Aer Lingus management is contemplating postponing the already delayed flotation of the airline until next autumn if it cannot make peace with the airline's unions by the end of January.
Company sources said the end of next month was effectively a deadline for re-starting the initial public offering (IPO) process in time to get the deal away before June.
The company and its advisers are unlikely to choose to go to the market over the summer and may be forced to postpone the share offering until autumn if the deadline is missed.
The Minister for Public Enterprise, Ms O'Rourke, has made it clear that she will not introduce the necessary enabling legislation for the IPO to the Dail until industrial relations at Aer Lingus return to normal.
The Minister reaffirmed her position last weekend and also indicated that she felt the company's management had been wrong to push for a flotation at the end of last summer.
"The day the chairman [of Aer Lingus] tells me that they dealt with the low pay issue in a proper fashion, then we'll talk about flotation," she said. "When I think I was being walked towards an early autumn flotation. That would have been a right kettle of fish," she said last weekend.
Industrial relations problems boiled over at Aer Lingus during the summer, as the company prepared for a public offering pencilled in for the early autumn.
Unions representing pilots, cabin crew, clerical and operative workers put in pay claims, all arguing that their pay had fallen behind their peers due to drastic cost-cutting measured agreed in the mid-1990s when the company faced collapse. The situation was not helped by internecine strife between the IMPACT and SIPTU trade unions over who should represent the cabin crew. The end of January may yet prove overly optimistic for an agreement. At present Aer Lingus has only agreed new terms with its operative and clerical workers.
It is in talks at the Labour Relations Commission and the Labour Court to settle pay claims by cabin crew. No third party mediation has taken place with the pilots who want to be paid in line with their counterparts in the larger airlines. Meeting all the claims plus the increases agreed in the Partnership for Prosperity and Fairness could swell the airline's annual wage bill by £40 million (€50.8 million).
This would make a significant inroad into profits, which were £59.5 million last year. Convincing prospective investors that these additional costs will not fundamentally damage the business will be a challenge should the flotation go ahead.
Assuming the industrial relations issues are resolved the airline management must still finalise a share ownership deal with staff to secure their support for the flotation. It is expected the staff will increase their stake to 15 per cent from around 4.18 per cent.
Ms O'Rourke is only expected to bring the legislation forward when these issues have been dealt with. "The understanding is that the legislation could pass through the Oireachtas within seven to 10 weeks," said an Aer Lingus source.
This calculation does not take into account the Easter break for the Dail and Seanad.
If the unions make peace by the end of next month the IPO "could be late May or June", said the source. "If that doesn't happen it could be the autumn," he said.
Aer Lingus stresses that a flotation this year is not critical to its plans. Although it needs to raise £200 million to meet the cost of replacing its aircraft over the next three years there is no immediate need for cash.
Delaying going to the market would increase the risk of investor sentiment being hit by a possible downturn in the US economy and the lucrative transatlantic market.
