Aer Lin­gus warns pay claims could put €1bn strat­egy at risk

IAG could switch eight promised Air­bus jets to low-cost unit, says air­line

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE - Fearghal O’con­nor

AER Lin­gus could lose out on a €1bn air­craft in­vest­ment to a new low-cost IAG sub­sidiary if staff con­tinue to de­mand sub­stan­tial pay in­creases, the Sun­day In­de­pen­dent has learned.

Aer Lin­gus chief op­er­at­ing of­fi­cer Mike Rut­ter warned that if the air­line can­not re­main com­pet­i­tive IAG could give eight promised new Air­bus air­craft to Level, a new low-cost car­rier it has set up in Barcelona

Last week Aer Lin­gus an­nounced it had or­dered the new Iag-fi­nanced Air­bus air­craft. The new fleet will dou­ble its transat­lantic traf­fic to 4.5m pas­sen­gers and see it hire 800 new staff by 2020.

But asked by this news­pa­per what im­pact an on­go­ing stand­off over pay could have, Rut­ter warned: “If Aer Lin­gus is un­able to re­main com­pet­i­tive in the medium term, then as a ra­tio­nal par­ent com­pany IAG has the abil­ity to move these air­craft to launch new routes and grow the net­works of other IAG com­pa­nies, of which Level would be most rel­e­vant in this con­text.”

Level was launched in March and of­fers €99 fares from Barcelona to Los An­ge­les, San Fran­cisco and Buenos Aires, with plans to ex­pand to other Euro­pean cities.

Aer Lin­gus has warned about “un­rea­son­able pay re­quests” and its “struc­turally un­sus­tain­able” model com­pared to com­peti­tors such as Ryanair and Nor­we­gian’s Ir­ish-based transat­lantic sub­sidiary.

Rut­ter did not rule out that Aer Lin­gus would con­sider es­tab­lish­ing the same type of sub­sidiary used by Nor­we­gian to op­er­ate the air­craft rather than hir­ing staff un­der ex­ist­ing terms and con­di­tions.

“Aer Lin­gus re­mains com­mit­ted to its cur­rent re­sourc­ing model pro­vid­ing that we can main­tain cost com­pet­i­tive­ness and im­prove pro­duc­tiv­ity,” said Rut­ter.

A stand­off over pay and profit-share de­mands has rum­bled on at the air­line in re­cent months with trade unions de­mand­ing pay in- creases. The Labour Court has rec­om­mended that staff should re­ceive an 8.75pc rise over 39 months — well below the 19.1pc de­manded by trade unions. But lo­cal union rep­re­sen­ta­tives have re­fused to give Siptu per­mis­sion to rec­om­mend ac­cep­tance of the deal to staff, it is un­der­stood.

The air­craft or­der — worth €1bn and paid for by IAG — is seen as the firmest ex­am­ple yet of the ful­fil­ment of the huge prom­ises of growth that Wil­lie Walsh made when he was look­ing to quell po­lit­i­cal op­po­si­tion to his pro­posal to buy Aer Lin­gus.

A re­ver­sal of the air­craft or­der would be seen as a mas­sive blow to the air­line’s am­bi­tious transat­lantic plans.

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