Aer Lingus pay freeze ends as fortunes revive

After a 14-month pay freeze, all 4,000 employees of the Irish airline, Aer Lingus, are set to receive a total pay rise of 9.5% from March 2003, with the company’s 400 pilots due a further 12.5%.

Over 4,000 workers at the state-owned airline, Aer Lingus, are set to benefit from the ending of a 14-month pay freeze, with pay increases worth 9.5% due from 1 March 2003. Meanwhile, pilots are to receive additional average rise worth 12.5% after the 'unlocking' of a separate pay award made earlier by an independent pay tribunal (IE0301201N). Neither case will involve retrospective application of the pay increases. A further 3% across-the-board increase - due under Ireland's proposed new national pay agreement (IE0301209F), which is currently under consideration - would mean an additional pay rise for all workers in July 2003.

The company-wide pay freeze and the deferment of the pilots’ pay award were crucial elements in the 'survival plan' that emerged from the major crisis that hit Aer Lingus in the wake of the events of 11 September 2001 (IE0111101F). The company’s December 2001 survival plan, which is closely associated with its chief executive, Willie Walsh, also involved major changes in work practices and over 2,000 redundancies. The plan included a major change in business strategy, which meant lower fares, slimmed down in-flight services and new routes. The combined changes resulted in a major turnaround in the fortunes of the airline. After initially planning to break even in 2002, the company made profits in excess of EUR 40 million for the year (IE0210201N), once again making it attractive to private investors.

Aer Lingus thus recently told its two main trade unions, the Services Industrial Professional and Technical Union (SIPTU) and the Irish Municipal Public and Civil Trade Union (IMPACT), that it will pay out the frozen 9.5% general increase due under the three-year national Programme for Prosperity and Fairness (IE0003149F), which expired in December 2002. However, the company says that while 5% of the total will be paid without conditions attached, the remainder depends on formal agreement on a number of issues that management says represent 'normal or ongoing change.' The unions, however, regard some of the change issues as 'significant' rather than 'normal', and the Labour Relations Commission is now likely to invite both sides to conciliation talks.

Management and the unions have agreed that the end of the pay freeze will not be retrospective, as the entire 14-month freeze period has been formally 'traded off' in return for agreement on an employee share-ownership plan (ESOP). The ESOP, which exactly mirrors similar arrangements in other state companies, means that the employees now own 14.9% of the airline.

The pilots’ deferred pay award, which will also apply from 1 March 2003, was recommended by an independent pay tribunal in 2001. At that time the tribunal said that payment would have to wait until the company could afford it. Now, almost two years later, the pilots are set to become the final group in Aer Lingus to benefit from a series of pay rises agreed by various other groups during the early part of 2001 (IE0105236N). All of these pay adjustments came after years of very high growth rates in the Irish economy and in the airline industry generally.