Aer Lingus 2013 Annual Report Download - page 36

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Pilots’ Scheme
Aer Lingus pilots are members of the Irish
Airlines (Pilots) Superannuation Scheme
(“the Pilots’ Scheme”). On 27 March 2013
the Pilots’ Scheme was estimated by the
scheme actuary to have a minimum
funding standard deficit of approximately
€172 million.
The Board believes that the proposed solutions in the
Recommendation would (i) significantly improve the
current and future pension prospects of employees
who are members of the IASS, thereby contributing
to a positive working environment that is in the
interests of all stakeholders; (ii) provide Aer Lingus
Limited with cost predictability and certainty over
the period to 2017 and a basis for industrial relations
stability; and (iii) address the risks arising from the
potential for serious operational disruption through
industrial action and the potential for protracted
litigation in relation to pension matters.
If the agreements and approvals required can be
achieved, Aer Lingus Limited would implement the
proposed solution set out in the Recommendation
which includes; a one-off contribution of €110
million to a new defined contribution scheme for
existing employees; and, cost stabilisation payments
in the period up to 2017 which would replace
existing annual increments, so delivering cost
predictability and certainty for Aer Lingus Limited in
that period. Aer Lingus Limited would also make a
one-off contribution of €30 million to the new
defined contribution scheme in respect of former
employees who are deferred members of the IASS.
Any implementation of the Recommendation is
dependent on a series of further complex steps. These
steps include (but are not limited to) the following
agreements being reached and approvals being
achieved:
 Agreement with the trade unions;
 Agreement by the IASS Trustee with the
sponsoring employers;
 Aer Lingus Group plc shareholder approval to
make the proposed once-off contributions
totaling €140 million;
 Trade union member ballot approvals;
 The successful conclusion of a range of
implementation steps by the IASS Trustee
amongst others; and
 Approval by the Irish Pensions Regulator (the
“Pensions Board”) of a funding proposal to
implement the benefit reductions proposed by
the IASS Trustee
Assuming that the above outlined agreements are
concluded, Aer Lingus Group plc will then issue a
circular to its shareholders setting out full details of
the proposed solution and convene an extraordinary
general meeting to seek approval from shareholders.
While Aer Lingus Limited is committed to seeking a
solution in a way that balances the interests of all
parties, including shareholders and employees, the
process is complex and there is no certainty that
agreement can be reached between the various
parties.
Pilots’ Scheme
Aer Lingus has recently agreed to engage in a
process of discussion with parties affected by the
funding shortfall in the Pilots’ Scheme in an attempt
to assist in the achievement of a fair outcome that
improves the pension prospects of affected Pilots’
Scheme members in a way that will balance the
interests of all parties, including shareholders and
employees.