TEAM Aer Lingus employees seek deal prior to potential sell-off

Ireland's state-owned airline, Aer Lingus, is engaged in talks in late 1997 with a number of prospective partners interested in obtaining a majority stake in its aircraft maintenance subsidiary, TEAM Aer Lingus. Before any deal can be agreed, however, the Aer Lingus Group must first negotiate an agreement with the trade unions to compensate a majority of TEAM's 1,500 employees for agreeing to forgo their legal right to remain as group employees.

Talks are currently underway between the Aer Lingus Group and trade unions representing 1,500 workers in the state-owned airline's aircraft maintenance subsidiary, TEAM Aer Lingus, on how to compensate them for agreeing voluntarily to sign away certain legal guarantees which give them the right to remain employed by the parent company. The legal guarantees are in the form of "letters of comfort", which 1,200 of the 1,500 received when they transferred over from the former maintenance and engineering division of Aer Lingus to work for the newly created subsidiary, TEAM, in 1990.

At the time, the "letters of comfort" broke an industrial relations deadlock. The workers concerned had refused, in three separate ballots, to agree to work for the new subsidiary unless they secured the guarantees. Essentially, the guarantees come in two forms. Firstly, each of the 1,200 workers involved were given personal guarantees regarding their employment status with Aer Lingus, as if TEAM did not exist. Secondly, their unions were given a collective guarantee that the Aer Lingus Group would retain a 51% in TEAM in the event of an investor taking a stake in TEAM.

Talks with potential investors

In October 1997, Aer Lingus acknowledged media speculation that it was holding discussions with a number of unnamed potential investors interested in TEAM. It was also confirmed that any strategic partner would be unlikely to be interested in securing anything less than a majority stake and that the letters of comfort issue would have to be resolved prior to any such alliance being finalised.

TEAM is in debt to the tune of IEP 70 million and is not expected to show a profit until 1999. It has suffered from an oversupply of similar maintenance facilities internationally and has consistently been undercut by other competitors or by larger players in the business. It is envisaged that a strategic partner would bring a steady stream of work to the Dublin-based company.

TEAM has a history of industrial militancy and the craft unions, such as the Technical Engineering and Electrical Union (TEEU), may resist any move effectively to privatise it. However, the Irish Congress of Trade Unions (ICTU), which has shown a willingness to agree to majority stakes being held in other state-owned concerns, is unlikely to raise any ideological objections.

Funding the package

Aer Lingus did not deny press speculation that the compensation on offer to individual TEAM workers would be somewhere between IEP 5,000 and IEP 20,000, depending on service, for each of the 1,200 workers who hold the guarantees. The 300 workers taken on since 1990 may also be offered some compensation, or "sweetener", as they would have to be balloted on a final set of proposals.

A solution to the problem, however, will require more than an industrial relations agreement as any deal entered into voluntarily could be challenged in the law courts by those who hold the original guarantees. Legal teams from management and the trade unions, therefore, are expected to enter negotiations in order to draw up a legal agreement by the end of 1997. Observers agree that only a legal agreement could replace the original letters of comfort and that any new agreement would, most likely, have to be signed both on an individual and on a collective basis.

The group as a whole would have to fund the compensation package. If, for example, an average payment of IEP 16,000 was made, this would involve a total cost of almost IEP 20 million, which is close to the price an investor is expected to pay. Aer Lingus has already received the final tranche of state funds allowable under EU regulations - some IEP 175 million over the past four years - and will be limited in terms of what it can offer.

Commentary

A very attractive monetary offer to TEAM employees could result in a number of them leaving and thus deskilling the company. This would make it less attractive to the new investor, and unable to carry out its core business efficiently and effectively. At a time of emerging skill shortage in the Irish economy, the workforce may not find it difficult to find alternative employment while, at the same time, collecting an attractive compensation package.

Meanwhile, a by-election is due to be held in March 1998 in a constituency in which Aer Lingus and TEAM employees make up a substantial portion of the electorate. With the minority Fianna Fail-Progressive Democrat coalition Government dependent in Parliament (the Dail) on the votes of three independent deputies, TEAM could also become an issue in this election. It has been such an issue in the past, a fact which indirectly led to the Government and the Aer Lingus Group agreeing to the letters of comfort in 1990. (Brian Sheehan, IRN, and John Geary, UCD)

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