issued to date and it is not therefore practicable to estimate
the financial exposure, if any, to the Group should such
claims be made and succeed.
It remains the Group’s position, supported by firm legal
advice, that it has no legal or constructive obligation in
respect of either the IASS or the Pilots’ Schemes, other
than to continue to pay the fixed rate contributions as set
out in the trust deeds of these schemes.
Reliance on third The Group is dependent on third party suppliers for certain
parties important parts of its operation. Services provided range
from aircraft heavy maintenance and technical support to
ground handling outside the Republic of Ireland to the
franchisee operating Aer Lingus Regional. Any failure or
inability of a major supplier to provide the contracted
services could cause significant disruption to the Group’s
operations and result in financial loss.
Each of these key relationships is actively monitored by a
nominated manager.